Retail News Update

New Delhi: The $130 billion French retail chain Carrefour has set up a 100 per cent-owned arm to enter the wholesale merchandise business in India and will opt for the franchising route to open multi-brand retail stores in the country, senior company officials said Tuesday.

The world’s second-largest retail chain with presence in more than 30 countries, Carrefour intends to open the first cash and carry or wholesale store on its own by the second half of 2009, the officials added.

“Carrefour WC&C India is our 100-per cent subsidiary and will set up the cash and carry business in India. We are planning one or two stores by the second half of 2009 and add more as the business grows,” said Managing Director Herve Clec’h.

“Master Franchise Company, also 100 per cent-owned by Carrefour, will appoint the franchisee for retail trade business. We are talking to five-six Indian groups for this,” Clec’h, who recently took charge of India operations, told IANS.

Carrefour hopes to finalise the Indian franchisee for the multi-brand retailing business, in which no foreign equity is permitted in the country, over the next couple of months, added Gerard Freiszmuth, general manager for Carrefour India.

“We have not finalised the investment plan yet,” Clec’h said, when asked for the amount his group intends to invest in the country,” he added, “We are here for the long haul, so money will not be a constraint.”

India presently permits up to 51 per cent foreign equity in single-brand retail trade business but disallows foreign equity in multi-brand stores in a bid to protect domestic stores, predominantly run as neighbourhood mom-and-pop shops.

The policy, however, permits 100 per cent foreign equity in cash and carry or the wholesale business, as also in the area of extending technical know how, supply chain management and general support services to Indian retail companies.

Carrefour WC&C India will also enter these areas where the Indian franchisee can get the same technical expertise that go into running the retail trade stores of the French company across the globe, the two officials explained.

“The Indian retail stores will also have access to our global brand. They will all be Carrefour stores, even though we will have no equity participation in them, in line with present policy,” Clec’h said.

“But we see the franchising option as a transition to partnership,” he said, adding his group will be interested in acquiring equity in the Indian retail trade venture as and when the Indian government gives permission.

Freiszmuth, who expanded Carrefour’s sourcing operations in India from virtually nothing to a few years ago to a $450-million business today, said his group was more keen on the hypermarket segment of retail trade in India.

“These are stores spread over 5,000-8,000 square metres. The Indian customer can get the same experience of shopping in any of Carrefour’s stores be it Milan or Kuala Lumpur – but with lot of local flavour,” he said.

The two officials said the entry into India’s merchandise trading business does not mark an end to the group’s global sourcing operations from the country. “At present garments account for 90 per cent of our sourcing operations. But fruits and vegetables are also catching up fast,” Freiszmuth added.

The past year has seen keen interest from global players and domestic companies alike to enter the retail trade business in India that is estimated at over $340 billion at present and projected to touch $520 billion by 2010.