Wal-Mart, the world’s largest retailer is set to open its first sales venture in India and has teamed up with Bharti Enterprises to open Wholesale stores in the country.
The Number 2 Fortune 500 company, which has been amongst the best companies to weather recession is planning to enter the country’s vast consumer market and has teamed up with the parent company of India’s largest telecom company, Airtel in a wholesale joint venture to be called Best Price Modern Wholesale.
Raj Jain, chief executive of Wal-Mart India says, “India is first of all a country with close to 1.2 billion people and a strongly growing economy which is driven by personal consumption,There’s a need to start out on a learning curve with the Indian consumer and this is the first significant step in that direction.”he told AFP.
The company isn’t opening up to consumers because of the country’s strict FDI rules in the consumer retail markets in which no overseas chains are permitted in the retail sector — except for single-brand outlets such as Nokia or Reebok. The rules have been setup after massive protests against the organised retailers amid fears that the country’s 15 million “mom and pop” stores shall be out of business.
Thus Wal-Mart can just be a wholesaler and must partner with domestic companies to enter the $400billion retail market which is pegged to grow much further.
Wal-Mart which had revenues of $405,607million in 2008 plans to open 15-20 outlets and employ about 5000 people in India. CEO Jain hopes that the country opens up the FDI (Foreign Direct Investments)norms in the sector so that “Huge investments and better infrastructure ” shall be possible for the country’s unorganised retail sector.
But even when the Regional players like the Pantaloon Retail(parent company of Food Bazaar and Big Bazaar) Reliance Retail (Reliance Fresh & Reliance Trends) there were concerns that the mom and pop stores shall be threatened by the organised players. But they weren’t. The consumers in India do not go to the organised retailers to buy good in small quantities. Only when they have to buy goods in greater quantities like buying stocks for the week, they go to the organised retailers which have been quite successful in getting the upper middle class of the country to their shops , largely by providing better discounts.
Lately, the country’s large retailers have been in debts due to the downturn as they has borrowed a lot when the situation was bright and things were looking very good. But when the optimism started to decline and the consumer sales fell, many retailers like Food Bazaar, More etc. had to shut down shops ,cut down spending and try their best to increase same-store sales in which the Pantaloon Retail group has been the most successful till now.
But whatever happens with a population of 1.2 billion and a large middle-class population, the country can surely not be avoided by the large enterprises who are looking at emerging markets after things the mature markets started looking bleak.
