Wal-Mart says 'Namaste India', with Bharti

NEW DELHI: The world's largest retailer is finally here — it’s the most admired, the most respected, the most feared, the most loved and the most hated company in Corporate America. And if all goes well, bulge-bracket retailer Wal-Mart will set up its first shop in India on Independence Day — August 15 — through a franchisee agreement with Sunil Mittal's Bharti Enterprises.

It’s a name that sends shivers down FMCG spines, a company known for squeezing consumer goods companies around the world down to the last cent. For consumers, it's good news — Wal-Mart drives the best bargains and passes on the benefits to consumers. And after four years on top, Wal-Mart made way for the oil giant Exxon this year as America's largest corporation on top of the Fortune 500 list.

The patriotic Mr Mittal may have chosen Independence Day to start his ambitious venture, but it is unlikely that the Swadeshi brigade will be amused. After all, the whole idea behind the numerous restrictions on FDI in the retail sector was to keep the $316-billion behemoth Wal-Mart at bay, even though its main USP is value-for-money for the average consumer.

According to the agreement, Mr Mittal will own the company running the front-end retail operations, while both Wal-Mart and Bharti will invest jointly in another company, which will engage in cash-and-carry, logistics, supply chain and sourcing — areas in which FDI up to 100% is allowed.

“Bharti, with its deep knowledge of India's fast-growing consumer market and Wal-Mart, with its extensive global retail experience, share the same commitment to building relationships with producers in order to provide great quality at reasonable prices to consumers everyday,” said a statement from Bharti.

Though it was always clear that Wal-Mart could set up shop in India through the franchisee route, very few thought it would come in without any FDI. As a matter of global policy, the retail major likes to control its ventures through equity participation and that's the reason why it unabashedly lobbied with successive Indian governments to allow at least some amount of FDI in the sector.

A section of the Indian industry has reacted with surprise to Mr Mittal's formal announcement of the Wal-Mart-Bharti alliance, though ET has been reporting of the developments over the past few weeks.

For Sunil Mittal, “it's a joint venture of equals, not an equal-equity joint venture”. Asked how it felt to be the entry-point for the world's largest retailer, Mr Mittal shot back: "I would rather look at it as Wal-Mart becoming our partner for our retail venture.” However, Wal-Mart was more guarded in its response.

“It's too early for us to comment further as we have just begun our relationship with Bharti, but we are pleased to be in discussions with such a well-respected company that truly understands India's fast-growing retail market,” a statement issued by Wal-Mart said.

It will be interesting to watch the forthcoming struggle for wallet share between Mukesh Ambani's Reliance Retail and the Bharti-Wal-Mart partnership. This is what Mukesh Ambani, who's being dubbed as India's answer to Sam Walton (the founder of Wal-Mart), said on hearing the news: “There's place for 6-7 large players in the retail sector. Sunil is a dear friend and we will work together to make Indian retail strong.”

Kishore Biyani, who once confessed to ET that his ambition is to be the Sam Walton of India, believes the trick is to get the merchandise right. "If that goes wrong, there will be no chance to run your stores ever. Retailers have to Indianise... But there's no denying the Wal-Mart effect. We will strive to ensure we get close enough."

And for FMCG companies, who fear that the rise in modern retail formats will eat into their margins, it's going to be an uphill task to maintain profitability. Listen to Godrej chairman Adi Godrej: "Good FMCG companies will work on their efficiencies and brands to claim better bargaining power. Global companies like P&G and Nestle are fine examples of companies that are very strong despite Wal-Mart."

Most of the Indian business houses which have held discussions with Wal-Mart in the past felt that it was too big for comfort. Besides being a financial power-house, most countries where Wal-Mart has entered have perceived it as a hydra-headed retail giant capable of gobbling up local stores.

However, industry and commerce minister Kamal Nath feels that large retailers can do a lot to improve the retail infrastructure in the country. "The country needs technology to set up cold-chain capabilities and this is where investments should come. It is not construction or building that lies at the heart of retail," he said.

The naysayers, well, will remain naysayers... And soon after the deal was announced, the Hate-Wal-Mart brigade sounded the warning bells: "Wal-Mart is a notorious MNC which has created problems in countries like Canada. In some places, it has forced goverments to change laws to suit it."

Source :Economic Times
 

gaurav200x

Gaurav Mittal
Well Wall mart surely can do gr8 if they can 'indianize' the malls..... I am sure that with bharti, and with wall-marts expertise on the market, they can work wonders and this will surely give a good competition to desi vendors.
 

vengabeats

Par 100 posts (V.I.P)
gaurav200x said:
Well Wall mart surely can do gr8 if they can 'indianize' the malls..... I am sure that with bharti, and with wall-marts expertise on the market, they can work wonders and this will surely give a good competition to desi vendors.


dude...i think so it will be a threat to the desi vendors
already Reliance is also entering in it
 

gaurav200x

Gaurav Mittal
vengabeats said:
dude...i think so it will be a threat to the desi vendors
already Reliance is also entering in it
Threat maybe.... but i see it from the competition angle.... More competition and it is always consumer friendly.... This certainly would force the desi vendors to improve their service. Moreover, unless the firangi folks make the malls desi.... they wont run.... which simply means, that u would buy vegetables only when the price is nearly the same... Who would run for the items when they cost a lot more in the malls than outside.

Hence, walmart would have to keep in mind this fact if at all, they want to run in India.
 
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