France-based Auchan’s hybrid model for retail shot down by DIPP

May 18 2013, 05:02 IST
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SummaryAuchan hypermarkets in India came into being in 2012 and have retail space of 6.3 lakh square feet in the country at present

The proposal by Croix, France-based Auchan Group, the world’s 10th largest retailer, of setting up stores in India under a hybrid model has not found favour with the department of industrial policy and promotion (DIPP). The 46-billion-euro retailer has been told that it cannot use the Auchan brand name in its existing 13 stores on a franchise model with the Landmark Group’s Max Hypermarkets India.

Company representatives had last month met DIPP officials proposing to set up stores in India on a hybrid model and invest more than 2 billion euros over the next two years.

The hybrid model entailed, apart from using a common brand name for stores owned by it in partnership with an Indian entity as well as its current stores in the country being run on the franchise model, using the same back-end infrastructure for both sets of stores. The company was keen on this hybrid model since the policy on foreign direct investment in retail allows for such stores to be set up only in cities with a population of more than 1 million. Further, the stores can be opened only with the permission of the respective state governments. Through the hybrid model the company thought it would be able to expand across the country bypassing such obstacles.

“Auchan can’t use the same back-end infrastructure for its FDI and non-FDI stores. They will have to create fresh infrastructure for investing directly in multi-brand retail, which is necessary to generate employment in the country,” a DIPP official told FE.

“They cannot use the Auchan name in their stores as it is a franchise model they are working on,” the official added.

An e-mailed query sent to the French retailer did not elicit a response.

“We are very enthusiastic about the Indian market. The new regulations are a new issue for us. So we are considering explaining our ambitions and seeking for some advice in order to address the best way this huge potential market can be tapped,” Auchan global chairman Vianney Mulliez had earlier said after a meeting with commerce and industry minister Anand Sharma.

Auchan hypermarkets in India came into being in 2012 and have retail space of 6.3 lakh square feet in the country at present. Currently, the company does more than 95% of its sourcing locally for its existing stores here.

The company clocked 46.9 billion euros in consolidated revenue before tax in 2012.

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