NEW GUIDELINES for FDI in retail trade of `single brand' products .

GUIDELINES for FDI in retail trade of `single brand' products are out from the Department of Industrial Policy & Promotion (DIPP), the Ministry of Commerce & Industry. Three conditions have been laid down. One, products to be sold should be of a `single brand' only. Two, products should be sold under the same brand internationally. And three, `single brand' product-retailing would cover only products which are branded during manufacturing. 

What is singularly visible is `single brand' right from the application stage, the starting point."The application would specifically indicate the product/product categories which are proposed to be sold under a `single brand'. Any addition to the product/ product categories to be sold under `single brand' would require a fresh approval of the Government". The latter clause introduces the much-dreaded `approval' system, while at the same time offering an apparent leeway to add more products as a sequel to `single brand'. 

But what is single brand retailing? Examples cited were of Sony and Nokia, when the Union Cabinet had given its nod to FDI in retail. Brands can be classified in many ways. Such as, product and service, single and multiple, best seller and unknown, foreign and local, and so forth. There are also the loved and unloved. Among the brands most `loved' by the visitors are Absolut, Apple, Coca-Cola, Audi etc.

"There are two main types of brand — manufacturer brands and own-label brands," "Manufacturer brands are created by producers and bear their chosen brand name. The producer is responsible for marketing the brand. The brand is owned by the producer." 

These are what the new FDI guidelines cover, when insisting that `single brand' product-retailing would cover only products which are branded during manufacturing. The other type, own-label brands, are created and owned by businesses that operate in the distribution channel — often referred to as `distributors'. Common examples are of departmental stores selling grocery under own labels, though the items might have been sourced from suppliers in bulk. 

With the emphasis of the new retail FDI regime on manufacturing, are own-labels out? The answer isn't yet clear, say experts, especially with regard to `store brands' or `private labels' branded during the manufacturing process. Presumably, the Government is averse to the idea of accommodating non-manufacturers in its new FDI policy. Which only means that any foreign investment flowing into retail may not directly benefit suppliers of locally-produced labeled goods. 

Let us not forget that global retail majors such as Wal-Mart, Gap, JC Penney, Ikea and Tesco source heavily from developing countries. 

"Wal-Mart's food exports from India could soon exceed those of its textiles procurement, which for the time being represent 65 per cent of the $1.5 billion worth of goods that the company sourced last year," informs the 4th edition of the PricewaterhouseCoopers From Beijing to Budapest: Winning Brands, Winning Formats 2005-2006. 

One learns that in China, Wal-Mart exports about $18 billion worth of goods a year, and the sourcing from the Dragon Land multiplied by five when it was permitted to set up retail operations in the country.

"The company sources 85 per cent of merchandise for its Chinese retail operations locally through domestic suppliers or global suppliers manufacturing locally. Metro also sources $1 billion worth of goods from China," informs PwC's report. 

Also remote is the possibility of a large format retailer turning into a manufacturer for all the items that are put on the shelves, because of diseconomies of smaller scale "International experience has shown that the entry of organised retailers who invest in the supply chain of developing economies has always paid off for the local population. When international retailers and wholesalers do come to India, their first job will be to determine which format they will employ," he said. Wonder if the new format that comes with a jingle called `single brand' will find audience among the global retail giants.