The opening of India’s retail industry to benefit logistics providers

To help ease inflation and encourage foreign investment in its infrastructure, India’s government has passed a hotly debated bill allowing for the opening of its estimated $400bn retail industry. The measure will allow up to 51% foreign ownership in a multi-brand retail format and 100% ownership in a single-brand format. This marks a huge win for Wal-Mart and Tesco who both have petitioned the Indian government for years to further open the industry.

According to India’s Commerce Minister, foreign retail chains will bring much needed investment in supply chain improvements and back-end infrastructure such as cold storage. Currently, India produces about 195m tonnes of vegetables, however, because of the poor supply chain, 40%-50% of fruits and vegetables are spoiled.

India’s infrastructure will indeed be a major hindrance for retail companies wishing to invest in the country. Government bureaucracy, a lack of adequate warehousing, a clogged road and rail network as well as ports and airports in desperate need of upgrading and expansion will result in only the brave of heart investing in this market.

Still, for international logistics providers such as Damco, DHL and FedEx the opening of the retail market will prove beneficial as these companies have already made important investments in the country.

According to Damco, India contributes 5% of its total ocean and supply chain management volumes and 10% of its global airfreight uplift. Additionally, the company has announced its freight forwarding group is looking for acquisitions in India. In 2007, DHL acquired India’s courier and air express company Blue Dart. Since the acquisition, the two have been expanding its domestic offerings within the country.

FedEx also has made acquisitions in the country. In 2007, it acquired Prakash Air Freight Pvt. Ltd, one of the largest domestic express companies in India and in 2010, FedEx acquired AFL Pvt. Ltd and its affiliate, Unifreight India Pvt. Ltd. This acquisition helped FedEx expand its domestic ground network within the country.

As retailers move into India’s retail market, they will need to partner with logistics providers that have local knowledge and capabilities. Expect more global logistics providers to acquire local providers and make needed investments in areas such as warehousing and distribution.

Quelle: eyefortransport
Portal: www.logistik-express.com