New Delhi: US retailer Wal-Mart Stores Inc. is all set to launch its cash and carry store in India in partnership with Bharti Enterprises Ltd. But don’t expect to find a Wal-Mart store in the country because its local avatar will be known as Best Price Modern Wholesale. After a slow start, Wal-Mart is confident of accelerating its India plans. In an interview, Wal-Mart India president Raj Jain talks about expansion, pricing, foreign direct investment (FDI) regulations and Wal-Mart’s journey to India. Edited excerpts:
Strategic market: Wal-Mart India’s Raj Jain says the firm will not shy away from whatever investments it needs to make in the country. Harikrishna Katragadda / Mint
It has been a slow start for you in India. What have been the reasons for the delay?
Well, I wouldn’t say it’s a delay. I think when we announced our venture way back in 2007, we said we would like to open our first store at the end of 2008. And honestly the key reasons for it taking longer than anticipated is that the real estate market was very hot at that point of time... So, as you know, things have settled down a bit, globally as well as in India, things are at reasonable level. So, I think that helped a lot. Secondly, I think we have done a lot in the meantime, we have opened a distribution centre through which we are supplying to Bharti’s retail stores. So I think we have accomplished a lot at the back-end, which is not visible to the general public.
We have seen prices of real estate come down sharply. Now that you have managed to tie up real estate, are we going to see you accelerate your expansion plans?
Absolutely. In fact, there is good news on that front. If you remember, going back to 2007, we talked about opening of 10-15 stores in the next seven years. I think we can open 10-15 stores in the next three years.
Is the real estate all leased out, or are you buying as well?
Currently, it’s a leased model, but we are looking at both leased and owned model. So, it will be a hybrid of both.
And what are the locations that you will be looking at? Why have you chosen Amritsar to launch? Now Bharti started off in Ludhiana and you have decided on Amritsar, what is the fascination with Punjab?
Well, it is a great market, great place, great consumers and great trade in Amritsar, or in Punjab in general. As you know, we have focused on Punjab because supply chains have to be regional in India. We have not yet reached a point where we can have national supply chains. So, I think, for the next couple of years, we will focus largely on the northern areas, so starting with Punjab and then from Punjab coming down to Haryana, Uttar Pradesh, Rajasthan, Delhi, even Madhya Pradesh. So, those are the areas where we are focusing on.
The brand is not Wal-Mart, but it’s Best Price Modern Wholesale. There is absolutely no confusion about what the proposition is. But why not Wal-Mart?
As far as Wal-Mart is concerned, it is a consumer brand. It is not a wholesale brand, so to put it on a wholesale cash and carry facility would not have been appropriate... We do have a couple of brands globally—Maxis is one of them, Sams another. So, we checked these brands with our customers and Best Price won hands down; it is very simple...
We have seen a review as far as FDI guidelines are concerned. There is ambiguity whether you can invest in a holding company, which can then go on to make downstream investments. Have you managed to get clarity on that, and has that changed your India perspective?
As far as partnership is concerned, we are fully committed to our partnership with Bharti. That was always the case from Day One and we will continue our journey. I think we read a lot in the press as to how confusing, or otherwise, these announcements are. And now there is a new government in place, and it will take appropriate steps in the right direction. Our view is FDI should open in multiretailing.
I think it is good for our country and supply chain. We need FDI. Unlike a few years ago, when FDI was very hot, FDI wanted to come into the emerging markets, now we have to be competitive to attract FDI.
But are you actually hopeful of things opening up, because the government did commission a study that says it will be useful if it brings FDI in the organized retail market, but there seems to be a rethink? The thinking seems to be that perhaps this is not the right time to allow FDI in multibrand retail.
I think we have read and seen over the last three years how much hype has been created about retailing and modern retailing in India. It is not about FDI. It actually doesn’t matter where does the money come from. And some of the large apprehensions about, you know, the traditional trade, the kiranas, etc., along the modern, should be behind us.
You spoke about hype as far as the retail business is concerned in India and we saw about a year ago everyone jumping onto the retail bandwagon, and we have seen how dramatically things have changed. From rolling out 400-500 stores, people are now talking of cutting down store sizes, laying off people. What went wrong, according to you?
I think what really changed is that there was too much of euphoria and hype about retailing, and probably people thought this is a sure-shot 100m dash, if I may use the terminology. And whoever breasts the tape first is the winner. The truth about retailing is that it’s a marathon and it takes several hours and laps to complete it, and it really dosen’t matter who wins the first lap. And those who are committed to retailing in the long run, and those who have patience and understanding of the consumer and of technology behind retailing, win the race.
OK, in terms of Indian investment, if you are talking about aggressively expanding or accelerating your India plans, are we going to see that in terms of investment as well?
Yes, of course, investment is a not a problem in terms of India... It is a strategic country and I don’t think we, as a company, will shy away from whatever investments we need to make.