New Delhi: Wal-Mart Stores Inc., the world’s biggest retailer, said the opening of its first cash-and-carry store in the country may happen only early next year, some 24 months after the company said it was exploring a joint venture and more than a year after it inked an agreement with Bharti Enterprises for the venture.
The company had previously said it would open the stores in the second half of 2008.
Wal-Mart’s Vice Chairman Michael T. Duke seemed unfazed by delays and added that Wal-Mart may choose not to use its own brand for the stores because it often uses local names outside its US home market.
In other countries, “the business operates under 52 different names,” he said. “We think it’s best to look at the market and say what will appeal best to the consumer.”
The cash-and-carry format, where products are sold to other shopkeepers and not consumers directly, is the only retail format where 100% foreign ownership is allowed in the heavily restricted retail business in India, worth an estimated $300 billion (Rs12.06 trillion) a year in sales. Indian laws bar foreign retailers from selling multiple products to consumers under one roof preventing the likes of Wal-Mart and others from forming such normal retail ventures.
Wal-Mart vice-chairman Mike Duke. (Aaron Skinner / Bloomberg)
However, Wal-Mart chose to enter the cash-and-carry segment as well through a 50:50 joint venture with Bharti, whose promoters, the Mittals, make much of their money providing mobile phones services in India under the Airtel brand. Wal-Mart is also providing back-end support to Bharti’s separate retail stores.
Some overseas retailers such as Metro AG, already operate fully owned cash-and-carry stores in India but the real spurt in retailing has been in stores that sell to individuals.
Conglomerates such as Reliance Industries Ltd have opened stores that sell everything from groceries to glue under one roof to tap into India’s burgeoning middle class that is new to this style of shopping.
For decades, Indians have been shopping at the local stores, or so-called kirana stores, which are often cramped spaces where goods are stacked in places thatonly the shopkeeper’s assistant can reach. Purchases are often home delivered and credit is freely given.
However, promises of cheaper purchases and well stocked browse-and-buy aisles in air-conditioned spaces have attracted some shoppers and dented the business of small-store owners and street vendors who have protested and, occasionally, trashed stores of organized retailers to put a stop to any aggressive expansion.
The protests last year forced the United Progressive Alliance government to commission a study to an independent think tank to map the fallout of organized retail on small stores and vendors. The Icrier study is yet to be made public though it’s well past its orginal deadline for submission to the government. In December, Mint carried the findings of this study that showed that small retailers in areas where organized retailers had opened stores had seen a fall in revenues and profits.
Some states such as Uttar Pradesh, India’s most populous, and Kerala, have barred organized retailers from opening stores. And small-store owners have taken to nationwide day-long protests at regular intervals.
Still, Wal-Mart and Bharti executives glossed over concerns the protests and the lack of a binding retail policy may be slowing their roll-out pace or damping their plans.
“My belief is we will see a change happening, because states are vying for investment, employment,” said Rajan Mittal, managing director of Bharti Enterprises. “We always start with rough times in our country.”
Wal-Mart is likely to open about four stores in 2009. Bharti, on the other hand, will open its first store that will sell to individual buyers by August in a northern state that hasn’t been officially named. Mittal added that Bharti would unveil its plans in April.
On Wednesday, Wal-Mart also announced it would be increasing the work it outsources to Indian IT services firms.