Curbs on Ikea can force global retailers to rethink

A ruckus in Parliament, a corruption probe into Wal-Mart, and, topping it all, restricting Scandinavian furniture retailing giant Ikea over the products it can sell in India threaten to completely upend India’s promising retail story.

The government is said to have forbidden Ikea from selling over half its products, without giving any logical reasons.
“This puts other retailers sold on the India story on the backfoot,” said an industry expert.

Global retailers were looking at Ikea’s entry as a test case.
Out of the 30 products that it had sought permission to sell, it got clearance only for 12.

Products barred include textiles, consumer electronics, cosmetics, decorative and lifestyle products, food & beverages etc.

Retailing experts said with this, the debate has festered from single brand and multibrand to specific products and categories.

“The government seems to have taken a U-turn on retail reforms. As a result, global retailers are very cautious. Though they have started researching the Indian market a long time back, some have said they will proceed only once the final FDI clearance is given,” said another industry expert.

The recent goings-on have turned many potential entrants circumspect.

“This will give the political parties against foreign direct investment in retail a strong stick. Even if this doesn’t derail the reform, it will make the issue more controversial, which, in turn, makes other companies cautious,” says Harminder Sahni of Wazir Advisors.