Wednesday, February 07, 2007

The Retail kettle rattled ; now it’s Multiplex’s turn to quake.

Even as the Indian retail industry is geared up to meet the impending arrival of global retail chains like Wal-Mart, Carrefour and Tesco, their knee-jerks do betray their internal jitters however best they try to conceal.

And now this. Wal-Mart, the no. 1 retailer in the US, known as the 800-pound gorilla, unveiled a movie and TV download service yesterday and all the major studios have joined the party. Wal-Mart Stores said the download movie service offers more than 3,000 titles from Twentieth Century Fox, The Walt Disney Co., Lions Gate, Metro-Goldwyn-Mayer, MTV Networks, Paramount Pictures, Sony Pictures Entertainment, Universal Studios Home Entertainment, and Warner Bros. It also includes content from television networks Comedy Central, Fox, and Nickelodeon

The entry of foreign retailers has been a contentious issue for many years, with the government unable to convince the political establishment to support the move, given the stiff resistance from the powerful trader lobby who argues foreign players would wipe out the mom-and-pop stores ( called “Kirana stores” in local parlance). Under existing foreign investment norms, international players can own up to 51% stake in companies that sell only one brand through a chain of stores. The commerce & industry ministry is, however, planning to expand the scope of foreign participation to select sectors like electronics and sports goods, where global chains can open retail outlets.

But the truth is that with the emergence of the Indian retail formats like Big Bazaar, Subiksha and others have already begun to impact the fortunes of these kirana stores. Their customers have been deserting kirana stores en masse because of the better shopping experience and apparent discount offers at the neibhorhood mall. In fact, the real threat for Kirana stores are from retail supermarket format itself regardless of the nationality of its owners.

So it is in fact the Indian branded retail lobby which is running scared of the foreign retail chains.

The ruling Indian Congress party President Sonia Gandhi, had written to Prime Minister Dr.Manmohan Singh asking the government to take into account the implications that these transnational giants could have on neighbourhood kirana stores.

Lately the big Indian retailers including Big Bazaar, Ebony, Shoppers' Stop, Landmark, Westside or even Subhiksha are looking to source merchandise at the lowest rates globally. Future Group's Pantaloon Retail India has just set up global sourcing offices in Hong Kong and Mainland China - the first overseas sourcing operation by any domestic retail chain.

“For retail chains across the globe, the world is becoming a single market. We are looking at markets across the world from where one can source merchandise at the lowest price. We have opened our global sourcing offices in Hong Kong and China a few days back,” Future Group's CEO Kishore Biyani reportedly told a correspondent.

Now it’s the 800 pound gorilla’s turn to shake up the Indian Film industry and the budding online DVD rental outfits funded by Venture Capital firms in India. Huge PE investments ( $ 7.46 billion in 2006 across industries, bulk in infrastructure and real estate including multiplexes ) have been made in India anticipating blockbuster performances of these businesses.

The fun has just begun. With Indian VC investors quaking in their boots, it sure has all the trappings of an edge-of-the-seat thriller. Watch the space.

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