Tesco hiccuping in Karnataka
Tesco hiccuping in Karnataka

In a shocking revelation, the plans of the world's third largest retailer, the £60-billion Tesco Plc, to set up its first cash-and-carry format store in India have hit a roadblock with the Karnataka Government refusing to issue the company licence for sale in the State of food products, including vegetables. Is this an indication that it will be bumpy road ahead in India for such retailers in the future if  other states follow suit?


Reliance Fresh’s case

If we remember, this is what had happened to Reliance Fresh when it had come to Bengal. They had met  political resistance from the Forward Bloc, a Left Front partner. The local traders had staged a dharna and broken the shop windows by pelting stones in protest. Well, they were not wrong. The threat were for real as so many would lose their livelihood. But the matter was soon solved with the intervention of government and problems ironed out.


Tesco's woes

Now, when the UK-based Tesco was planning to set up its first store in Bangalore, the State Government has refused to grant licence to sell agriculture produce including grains and vegetables bowing to pressure from local traders.


“We are still evaluating the situation but it is unlikely that we will start our first store in Karnataka,” Ms Leonie Morris, Director, Corporate Affairs, Director, Tesco India, told Business Line.


Ms Morris, the official spokesperson of Tesco India, further said that while no “finite decision” has been made so far because of the rapidly changing situation in the State, the UK-based Tesco, a global grocery and general merchandise retailer, might now look at setting its first cash & carry format store in other States.


“We are investigating our other options, which could include Maharashtra,” Ms Morris added.


Tesco, whose core business and strength is based on selling agriculture produce including grains and vegetables to restaurants, hotels and other such establishments and hence it does not want to move away from such a model. “We, however, want to make it clear that we are very much committed to long-term relationship in India,” the spokesperson said.


Metro's case

The Germany-based Metro Cash & Carry was the first such company that set up its stores across India including in Bangalore. But even it was difficult for them as it had to move the Karnataka High Court, for licence to sell commodities and other agriculture produce. The court stayed a Government Order disallowing the company to sell commodities.

But Ms Morris termed the Metro's case as one-off and pointed out that it did not apply to other foreign companies that planned to set up such cash & carry stores in Karnataka. Any other foreign retailer will have to abide by the Government Order, she said.


Tesco, who has successfully been exporting food as well as non-food products from India, and having over £270 million worth of such products in 2010 , expects the share of food products to increase this calendar year. It expects to export 15 per cent more of such products this year.


Tesco also has an arrangement with Tata Group's Trent in India and supplies products on a wholesale basis to Star Bazaar retail outlets across the country.

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Unveiling India's Retail Revolution: Tech Disruptions, Consumer Shifts, and the Future of E-Commerce
Unveiling India's Retail Revolution: Tech Disruptions, Consumer Shifts, and the Future of E-Commerce

India’s retail industry is undergoing an unprecedented transformation driven by technological disruptions, evolving consumer behavior and new innovations redefining the retail experience. As Deloitte’s ‘Future of Retail’ report observes, these pivotal forces have set the stage for online retail to surge 5X over the next 7 years. With projections indicating e-commerce growing at 25 percent annually until 2030 compared to offline retail’s 10 percent, digital channels are primed to dominate India’s $1.5 trillion retail market in the years ahead.

Decoding the Underlying Market Drivers

As per the latest retail industry data, India’s Tier II and III cities have begun overshadowing metros as the next e-commerce frontier. In 2022, order volumes from Tier III cities witnessed 65 percent year-on-year growth, and Tier II cities saw 50 percent expansion. In contrast, Tier I cities clocked a modest 10 percent increase over the same period. Given this divergence, industry projections indicate Tier II and III cities will continue dramatically outpacing their Tier I counterparts in online order growth rates over the next decade.

Attractive value propositions like wider product choices, discounted offerings, convenience, and personalized engagement are driving smaller cities to warm up much faster to e-commerce adoption even within an inflationary climate. For retailers chasing the next wave of growth, the writing is clear – India’s underpenetrated towns and cities housing over 900 million people hold the key to market leadership.

Rising Data Analytics Creating Asymmetric Advantages

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The Way Forward: A Roadmap for Retailers

Adopt Omnichannel Strategies Aligned with Evolving Consumption: As smaller cities drive more than 60 percent of e-commerce volumes, retailers need a presence across online and offline channels with a hyperlocal outreach to tap into growth opportunities beyond metros. Localization, vernacular interfaces, and experiential stores are key.

Build Intelligent Supply Chains Resilient to Disruptions: Invest in data integration across the value chain to obtain end-to-end visibility. Leverage analytics for demand planning, inventory optimization, and predictive maintenance. This can minimize stock-outs, and ensure faster deliveries while improving supply chain profitability.

Deliver Personalization through Customer Analytics: Capture every customer interaction and apply analytics to discern behavioral patterns. Offer contextually relevant recommendations via multiple channels. Personalize communication and marketing content based on purchase history and search trends.

The Pivot to Experience-First Retail Powered by Technology

As the Indian shopper gets more evolved and demanding, customer experience across retail journeys is emerging as the biggest differentiator for both customer acquisition and retention. Retailers unlocking the power of analytics and technology to elevate personalized engagement, and minimize friction while tailoring experiences to align with local preferences will lead to market dominance in the future. The secret sauce for success lies in using data and innovation to blend online convenience with offline experiential retail - a trend that will further accelerate as India ascends into a trillion-dollar consumer market.


Authored By


Prerna Kalra, Co-founder & CEO of Daalchini Technologies


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