Wal-Mart in India

‘In most countries, supermarket chains create and manage well-oiled supply chains to offer consumers lower prices and dampen inflationary trends. Inflation in India is touching decade-highs. But then it’s a fallacy that in India it is always about low price’. Companies like Tata, Birla and Reliance have all attempted to enter food-and-grocery retailing in India with mixed success. Will Wal-Mart’s supply chain work in India?

Contents

1. Introduction – Wal-Mart’s first store in India
2. Joint venture with Bharti Enterprises
3. About Wal-Mart
4. Wal-Mart – Background Note
5. Wal-Mart – Timeline
6. Wal-Mart – Quick Facts
7. The world’s largest retailer isn’t new to India
8. India’s first special skills training centre
9. Exhibit – Wal-Mart’s business model in India
10. Mera Kirana programme
11. Exhibit – Foreign hypermarket chains in India
12. Wal-Mart Internationally
13. Exhibit – Wal-Mart and Expansion into International Markets
14. Wal-Mart’s imperfect success record in a foreign country
15. Cost-Leadership Strategy- Wal-Mart’s core philosophy – EDLP (every day low prices)
16. Will Wal-Mart succeed in expanding outside the U.S.?
17. Best Practices and lessons from the International Markets
18. Wal-Mart India – Plans and Challenges
19. Wal-Mart’s Strategy and Supply Chain tuning for India
20. Physical and Regulatory Challenges
21. The Indian Consumer
22. Bringing private label suppliers to India
23. Will the kirana store go out of business?
24. Advantages of a small Indian shopkeeper – The Kirana store
25. Exhibit: Wal-Mart – Store Formats
26. Exhibit: Wal-Mart – International operating formats
27. Questions for Discussion

Sample Page/Content

"India is a price sensitive market and therefore we will be devising our strategy for her very carefully…Retailing is like a game of three dimensional chess where we operate as a local, regional and global player, so depending on the needs of the market we shall change our format and adapt." – John B Menzer, President and CEO, Wal-Mart International.

"India is not a homogeneous market, so ours is not a cookie-cutter approach from the U.S. …Wal-Mart is in no hurry to unfurl the Wal-Mart flag nationally. The easiest thing is to roll out stores, but the most difficult is to sustain and feed them." -Raj Jain, President of Wal-Mart India in May 2009.

"Wal-Mart operates with multiple private brands around the world. In each market that we operate, we look to be local. We treat each market as unique and India, in this respect, is no different." -Arti Singh, vice-president of Corporate Affairs at Bharti Wal-Mart.

1. Introduction – Wal-Mart’s first store in India

In December 2006, Wal-Mart Inc. believed that by the year 2015, 35% of India’s retail sales could be from chain stores . This was a radical increase from the prevailing 2%. In May 2009, Wal-Mart was ready to open its first store in India. The reason for Wal-Mart’s entry in India was clear – The Indian middle class . The world’s biggest retailer had been silently working on its strategy for India for around two years. Mom-and-pop stores and traditional distribution networks dominated the $375 billion Indian retail market. Wal-Mart’s first outlet was set to launch in the city of Amritsar, Punjab in North India. The first store air-conditioned and built over 50,000 sq. ft. was on the outskirts of the city, Amritsar. The store employed 200 locals and was likely create 500 indirect jobs. In the first few weeks itself, the company had managed to sign on close to 35,000 members. However, the debut outlet was not to carry the familiar Wal-Mart brand. Did this mean Indian consumers could not benefit from Wal-Mart’s everyday low prices?

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Case Updates/Snippets

• 50:50 joint venture: In India, Wal-Mart has a 50:50 joint venture with Bharti Enterprises in the wholesale cash-and-carry segment.
• Direct Farm Program: Multinational retail giant, Wal-Mart’s Direct Farm Program in India is a partnership with 110 small and marginal farmers near Ludhiana in Punjab where it encourages cultivation of safe, high-quality, seasonal vegetables. Farmers are advised at every stage of cultivation by field agronomists. Farmers learn about nursery management, transplanting, nutrient management, as well as harvest and post-harvest practices.
• Wal-Mart India in 2010: In 2010, Bharti-Wal-Mart plans to launch seven Best Price Modern Wholesale Cash-And-Carry stores across India. These stores will be 100,000 sq ft in size and each store will involve an investment of $6-7 million.
• Sourcing from India: Wal-Mart has a large sourcing business in India. The retail major sources goods worth $125 million a year from Punjab. In 2010, Wal-Mart is planning to increase sourcing from India to strengthen its global business.
• Preference for Kirana/local retailers: According to a survey by ASSOCHAM in early 2010 in which it interviewed 5000 shoppers in various cities in India, kirana stores (mom and pop stores) and local retailers were the preferred destination for shoppers as compared to shopping malls. The survey found that goods were less expensive (as much as 25%) in local kirana stores as compared to big shopping malls. Smaller stores also offered more variety and affordable options with sustainable quality at a negotiable price (reduced margins).
• Training centers: Inheriting a model from its U.S. parent, Bharti-WalMart (Best Price Modern Wholesale) intends to set up its own training centers to train less-privileged youth to work in retail stores.
• FDI in retail in India: In India, the Government presently does not allow foreign investment in multi-brand retail. It allows 51% FDI in single-brand retail and 100% in wholesale venture. In 2007, Walmart Stores and Bharti Enterprises entered into a joint venture and began cash & carry stores under the brand Best Price Modern Wholesale.