NEW DELHI: Amid tremendous interest in his and his company’s movements, Wal-Mart Stores Inc. vice-chairman Michael Duke began a low-key visit to India aimed at finalizing details of a high-profile joint venture with Bharti Enterprises that would potentially allow the world’s largest retailer to enter organized retailing in India.
Duke spent an hour checking out Inorbit, one of the biggest shopping malls in Mumbai. “It’s good to learn about Indian customers and see how things are set up here,” he told reporters.
Wal-Mart also issued a statement saying that the company’s plans with Bharti to enter India as a wholesaler to businesses and other retailers are “still being discussed”. Duke is not expected to make any announcements during his trip to Mumbai and New Delhi. He is widely expected to meet Union minister for commerce and industry, Kamal Nath, on Friday.
In November, the Bentonville, Arkansas-based retailer entered into a memorandum of understanding with Bharti, which owns the country’s largest mobile phone network Airtel, to “jointly explore business opportunities” in India’s $9 billion (Rs39,600 crore) annual modern retailing market, which is expected to touch $43 billion by 2010 and would swell to $114 billion by 2015, according to one McKinsey & Co. forecast.
Since Indian regulations restrict foreign retaliers from selling products directly to the country’s consumers, Bharti will operate the retail stores, with the American giant likely managing supply-chain and logistics.
“We recognized the value of having a partner like Bharti,” Wal-Mart had said at the time of signing the initial agreement. That’s why the company is “looking at cash-and-carry (business) jointly with Bharti”.
With domestic sales not growing as rapidly as it is used to, Wal-Mart sees India as a potential new frontier. “We believe that India, with the dramatic growth of its middle class and with the policies that this government is putting in place, offers an excellent opportunity for our kind of retail,” Wal-Mart chief executive Lee Scott had told an investor conference in 2005. However, in the same breath, he had added a note of caution, “It has to be done the right way. There are a lot of concerns...about how a company would do that, how quickly they might grow.”
“Wal-Mart has been sensitive to the whole political scenario in India right from the beginning,” said Devanshu Dutta, head of retail consultancy firm Third Eyesight.
Still some concerns came into the spotlight again recently when the chairperson of Congress-led ruling alliance, Sonia Gandhi, alluded to Wal-Mart’s entry into India and its potential impact on the country’s millions of small shopkeepers in a letter to Prime Minister Manmohan Singh.
Much of the focus on whether organized retail would impact the millions of mom-and-pop stores in India has focused on Wal-Mart and other foreign retailers who have expressed an interest in the country, such as Tesco and Carrefour.
But much of the nascent organized retailing efforts in India are currently coming from major players such as Reliance wanting to set up hundreds of retail stores throughout the country.
For their part, Bharti officials tried to play down its partnership with Wal-Mart earlier this week when they unveiled the company’s $2.5 billion investment plans for its retail venture. “Bharti Retail is like any other Indian (retail) company,” said Rajan Mittal, who is heading the venture. “We are no different.”
Wal-Mart started its international foray in 1991 and says it serves 175 million customers every week in more than a dozen countries, from Costa Rica to China. Not all of its ventures outside the US have been successful, notably in Germany.
Some 100 protesters led by the Communist Party of India (Marxist) rallied against Wal-Mart outside the ministry of commerce and industry.
—Ashok Sharma of AP contributed to this story.