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International retail chains primed for debut

January 15, 2003 12:03 IST

International retail chains are making a beeline to have a toehold in India. The latest entrant in this rush is Shoprite, Africa's largest grocery retail supermarket group, which has decided to set up base in the country as part of its expansion plans.

The move to start operations is part of the organisation's strategy to expand beyond the borders of South Africa since the potential for further expansion there are limited now.

Though foreign direct investment is not allowed in the retailing sector except in cash-and-carry format, international chains are allowed to enter the Indian market through the franchisee route.

Marks & Spencer, UK's leading retail chain, has adopted this route to set up its operations here.

Shoprite could also be starting operations on similar lines, according to sources, and it would be setting up its first supermarket sometime this year.

On the other hand, the world's fourth largest retail chain-the Germany-based Metro AG, has entered India through the cash-and-carry format.

It is expected to kick start operations in Bangalore. Metro is the first international retail chain to use this route.

Shoprite's India plans come close on the heels of the group making a foray into Mauritius. Shoprite offers a comprehensive range of groceries, household items and fresh food products under one roof with a strategy of offering basic commodities at low prices.

The Indian retail sector is estimated to be around $180 billion of which the organised sector accounts for just 2 per cent, but with a potential to grow up to 10 per cent over a decade.

The big ticket growth drivers in the retail industry are considered to be household groceries and apparel.

Grocery is the largest segment, taking up nearly 72 per cent of the retail consumption. Unlike in the West, where organised retailing plays a larger role, here it is yet to evolve in a big way.

"With global food markets becoming increasingly saturated, global food retailers are looking for new markets for growth. And Asia is a major market, where high population and income growth are in evidence," said a senior executive from a foreign investment bank.

The major players in the food retail segment are Food World, Subhiksha, Nilgiris, Giant and Big Bazar among others.

Reeba Zachariah in Mumbai