Wal-Mart targets Indian growth

09 May 2011

NEW DELHI: Wal-Mart, the world's largest retailer, plans to double the size of its Indian joint venture over the next two years, based on an expectation of rapid market growth.

The US organisation trades through a partnership with Bharti Enterprises in the country, where official legislation limits non-indigenous companies to pursuing wholesale, rather than multi-brand retail.

It has outlined the intention of supplementing its existing roster with an extra 20 stores to in the near future, having first entered the Asian nation in 2009.

"In the next one or two years we do anticipate we will be in a market leadership position," Raj Jain, chief executive of Bharti Walmart, told Livemint.

This scheduled expansion easily surpasses the rate of development revealed two years ago, when Bharti Walmart stated the goal of unveiling approximately 12 outlets by 2012.

The current network, which has required an estimated investment of $45m, incorporates six Best Price Modern Wholesale stores in Punjab, as well as single sites in Kota, Rajasthan and Bhopal.

Target areas going forward include Karnataka, Andhra Pradesh, Chhattisgarh and Maharashtra, with attempts to "cluster" Best Price units in particularly important regions.

"We have always followed that strategy and we were largely focused on Punjab, although we opened stores in other places also," said Jain.

He reported the wholesale category is worth around $140bn annually, from a retail sector valued at $350bn overall, with traditional formats still holding a crucial role.

"The opportunity is huge," Jain said.

Tesco, Carrefour and Metro are all boosting their own presence in this segment, suggesting competition could intensify dramatically.

Although pressure has been mounting to permit foreign direct investment (FDI) in multi-brand retail, Wal-Mart does not intend to abandon its wholesale activities.

"We know that the debate of FDI in retail is continuing but in the meanwhile we are opening cash-and-carry," said Jain.

"And even after India's FDI opens, I don't see why we should stop opening cash-and-carry."

More specifically, the possibilities resulting from serving consumers in less urbanised parts of India means this model retains a strong appeal.

"There is a need in the hinterlands of India to improve the quality of the distribution and products, pricing and availability to the customers," Jain said.

"The initial experience has been good so we shall continue to be on this path in addition to whatever FDI allows us to."

Abhishek Malhotra, a partner at Booz and Co, the consultancy, agreed the wholesale field may prove a useful sideline if the market is liberalised, as rivalry across the supermarket arena would be especially fierce.

"Even if they are allowed in, more and more such foreign companies will continue to operate in that space," he said.

Data sourced from Livemint; additional content by Warc staff