This article reports that Australian supermarket and retailing giant Woolworths (who runs the Safeway brand here in Victoria, as well as Big W, Dick Smith, Tandy and Dan Murphy) is looking to expand its involvement in India. This is a huge move for a company whose only really significant international operations at the moment are in NZ (the firm does have a wholesaling arrangement with Tata in India is in the electronics business, but has no retail outlets).
Australia’s largest domestic retailers are very inexperienced overseas (see some analysis of this in a chapter I wrote last year for a book called The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation).
There is clearly a huge ‘pull’ towards India, which currently is underserviced by modern supermarket chains. The initial target would be the emerging middle class, currently estimated to be around 250m people and projected to exceed 500m within two decades.
India is also a rather ‘special’ case in terms of retail, as historically there has been laws preventing international investment in the sector. These has only been relaxed in the past couple of years, but there is still some significant restrictions around the sale of multiple brands of products.
Woolworths face considerable challenges if they enter the supermarket business in India:
– the huge cultural differences in terms of both business relationships and customer needs
– the threat of government limits on operations (as driven by the political power of incumbent small-scale retailers, and/or anomosity to foreign/large firms)
– worries about economic stability
– the need to develop strong local supplier relationships
– the significant upfront (and ongoing) investments to acheive sufficient scale (with all the risks of failure this entails)
– the possibility that consumer behaviour/needs (such as price sensitivity) will be misunderstood