India is a retail market that offers great potential. The economy is growing and so is the retail. While most of the world is struggling, India is still chugging ahead at an average 6 percent growth that even though poor by Indian standards, compared to European economies it would recite a completely different story. The dollar is bullish against the INR and perhaps this is the best time to enter the Indian market, given that the dollar can achieve much more than it could garner a few months ago.
There may however be a counter argument. Despite having the opportunity to address a population of 1.2 billion Indian people, the premium brands suffer heavily here. The political climate is in a state of turmoil, and there appears to be an economic stagflation. However, a visit to any of the branded malls will prove beyond any doubt that consumers are still buying. A simple exercise to prove this point would be to try and find parking space at a mall on any evening of the week.
Each country or region has a specific retail climate. Thankfully for the Western world, it does not vary too much across its length and breadth. However, when these brands come to India, they realise that what may be generally true elsewhere may not hold much water in India. The reasons can be many folds and causes can be attributed to many local conditions including governance and distribution. But the truth is that India is the Black Swan they never thought of!
To be successful in India, foreign brands need to adapt to the local retail climate. There are challenges such as high customs and excise tariffs, unsatisfactory warehousing and distribution, spiraling real estate costs and the lack of trained sales staff, and the list will go on.
However, there isn’t a single factor that cannot be addressed with a judicious approach. Nike, Suzuki, Levi’s, Zara, Samsung or Honda could be great examples of success in India having adapted well to the local climate.
The top five things to do for an MNC to be successful in India are:
· Create a flexible strategy backed by an open tactical plan. Do not be afraid to invest, for India is a country that offers easy course corrections.
· Create a judicious mix of local production and imports. (When you export some local production for the rest of the world you may get a duty drawback, adjust these with the imports duties that you incur!)
· Set up your own warehouse or involve partners.
· Book your retail spaces in advance, this will ensure better prices and you could stay ahead in the learning curve for real estate.
· Train your own staff, the locals are more than malleable compared to the westerners and what’s more, most of them speak English. They are also much cheaper and this could be another leveler!
India is a better investment destination than its other Asian counterparts, the growth may be slower but if you get your act right the medium to long term returns are bound to be significantly higher. After all which other market offers you a rapidly growing consumer population, coupled with a strong sourcing base, whether you are a mass, premium or luxury brand?