FDI in retail

What history has shown us

Let’s roll back a few years ago – Staples Inc. enters India with a bang under Foreign Direct Investment(FDI). It invested millions of dollars to replicate its model of high end convenience stores for office supplies along with contracts with large corporations for exclusive supply rights to their office and stationary needs.

Staples is among USA’s top 5 largest retail chains clocking more than US$ 20 billion in revenue each year. Office Depot, another competitor in the US soon followed.

Today, OfficeDepot is no longer a player in India market and Staples is running into massive losses here as it struggles to cut down its presence across the country.

David Vs Goliath

What happened? Office Supplies is a category which has been given a chance for FDI in India and failed terribly due to kind of supplier relationship and local convenience offered by Kiranas. That, coupled with low margins in commodity products like printing paper which occupies huge warehousing space with minimal returns proved as to why the paranoia about FDI and organised retail is baseless.

The risk taken by investing large amounts in such products which may not sell led to a massive inventory pileup by Flipkart and other e-Commerce companies 3-4 years ago before the marketplace model was established.

Today, the only categories which e-Commerce companies can make sure shot bets are on electronics and other commoditized products which are not seasonal and do not have too many variations that customers would want.

Opportunities for SME retailers

India is a marketplace-first country where thousands of sellers are already selling and growing by selling on Flipkart, eBay, Amazon, Snapdeal and Shopclues. Categories like Apparel, Home and Furnishing, Fashion are very troublesome to predict and store by large retailers.

Categories like Apparel, Home and Furnishing, Fashion are very troublesome to predict and store by large retailers.

Hence, the opportunity for Indian sellers is massive. Already, millions have become online sellers in the used goods market using OLX and Quikr. There are only 50,000 serious sellers in India today. We have the potential for a million given the right platform. Primaseller hopes to be such an enabling platform that can create millions of sellers.

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