The $6.5-billion UK-based cash and carry group, Booker, is looking to expand its India operations. Even as American giant Walmart, French chain Carrefour and German group Metro are seen as the big daddies in the segment, now Booker would add to the competition.
With three stores in Maharashtra (in Mumbai, Pune and Thane), the UK chain has begun exploring options outside the state. In the next five years, it is planning as many as 20 cash and carry stores, the company’s India managing director, Zunaid Bangee, told Business Standard.
In 2009, Booker had set up its first store in Mumbai, followed by a joint venture outlet in Pune in 2011 and Thane just last month, in 2012.
In fact, Walmart’s first store, along with its India partner Bharti, was in 2009, in Ludhiana. Since then, the American chain has expanded to 17 stores across India. German group Metro started slow, in 2003, but has picked up pace, opening its 10th recently in Delhi. French retail biggie Carrefour started in December 2010 with a Delhi outlet and recently launched its second store in Jaipur. While both Walmart and Metro are looking at 8-10 stores a year, Carrefour has not announced any target numbers.
“We are presently reviewing opportunities in and around the state of Maharashtra,” said Bangee. Adding: “In due course, we intend to expand to other states. But in the next five years, we could open up to 20 stores.”
The company has denied any interest in setting up multi-brand retail stores even when the Indian government allows foreign direct investment (FDI) in the sector. “We are a pure wholesaler. That is our model in the UK, and the same concept will be adapted here. We will support the local independent retailers (kirana shops), and not compete with them,” said Bangee.
Like Booker, Metro, too, is not interested in multi-brand retail stores as it, too, is a wholesale group in Germany. Walmart and Carrefour, though, are waiting for Indian rules to change so that they can set up front-end multi-brand stores in the country.
On why the company has been low-profile in India, Bangee pointed out, “We are actively campaigning within the local area where our cash and carry stores are located. The marketing activity is designed to target our customer segment, the traders. The end-consumer is not our target hence a low profile.”
Booker’s main business is in the UK, where it has 172 cash and carry stores. India is the only other country where the group operates the cash and carry format stores. Since the concept is relatively new here, Bangee identified that as a challenge in the country.
Although the volume from business is rather small currently in relation to the Booker group’s global turnover, Bangee said, “The business here has the potential to contribute significantly to the group’s turnover.” Both Walmart and Metro generate around one per cent of the global turnover from their India business. As for sourcing, all of Booker’s products for the India business is sourced locally, according to the company. While it has begun sourcing products for the UK stores from India in a limited way, it is expected to grow significantly by the next year or so.
Recently, Anshuman Magazine, CMD (south Asia) of CB Richard Ellis (global real estate consulting firm), had said India would see a significant increase in larger-format shopping spaces in the next few years.
Cash and carry represents an opportunity worth $140 billion (Rs 7 lakh crore) of the $500-billion (Rs 25 lakh crore) annual retail business in India. This format refers to goods sold at wholesale outlets or warehouses. Its customers are retailers, professional users, caterers, institutional buyers and other businesses, who need special licences to buy from these outlets. There’s no restriction on FDI in the cash-and-carry format. However, for front-end multi-brand retailing, foreign players are not allowed. In single-brand retail, FDI up to 100 per cent was permitted recently.