More than 40 global brands may go online soon in India after FDI reforms

Brands hope for volume sales even before setting up physical stores

From top luxury apparel and perfumery brands from the UK and France to premium cosmetic labels from South Korea and affordable athleisure brands from Japan to few of the biggest US-based lingerie brands, India over the next two years might see as many as 40 different retailers come to India under single-brand retail.  

 

According to industry insiders, a host of companies on the sidelines might finally make an entry into India. This is after the government on Wednesday announced a host of big-ticket reforms in foreign direct investment (FDI) in single-brand retail, which state that brands can first enter via the online e-commerce route into the country before setting up physical stores.

 

According to sources, a number of companies in the bath and body space from the UK, Japanese apparel brands, French outdoors brand, electronics companies from Indonesia are all planning to start online operations in India over the next 12-18 months.

 

The government said that the present policy requires that single-brand retail trading entities have to operate via brick-and-mortar stores before starting retail trading of that brand via e-commerce.

 

“This creates artificial restriction and is out of sync with current market practices. It has, therefore, been decided that retail online trading can also be undertaken prior to opening of brick-and-mortar stores, subject to condition that the entity opens brick-and-mortar stores within two years from the start of online retail,” the commerce ministry on Wednesday said.

 

According to industry experts, a lot of brands were wary of coming to India. Without an e-commerce platform to sell products, achieving volume sales becomes impossible. While bigger brands can manage, mid-range to smaller brands will find it difficult to sustain.

 

“There are a certain number of stores a brand can open. A lot of factors go into opening a physical store. To create volumes, online retail is required. This will help a lot of brands enter India. Over the next few years, at least 40 new international brands in various categories would make an entry into this country,” said Kumar Rajagopalan, chief executive officer, Retailers Association of India (RAI).

 

RAI had on multiple occasions written to the government batting for changes in single-brand retail norms. Industry experts believe that by allowing brands to start operations immediately after they enter India, it would also help brands setting base of operations, which, in turn, would generate employment.

 

“Allowing companies to conduct online retail trading, prior to opening of physical stores, fulfils the long-standing FDI relaxation and reforms demand of many international businesses that wanted to set up shop in India. While promoting healthy competition, online sales will lead to creation of jobs in logistics, digital payments, customer care, training, and product skilling and will also help India compete with manufacturing hubs in South and Southeast Asia,” said Salman Waris, managing partner at TechLegis Advocates & Solicitors, a law firm.