Carrefour’s Entry and Exit in India

Carrefour was the world’s second largest retailer with a turnover of $ 100 billion in 2013. It
had 174 cash and carry stores, 1421 hypermarkets, 2917 supermarkets and 5,593 convenience
stores across 34 countries. 46% of its sales come from France, 27% from rest of Europe, 18%
from Latin America and only 9% from Asia. It shifted focus to consolidation after the global
meltdown in 2009 and went in for relocation and closure of some stores.
Indian Retail Sector
The Indian retail market was pegged at $ 490 billion in 2013. It is expected to reach at a level
of $ 2000 Billion by 2030. It has been registering a healthy growth of over 7% since 2009.
The market is dominated by traditional retailers who still control over 92% of the market.
Amongst the big players, Reliance Fresh and Future group have done reasonably well with
some others like Spencer’s and More still struggling.100% FDI was allowed only in
wholesale/ Cash and Carry trade with a high resistance to FDI in Multi Brand retail. Foreign
players therefore had the option of starting with wholesale trade (cash and carry) and then
wait for the appropriate time to enter the retail market with Multi-Brand Retail stores. Entry
of Online players such as Flipkart, Amazon, Ola, Zomato are further contributing to the
growth of online market.
Cash and Carry
Cash and Carry stores are primarily for wholesale buyers and retailers with a potential of
nearly $ 100 million in India. Sales can be conducted only to an institution registered with
state sales tax authorities to dissuade the cash and carry stores from selling to the end
consumer. The invoices have to be settled in cash and the customers have to carry the goods
to their premises. The investment required in setting up a Cash and Carry store is as high as
Rs. 25 crores to Rs. 40 crores. Profits from a Cash and Carry setup can only be expected at
the end of 15 years. The customer gets the right quality at the right price and can cut down on
his inventories with the warehousing aspect being taken care of by the cash and carry store.
Customer (traditional retailers and other smaller wholesalers) however, has to travel quite a
distance to the store since usually Cash and Carry stores are located on the outskirts.

Early Players in the Cash and Carry Segment

Metro (Germany) was the first international player in the Cash and Carry format opening
their first store on the outskirts of Bengaluru in 2003. They have increased their store count to
16 – 3 in Bengaluru, 2 each in Mumbai and Hyderabad and 1 each in Delhi, Kolkata,
Amritsar, Jalandhar, Ludhiana, Zirakpur, Jaipur, Indore, and Vijayawada. They reported a
turnover of Rs. 2,521 crores in FY 13 with a loss of Rs. 272 crores. They have no tie-up for
the front end operations of retail.
Wal-Mart entered India in 2007 through a tie-up with Bharati Enterprises who would run the
retail operations while Wal-Mart would invest in the Cash and Carry stores only. The first
store was opened in Amritsar followed by stores in Jalandhar, Ludhiana, Zirakpur and
Bathinda in Punjab, Meerut, Agra and Lucknow in Uttar Pradesh, Kota in Rajasthan, Jammu,
Indore, Bhopal (2) in Madhya Pradesh, Aurangabad and Amravati in Maharashtra,
Hyderabad, Guntur, Rajahmundry and Vijayawada in the erstwhile Andhra Pradesh. It may
be noted that they have avoided the metros completely. They put a freeze on expansion in
October 2012 and broke off their agreement with Bharati Enterprises in October 2013. They
have now announced that they will expand their cash and carry stores to 50 by 2020. Their
turnover for calendar year 2012 was Rs. 3,381 crores with a loss of Rs. 372.32 crores.
Reliance announced that they would enter the cash and carry business in 2010. They opened
the first store in 2011 at Ahmadabad and now have stores in Bangalore, the National Capital
Region, Anand, Rajkot, Bhavnagar, Ludhiana, Mohali, Chennai, Guntur, Madurai,
Coimbatore, Hyderabad, Mumbai, Aurangabad and Baroda. The total store count is 26 and
they already have 1.2 million registered members. They have planned to take the count up to
60 in the next five years.
Carrefour’s Entry and Exit
Carrefour announced their intentions of opening of cash and carry stores in 2007 but opened
the first store at Seelampur in Delhi in December 2010. They opened the second store in
Jaipur in December 2011. They then moved to smaller size stores in Agra and Meerut in 2012
opening their last store in Bangalore. Their turnover was, however, only around Rs. 60 crores
per store against an average of Rs. 160 crores for Wal-Mart or Metro. India was the only
country outside Europe where Carrefour had gone for Cash and Carry stores. This was
largely due to India’s FDI policy regarding Multi Brand retail, because of which Carrefour
seemed to be playing more of a wait and watch game rather than being aggressive in their
approach. The slowdown in Europe also forced them to look very carefully at their
international operations.
The Government of India opened Multi-Brand Retailing in December 2012 with the
following restrictive clauses:
 Minimum FDI of $ 100 million with a 51% cap on FDI with a provision that at least
50% should be in back end excluding cost of land.
 Minimum 30% of sourcing should be from small and medium enterprises within 5
years of starting operations.
 Only cities with population of over one million were included. In states where no such
town was there, the state could give sanctions for select cities. Even in this the state
government approval had to be taken. This restricted the number of cities to 18.
Foreign players would also face the challenges of availability of quality retail space, high
rentals, high red tape, skilled manpower, infrastructure challenge and currency fluctuation.
However with the political change at the centre, FDI in Multi-Brand Retailing is facing
difficulties with Delhi and Rajasthan being the first states to ban foreign players in retail
operations.
Carrefour finally announced that they would exit the cash and carry business and wind up
their operations in India by September 2014. This came as a surprise because other foreign
players were increasing their presence. Wal-Mart increased their presence by acquiring
Flipkart.