Sheikhs fail to shake up Indian consumer markets

31 Jul,2013

By Rasul Bailay & Vijaya Rathore

 

Thousands of Indians may have struck gold in the Gulf with their hard work, but most Sheikhs who ventured into the Indian consumer market have failed miserably due to factors ranging from operational issues to religious tenets.

 

A number of Middle East enterprises that successfully run franchisee stores of various global brands in their home markets, such as the region’s largest mobile phone retailer Axiom Telecom, Jawad Business Group, Sharaf Group and BinHendi Enterprises, have either shut down their shops in India or diluted their stakes.

 

Last month, for example, Dubai-based conglomerate Sharaf Group, which successfully runs franchisee stores of global brands such as Forever 21 and Woolworths in its home market, shuttered its lone India franchisee store of Forever 21 in New Delhi. The Los Angeles-based fashion retailer has now picked DLF Brands as a local joint venture partner for expansions in India.

 

Experts attribute the Sheikhs’ failure in India to various reasons starting with their inability to understand the complex Indian retail market. “Most of these entrepreneurs like to control their businesses sitting in the Middle East,” a retail consultant says. “Which is not a great idea, especially in a market like India where local knowledge and connections are very crucial,” the person adds.

 

Gaurav Marya, president at Franchise India Holdings that advises companies on franchising opportunities in the country, says the retail environment in India is different and is difficult to operate in. “The cost of real estate and marketing is very high, besides high attrition rate of shop floor staff, unlike in the Middle East,” he says. “Given the challenges, many companies from the Gulf have either gone slow or pulled out their investments,” Marya adds.

 

Axiom Telecom LLC all but ended its equal wholesale business with Future Group last week after filing an arbitration case in Singapore against its local partner. It has also filed a case in the Bombay High Court, accusing the Kishore Biyani-led group of breach of contract, a person with direct knowledge of the cases says.

 

“The joint venture still exists on paper but in reality and practice its not there,” the person says, adding that Axiom is seeking damages of 150 crore with interests from Future Group through the Singapore arbitration. Ashish Bhan, a lawyer representing Axiom, declined to comment. Future Group has not yet responded to an e-mailed questionnaire sent on Saturday.

 

Bahrain-based Jawad Business Group – which operates more than 300 outlets of foreign brands such as Adams, Accessorize and Costa Coffee from the UK, Spanish brand Mango and US-based Papa Johns Pizza – is looking to dilute its remaining 20% stake in Papa Johns franchisee in India. It had sold 80% in the venture to Chennai-based TVS Capital in 2010. Currently TVS and Jawad are in talks with private equity players to raise money and Jawad will further dilute its stake to become a miniscule minority, a person with direct knowledge of the matter says.

 

Jawad has also folded up other retail ventures of Adams Kids and Pumpkin Patch in India. Jawad Business chief executive has not yet responded to an email.

 

If these firms mostly failed to understand the intricacies of the Indian market, UAE-based BinHendi Enterprises LLC decided to shut its lone franchisee restaurant of Japanese Cafe Japengo in Mumbai tony Nariman Point area after realising what consumers wanted.

 

Mohi-Din BinHendi, president of BinHendi Enterprises, says serving alcohol is vital for any fine-dining restaurant to become successful in India. But that would be against his cultural and religious tenets, so he decided to quit. “I do not want to make money by serving alcohol to people. It is a matter of principle for me,” BinHendi said over the phone from Dubai.

 

Source:The Economic Times

Copyright © 2013, Bennett, Coleman & Co. Ltd. All Rights Reserved

Licensed to republish

 

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One response to “Sheikhs fail to shake up Indian consumer markets”

  1. Himanshu Agarwal says:

    This warrants the question if Retail is a match which can be only won on the home ground? Would like to see a series feature on this thread.

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