Tesco’s India plans on hold

Tesco, the world’s third largest retailer, has decided to adopt a wait and watch policy

to enter the Indian market. As of now, it has decided to focus its exisiting franchise arrangement with Tata’s Trent. According to the arrangement, Tesco provides back-end support to Star Bazaar hypermarkets run by Trent, in terms of inventory and supply chain management and IT solutions. According to Tesco spokesperson, they are not going ahead with setting up of the cash-and-carry store in Karnataka for now.

With a support centre in Bangalore, Tesco entered India in May 2004. This was followed up by a plan to enter the cash-and-carry format. For this it signed a franchise agreement with Trent in August 2008. It is estimated that the retailer sources goods worth £270 million from India. The retailer was waiting for a nod to FDI in multi-brand retail to formally enter the Indian retail space.

Earlier this year, the Karnataka government refused to grant a licence to Tesco to sell agricultural produce, including vegetables and fruit, due to pressure from local traders. Tesco, which announced its ambitious plans to set up cash-and-carry stores in India, planned to set up its wholesale stores in Mumbai first and then in Delhi and Bangalore. It had planned to invest nearly Rs 500 crores in the venture.

While Tesco has decided to step back on its plans, other global players such as Wal-Mart, Carrefour and Metro are steadily increasing their presence in the Indian cash-and-carry market. Germany’s Metro, one of the first entrants, plans to add 50 stores in the next four-five years. Wal-Mart, which has a tie-up with Bharti Enterprises, plans to open 20 wholesale centres in the next two years. French retail major Carrefour, which opened its first cash-and-carry centre in December 2010 and the second in Jaipur last month, wants to open a dozen more in the near future.