Mumbai: In the past few years, global retail chains have been increasingly attracted towards the rapidly growing Indian market. The most recent is South Africa’s largest grocery retail supermarket group, Shoprite, which is finalising plans of setting up base here.

Since foreign direct investment (FDI) is not allowed in the retailing sector in India except in the cash-and-carry format, Shoprite Holdings Ltd is entering the Indian market through the franchisee route much like Marks & Spencer, Britain’s leading retail chain, which adopted this route to set up its operations here.

Shoprite is said to have tied up with Nirmal Lifestyle to set up a 70,000-sq ft hypermarket in the Nirmal Lifestyle Mall in Mumbai. The South African chain will be handling the entire mall, including food retailing and other consumer products, and will commence operations after March 2003.

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

The Shoprite group of companies operates 598 outlets in 11 African countries apart from its home country, South Africa. It has a broad customer base in South Africa and retails in various store formats to cater to the different demographic profile of its customer base.

For instance, the stores known as Checkers, Hyperama and House & Home stores target the middle-to-upper-end market while Shoprite and OK Furniture target the middle-to-lower market.

Very recently the world’s fourth-largest retail chain - the Duesseldorf, Germany based Metro AG - entered India through the cash-and-carry format. The cash-and-carry format of retail basically results in the elimination of the wholesaler so that products are available at very competitive prices at all cash-and-carry stores.

A global concept
This format of retail is gaining popularity in Europe as well as countries like Japan, China and Russia. Metro Cash and Carry is expected to begin operations in Bangalore. It is the world market leader in cash-and-carry operations with stores in 20 countries, accounting for 75 per cent of the division’s sales. Metro Cash & Carry has an annual turnover of more than euro 21 billion ($19 billion).

The growth drivers in the organised retail industry are household groceries and apparel, of which grocery is the largest segment, taking up nearly 72 per cent of the retail consumption.

And Shoprite and Metro are both big players not only in household groceries but also in retailing fresh farm produce such as vegetables, fruits, dairy, poultry and meat products.

Global retail consultants Ksa Technopak say that organised retailing in India is expected to touch Rs 35,000 crore in the year 2005-06. The Indian retail sector is estimated at around Rs 900,000 crore, of which the organised sector accounts for 2 per cent.

The notable domestic stores retailing household groceries in India are Food World, Nilgiris and Subiksha, all based in South India. These stores have successfully taken on the ubiquitous mom and pop and kirana stores and it remains to be seen how global chains would fare on that front.