BackWalmart India to launch B2B online operations in July
Retailer to launch wholesale e-commerce operations in Hyderabad and Lucknow before expanding to cities where it is present by January
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New Delhi: Wal-Mart Stores Inc., the world’s biggest retailer, will launch wholesale e-commerce operations in Hyderabad and Lucknow next month before expanding to other cities where it has a physical presence by January, seeking a foothold in a potentially lucrative online market for its cash-and-carry business.
The Walmart India business-to-business (B2B) website will be branded around BestPrice.
The website will offer customers within a 40km radius the option of ordering online and picking up products from a physical cash-and-carry store or having them delivered, said Krish Iyer, president and chief executive officer.
“The idea is to service sellers who currently find it difficult to access our stores," Iyer said in an interview.
Currently the retailer operates 20 cash-and-carry stores in India. In April, the company said it would open 50 wholesale stores in four to five years and establish an e-commerce platform in India.
The online venture comes at a time when e-commerce in India, which has upwards of 200 million Internet users, is expanding at a rapid pace. Online retail is worth $3.1 billion, or 10% of the organized retail market, and is estimated to grow to $22 billion, or over 15% of the organized retail market, in five years, according to a November 2013 report by brokerage firm CLSA.
Walmart’s presence is limited to cash-and-carry stores. In 2012, the government allowed foreign supermarket operators to hold a stake of up to 51% in local store chains, but Walmart hasn’t moved to build a presence in the so-called multi-brand retail market amid political opposition to the move and lack of sufficient clarity in policy.
India doesn’t allow foreign direct investment (FDI) in both online and offline retail that sells directly to individuals.
The Bharatiya Janata Party (BJP), which swept to power in the April-May general elections, has opposed FDI in multi-brand retail.
Last year, Wal-Mart and Bharti Enterprises called off their Indian joint venture, which ran wholesale stores called Best Price Modern Wholesale. Wal-Mart acquired Bharti’s 50% stake in the joint venture, giving the US retailer 100% holding in the company Bharti-Walmart.
As far as opening front-end stores in India is concerned, Wal-Mart would continue to study the market and wait for the regulatory framework to be eased, said Iyer.
“...as far as retail is concerned, we want to study the environment, we are not currently representing that we want to be in retail...we are currently studying the regulatory environment," he added.
Neither is it seeking a joint venture “We currently are not thinking of that. We don’t need a joint venture right now," Iyer said.
Walmart is focusing on expanding its cash-and-carry business and venturing into wholesale e-commerce in the cities it currently has operations in—both spaces are open to 100% FDI.
“FDI in (business-to-consumer) e-commerce is currently not allowed and we would continue to study the regulatory environment. We will not jump the gun...primarily because our hands are full at this point of time and there is a lot to be done in cash-and-carry," Iyer said.
Globally, e-commerce is high on the agenda of Wal-Mart as it faces increasing competition from online retailers such as Amazon.com Inc.
Iyer said that even if the Indian government were to open up FDI in consumer-facing e-commerce, the retailer would not shift its focus from the wholesale business given that the two are entirely different business models.
“We will continue to follow on our course of establishing B2B e-commerce in all the stores," Iyer said.
According to Iyer, the size of the overall wholesale market in India is currently pegged at $300 billion, $50 billion of which is Wal-Mart’s addressable market.
The retailer, which earned $473 billion in revenue in the fiscal year ended January, has been under a cloud for its lobbying activities related to India. In 2012, top executives at the company came under the scanner after allegations that in the process of lobbying they may have violated the US Foreign Corrupt Practices Act (FCPA).
“As far as the FCPA is concerned some of the investigation is still in progress. Whenever the findings are completed those will be known," Iyer said.
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