FDI Googly

The opposition do not like FDI in retail. (Strange it's always the opposition: when the current ruling and opposition parties were on the opposite sides of the fence before they swapped positions). Even some ruling parties are opposing it. The PM is hell bent on passing it through. Some of his ministers (especially from poll-bound states) are not very keen for it. The Anna brigade is still very silent about it. The small time traders are up in arms against and organizing bandhs. What are the channel partners saying? Especially as many of them have moved into retail or planning to do in some way or the other.

The retail juggernaut amongst partners is now visible in the big IT hubs like Nehru Place, Lamington Road and GC Avenue. Partners like Elcom, Challenger, Computer Land, Technocrat and Supreme all have sprawling retail showrooms with significant footfalls; their retail turnover has started contributing seriously to both their toplines and bottomlines. Or take the example of Geonet IT Mall, which previously used to have a strong retail presence in Navi Mumbai and Thane, but now have expanded into Mumbai too and competing against the likes of large LFRs like Chroma and Vijay Sales. Smaller cities, thanks to the growing consumption power of the populace, are also thriving on the IT retail front. Riddhi Siddhi Computers in Ranchi or E-Mart or SA Infosys in Bhubaneswar are notable examples.

Two factors are influencing this increasing democratization of IT retail in India. While consumption power of retail consumers is obviously on an upward curve, the class B and class C cities remained relatively immune from the impact of recession till date. Not surprising therefore that smaller cities are now coming up with a large number of retail showrooms. Secondly, while large enterprises reduced or kept on hold their IT spending, the scenario was much better among home and SOHO users, the typical buyers of the IT retail segment. According to the BMI India Retail Report, the total retail sales in India will grow from $353bn in 2010 to $543.2bn by 2014. For the fourth time in 5 years, India has been ranked as the most attractive nation for retail investment among 30 emerging markets by A T Kearney in its 8th annual Global Retail Development Index (GRDI). India's retail market is expected to be worth about $410bn by the end of the year; BMI forecasts consumer electronic sales at $29.86bn; IT sales through retail channel will conservatively account for 10% of this.

What these trends and statistics mean is the entry of big IT & electronics LFRs like Target and Best Buys would definitely impact the small time IT retailers too? Actually they will take advantage of what the stats and trends bear out, and jump into the retail bandwagon thereby pushing the IT retailers out of the limelight. Already the small time retailers are threatened by the likes of Indian LFRs like Croma and eZone and with the global biggies coming in they will take a bigger share of the retail pie. And with their excellent supply chain and relationship with OEMs, they can easily push retailers into the sidelines, as they will enjoy much better margins. No wonder, IT partners in places like Chennai are observing bandhs in protest.

Now the dynamics of free market and commerce will ensure that FDI will come in sometime if not tomorrow but the day after. And no amount of efforts by politicians and traders can stop the inevitable. Rather our partners should focus on their USP: personalized services and support. This was how the gray market PC vendors successfully resisted the branded PC vendors till economics ensured a level playing field. Surely a Target cannot give the same benefits as what Deepakbhai of Lamington Road gives to Hetal of Kandivli. Yes, they will give a lower price, but when the motherboard conks off at 6 in the evening and it's Hetal's presentation next day, it's only Deepakbhais who can save the situation. Long live Deepak bhai...and also Target! Long live the Indian IT market.

(rajneeshd@cybermedia.co.in)