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IKEA okay to spur retail rush

New Delhi, Jan. 22: A large number of foreign single-brand retailers are chalking out their entry plans, following Swedish furniture retailer IKEA’s success in getting its entire Rs 10,500-crore proposal approved by the government.

According to commerce ministry officials, single-brand heavyweights such as America’s Fossil, French cookware maker Le Creuset, French sports goods giant Decathlon, Thailand-based luxury goods retailer Lotus Arts de Vivre and Italy’s pharma-nutrition business player Officina Farmaceutica Italiana are waiting to set up shop.

Fossil is likely to be the first to get a go-ahead. With over 390 stores and a strong global e-commerce business, Fossil is known for its assortment of lifestyle and accessory items, including watches, handbags and clothing.

The US firm also makes fashion accessories for a number of other owned and licensed brands, including MICHELE, Zodiac, Relic, Emporio Armani, DKNY, Armani Exchange, Michael Kors, Diesel, Burberry, Marc by Marc Jacobs, Adidas, Skagen Denmark and Karl Lagerfeld.

France’s Le Creuset is best known for its coloured cast-iron casseroles and saucepans, while Thailand-based Lotus Arts de Vivre is into art, home décor, antique furniture, carpets and handicraft.

Analysts said these players were closely tracking the government’s stand on IKEA as the policy flip-flop in retail had raised concerns among them.

They felt the time that the government took to clear IKEA’s proposal had not sent a positive signal. The Centre should work out a mechanism for a faster clearance of applications to improve investor confidence.

Industry sources said Stockholm-based apparel retailer Hennes & Mauritz (H&M) and several UK-based apparel brands, including House of the Gods, Voi Jeans, Religion and Ringspun, were keen to enter India.

Saloni Nangia, senior vice-president of retail consultancy firm Technopak Advisors, said, “Several players are evaluating their plans to enter the country. The IKEA clearance will boost global investor confidence as it sends a strong message that the government is committed to its policies.”

However, she added that “policy stability is the key thing that investors have been looking for. The clearance by the FIPB sent out that message”.

The Cabinet Committee on Economic Affairs will now take up the the IKEA proposal because the FIPB can clear investments up to Rs 1,200 crore only.

The FIPB okay came hours before finance minister P. Chidambaram left for road shows in Asia and Europe to attract investments and commerce minister Anand Sharma left for the World Economic Forum in Davos. Sharma is expected to hold talks with the bosses of Walmart and Tesco and other foreign investors in Davos later this week.

To accommodate the concern of global retailers, the government had tweaked the sourcing norms for FDI exceeding 51 per cent in single-brand retail by diluting the previous condition of “mandatorily” sourcing 30 per cent of requirements from medium and small units to sourcing “preferably from MSMEs”.

 
 
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