100% FDI in single-brand retail to help Companies Apple, Xiaomi and Oppo in India

New Delhi, January 10: Tech giant Apple and Chinese handset makers like Xiaomi and Oppo could turn out to be big beneficiaries of the government allowing 100 per cent FDI in single-brand retail under automatic route, say analysts. Setting up own stores helps brands offer closer engagement with customers, something that will come handy for these global giants seeking to woo customers in the hyper-competitive Indian handset industry.

According to Counterpoint Research Associate Director Tarun Pathak, Chinese players, as well as companies like Apple, have engaged with customers through multi-brand outlets. “With their own stores, they can manage the end-to-end experience for the customers,” he said.

While the move itself is a positive one for handset makers like Apple, pricing of devices will play a crucial role in the success of the brand in the Indian market, Pathak said. Apple, which plays in the premium category, has its own stores across major cities in the world, including in markets like the US, Australia, China, Singapore and Hong Kong.

Anshul Gupta, Research Director at Gartner India, said that the latest decision “removes systemic friction and will allow global brands to speed up investment to begin operations sooner”. “Easing of norms will definitely excite global brands to enter into India to tap the vast consumer market,” he added.

Last year, Oppo Mobiles India had received the nod to undertake SBRT (single brand retail trading) of OPPO brand, in addition to the existing business of wholesale. An industry watcher said many Chinese companies have set up their own stores in China as well that drive strong sales for these brands. He added that Chinese companies like Xioami and Huawei would hope for a similar outcome in India as well.

Till date, 49 per cent FDI was allowed under automatic route, while beyond that government approval was required. “It has now been decided to permit 100 per cent FDI under automatic route for SBRT (single brand retail trading),” the government said in a statement. As part of changes in FDI norms in the SBRT, the government has also relaxed mandatory local sourcing requirement of 30 percent, which has been a long-standing demand from foreign brands.

Under the relaxed norms, a foreign retailer will be able to get credit from the incremental increase in sourcing for its global operations from India towards the mandatory 30 percent local sourcing requirement for its business in the country.