World’s largest retailer Wal-Mart (WMT, Financial) were among the first retail players to have bet big on the huge prospect of the Indian retail Industry. India’s retail industry is still largely unorganized and mostly comprised of small mom-and-pop stores. So, after the present government in India allowed 51% foreign ownership in supermarkets, Wal-Mart should have enjoyed the first mover advantage. However, it hasn’t quite turned out that way for the Arkansas-based retail giant.
Wal-Mart had plans to open eight new wholesale outlets in India in 2013; however, it did not open a single one. This voluntary measure to hold expansion plans has been necessitated by bribery allegations that have taken the India setup by storm. In 2012, top executives at the company faced allegations of violation of the U.S.’s Foreign Corrupt Practices Act.
To make matters worse, the political party that is expected to win the ongoing elections in India has clearly indicated its intention to roll back FDI in retail. If that did materialize, it would certainly be a huge disappointment for Walmart.
Keeping all the speculations aside, the company has announced its plans to open 50 new Cash and Carry stores over the next five years and has insisted that it is committed to building its supply chain infrastructure in India.
Scott price, CEO and president of Walmart Asia, said,Â "Wal-Mart is committed to India and we are excited about our growth plans. We will continue to focus on the Cash and Carry format as we are very happy with the way it has shaped up in the last few years. Along with our growth, we are taking a number of important steps to strengthen compliance so that we do the right thing every day. We are evaluating and reinforcing procedures and programs relating to all compliance areas, including licensing and permits, food safety, and responsible sourcing among others.”
Having already exited a joint venture with local player Bharti Enterprises, the company currently operates 20 stores in cash and carry format and sells directly to traders.
Wal-Mart is also poised to enhance its E-commerce foothold in India through the B2B Format. Global players like Amazon have already scaled up its presence in India. Since 100% FDI is allowed in this segment, the immense potential of this virtual shopping space cannot be over emphasized.
What Lies Ahead
Other global retailers like Carrefour and Tesco have also been investing a lot on infrastructure, especially the Cash and Carry format, to get a piece of the $500 billion Indian retail sector. Wal-Mart, though, seems to be making the right moves as a combination of e-commerce and stores, which work as physical evidence, is sure to be a success in this market.
With the news of Wal-Mart launching a money transfer facility in the U.S., it would be interesting to see if there is a possibility of such financial services in India too, which is characterized by large chunks of unbanked areas badly in need of good and reliable financial services like money transfer, and prepaid debit card services that Wal-Mart already provides. That of course would need clearance from Reserve Bank of India.