Major retail investments of 2016 that will impact the retail in 2017

The organized trade in India is growing exponentially. As per the combined study of FICCI (Federation of Indian Chambers of Commerce and Industry) and Pwc (consultancy PricewaterhouseCoopers), By 2020, India’s retail sector is expected to double to $1.1-1.2 trillion from $630 billion in 2015 at a compound annual growth rate (CAGR) of 12%.

However, end of the year 2016 saw the one of the biggest economic movements in terms of ‘demonetization’. Through there was drastic escalation in card transactions, but retail was effected at least for sometime due to lack of liquidity in the economy. However, retailers across the country did not register much impact except a short downfall in the early two weeks of November. But,as per the experts, overall sales may be down for next two quarters.

Apart of demonetization, here is the list of the list of some major events of 2016 that has the potential to change the retail scenario in 2017:

PE investments

Leading real estate leading consultancy CBRE South Asia Pvt. Ltd has come up with a report tittled India Retail MarketView – H2, 2016 which states  the retail segment in 2016 witnessed more than USD 0.7 billion of investment by PE Firms/wealth funds and saw the entry of more 19 new global brands. As per the report, private equity investments into the segment are expected to increase by as much as 20% in 2017, signaling that the overall market dynamics for the segment continue to be positive.  According to CBRE, maximum PE investment was spread across Mumbai, NCR, Pune and Ahmedabad during 2016.

 FDI norms eased to promote investment

In 2016, government allowed 100% automatic FDI in single brand retail to attract international players and 100% FDI in online retail under the marketplace model was also made allowed. Earlier, FDI up to 49 per cent was permitted under the automatic route without approval from the official authority.  As per CBRE, m+easures such as the relaxation of FDI norms in single-brand retail, e-commerce, and food products manufactured/produced in India; coupled with the expected easing in retail loan rates are likely to positively impact retailer entry into India and demand for consumer durables respectively.

Here are some key investments lined up in 2017:

*Kate Spade India entry

New York-based designer brand Kate Spade may be shortly launching its maiden store at Select CITYWALK mall, New Delhi. As per resources, the first India store of Kate Spade will be open sometime in March 2017. The retailer will set up a network of stand-alone stores across major cities with elaborate investments, thus becoming one more global brand entering the Indian retail space after the Government of India relaxed single brand retail norms recently.

*IKEA and Apple India entry

The amendment has certainly  cleared the way for Apple to open stores in the country. The retailer may shortly open its first manufacturing facility in Bengaluru area with undisclosed amount of investment. Moreover, Swedish furniture retailer IKEA also the world’s largest furniture retailer has announced the  investment  of  Rs 10,500 crore (US$ 1.56 billion) to set up 25 stores across India and hire over 15,000 permanent employees and 37,500 temporary employees to assist in running its stores.

IFC investment in Future Group

In 2016,International Finance Corporation (IFC), the private-sector investment arm of the World Bank announced the proposed investment of $20 million (Rs 134 crore) via equity-linked instruments in Future Consumer Enterprise Ltd over next few year. The investment from IFC will certainly boost the expansion plans and strengthen the balance sheet in future.