(1888PressRelease)
August 15, 2008 - Even as big Indian retailers like Foodland Fresh and the RPG Group’s, Spencer’s Retail scale back operations owing to high property costs and insistent protest from small retailers, international retailers scramble for a pie of Indian retail driven by the emerging Indian middle-class consumers.
UK-based Tesco has announced its solo foray into the cash-and-carry segment of London - Indian retail sector. It may also ink an exclusive franchise agreement with Trent Limited, a Tata Group company which operates hypermarket chain Star Bazaar and lifestyle departmental stores under the brand name Westside. Trent will also have access to Tesco’s supply chain, IT systems, and inventory and infrastructure management systems for a nominal fee.
Plans are on for the first Tesco branded warehouse store to open at the end of next year in Mumbai followed by Delhi and Bangalore and use a hub-and-spoke model for distribution. Tesco plans to spend about £60 million ($115 million) in two years on the project.
As Indian regulations bar foreign companies from buying Indian retailers outright or from operating large stores of their which sell multiple brands, the deal will not see Tesco setting up retail shops in India metros. Tesco will instead build cash-and-carry warehouses which will supply to Tata stores and items in bulk to small traders like kirana stores (mom and pop stores) and institutional customers, like hostels, restaurants, and caterers.
This is UK’s biggest retailer’s second attempt to enter the Indian retail sector. In November 2006, Tesco was in talks with Sunil Mittal’s Bharti Enterprise to set up operations. However, the deal never materialized and Bharti moved on to join hands with Walmart– the world’s largest retailer.
The Tata deal gives Tesco entry into one of the fastest growing economies in recent times. Retail industry in India is valued at more than $350 billion in annual revenues and is expected to double in the next seven years.
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