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Big retail brands lukewarm on India: report
High rents and restrictive investment policies are among the reasons for global retailers' comparative disinterest in the country
New Delhi: Despite a growing base of well-off shoppers, the presence of the world’s top 100 retailers in Indian cities is sparse compared with others in the Asia-Pacific region, according to a report by Jones Lang LaSalle, a real estate consultancy.
High rents and restrictive investment policies that hinder profitable growth in India are among the reasons for global retailers’ comparative disinterest in the country, said the report, titled A Magnet for Retail.
The report ranked 30 cities in the Asia-Pacific based on the presence of the world’s top 100 luxury and mid-tier brands, where Indian cities of Delhi, Mumbai and Bangalore came in at 24, 25 and 27, respectively.
Cities in Greater China, which includes mainland China and the special administrative regions of Macau and Hong Kong, were the most attractive for global retailers, with Hong Kong being the most-densely populated in terms of presence of top retailers, as wealthy Chinese shoppers flock to the city and fuel a high level of spending.
Asia-Pacific markets, which account for 54% of the world’s population, have become increasingly important for large global retailers as sales in home markets have slowed down. The rankings showed Shanghai in the second place followed by Singapore and Beijing.
Escalating rentals make it unusually longer for international labels to break-even in India despite consumer appetite for shopping, making them skip Indian cities.
“Given that the size of consumer spending in Indian cities is still on the threshold of growth when seen in the Asia-Pacific context, the break-even period for retailers in this country is discouragingly high,” added Ashutosh Limaye, head of research and real estate intelligence service at JLLS India.
Quality locations for brands to open stores is still limited, the report added.
For most top retailers, well-placed malls are most lucrative when it comes to opening stores in the country. With limited quality mall spaces, rentals come at a pemium compared with other cities in the region.
Despite enjoying a high level of economic growth in the past decade and housing large urban populations over the last decade, retail expansion has been slow in the country, the report added.
“While international retailers have shown a keen interest to go into these markets, the scale is yet to be achieved in existing cities,” said Limaye.
Real estate concerns aside, regulatory uncertainty surrounding retailing by foreign businesses in India is also a concern for foreign retailers, the report indicated.
However, over the past few years, several European retailers have invested in the country with foreign labels such as Inditex’s Zara and Swedish label H&M—widely popular among shoppers globally—opening shop. Talks for American apparel retailer GAP Inc. setting up shop in India through a joint venture are underway.
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First Published:11 Aug 2014, 05:08 PM IST
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