FDI in retail: What it means for the Indian gaming industry

The Indian government recently greenlit its long-delayed plans to allow 51 per cent foreign direct investment in multi-brand retail in India, which analysts believe could bring in $2 billion in investments over the next two years.

The move paves the way for international retailers such as Amazon.com and Carrefour to set up retail operations in India. Both companies have shown keen interest in expanding to India.

Amazon, the world’s largest online retailer, already has a presence in India via a logistics arm as well as a development centre that provides backend support to all Amazon websites.

Earlier this year, the company launched Junglee.com, a retail aggregation service that also facilitates purchases from Amazon’s international websites, but due to prevailing government restrictions, stops short of selling products directly.

With the government now allowing 51 per cent FDI in multi-brand retail, Amazon is expected to begin its retail operations in India soon, for which it will use the amazon.in domain. Amazon also recently opened up the Kindle store to Indian users.

Amazon is expected to invest $3 million and employ 300 people in India in the initial phase.

Amazon offers products across several categories, gaming being one of them. And since the gaming category has been included in Junglee.com since its launch, it wouldn’t be a stretch to assume that the company would do the same for its retail business in India. Amazon will compete directly with Indian online retailers such as Flipkart, Infibeam and HomeShop18, as well as specialists such as Game4u, NextWorld and Intencity.

Flipkart is currently considered to be India’s largest retailer for video games.

The fact that the government is leaving the door open for individual states to disallow international retailers from setting up shop within their borders shouldn’t be an issue for Amazon. Due to the online nature of its business and the fact that it already has its own logistics in place, the location of its retail operations won’t be of much concern.

That policy will, however, impact offline multi-brand retailers such as Carrefour, which also has aggressive plans to expand in India.

One of the world’s largest hypermarket chains, Carrefour already has a presence in India, with stores in Delhi and Jaipur, but in accordance with existing retail norms, these stores operate only on a cash-and-carry basis.

With 51 per cent FDI coming in, Carrefour is expected to make a more aggressive push into India and expand its product offerings to include games and related hardware, which it does offer in other countries.

Aside from Amazon and Carrefour, Costco, Tesco and Wal-Mart are also looking to enter the Indian retail market. Wal-Mart has already entered into a joint venture with Bharti Enterprises to open cash-and-carry stores in the country.

What it means for gaming

Game distributors and consumers have for long lamented the lack of knowledge about games amongst retail buyers, which is vital for an entertainment medium that is still growing in India.

With the entry of retailers that have been offering video games in developed markets for a long time, it will bring in game retail expertise that is currently sorely lacking amongst even the large format retailers.

In a price-sensitive market such as India, retailers are constantly looking to undercut one another by offering lower prices even on new games. With these international retailers operating on a large scale, it will allow them to offer more aggressive prices. More competition amongst retailers is good news for consumers.

Most of all, the influx of international retail brands means there will be more store shelves stocked with video games. With electronics retail chain Croma drastically reducing its focus on gaming lately and a recent plateauing of India’s mushrooming mall culture, the government’s retail reforms couldn’t have come at a better time.

Update: The Indian government has imposed a ban on FDI in multi-brand online retail, which means that the likes of Amazon will still be unable to set up shop in India.

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