New Delhi: Bharti Walmart Pvt. Ltd, the wholesale joint venture between the world’s largest retailer and Bharti Enterprises Ltd, aims to be the top wholesaler in India as it adds 20 stores that will sell products to retailers and other businesses in the next two years.
“In the next one or two years we do anticipate we will be in a market leadership position,” said Raj Jain, chief executive of Bharti Walmart.
At the time of its India entry in 2009, the US-based Wal-Mart had said it planned to open about a dozen wholesale stores in the country by the end of 2012.
Bharti Walmart has so far invested about $45 million (Rs 200 crore) in India to open six Best Price Modern Wholesale stores—four in Punjab and one each in Kota, Rajasthan, and Bhopal in Madhya Pradesh.
Jain said the company will next open stores in Karnataka and Andhra Pradesh in the south, where it plans to open three cash-and-carry outlets this year. It will also open stores in Chhattisgarh and Maharashtra later this year.
“We have always followed that (cluster approach) strategy and we were largely focused on Punjab, although we opened stores in other places also,” said Jain. “We have covered the four big markets (in Punjab) already. My own guess is that in the years to come we can open couple of more (stores in the state), but at this point of time we have reached where we could have reached.”
At an investment of about $7.5 million per store—although depending on investments in the supply chain, spending per store would differ in different locations— Bharti Walmart would invest about $75 million in India by the end of this year to open about 10 stores. Its total investment in the country could reach about $195 million by the end of 2012.
Jain said wholesale retailing is a $140 billion opportunity, out of India’s estimated $350 billion annual retail business. “The opportunity is huge,” he said in a telephone interview on Thursday from Ludhiana, the native city of the Mittals of Bharti Enterprises where the joint venture opened its fourth store in Punjab.
After years of unsuccessfully lobbying for India to open its retail market, Wal-Mart in 2007 decided to team up with Bharti Enterprises for a wholesale venture, a business where India allows 100% foreign ownership but such ventures can sell multi-brand products only to other retailers and businesses.
Meanwhile, Paris-based Carrefour SA has also opened a wholesale store in New Delhi, and Britain’s Tesco Plc plans to open its first wholesale stores in India later this year.
Germany’s Metro AG, the first global retailer to open such stores in India in 2003, said it will rapidly expand in India, opening 50 wholesale stores in the country in the next five years.
Last year, after years of being non-committal on foreign investment in retail, India’s department of industrial policy and promotion (DIPP) invited opinions from stakeholders such as large retailers and small shop owners on whether the country should allow foreign direct investment (FDI) in multi-brand retail.
The government has constituted a committee to come up with a report based on the feedback DIPP received on the discussion paper.
Meanwhile, Bharti Walmart says it will continue with its wholesale business even if India opens up the retail market to foreign companies.
“We know that the debate of FDI in retail is continuing but in the meanwhile we are opening cash-and-carry,” Jain said. “And even after India’s FDI opens, I don’t see why we should stop opening cash-and-carry. There is a need in the hinterlands of India to improve the quality of the distribution and products, pricing and availability to the customers... the initial experience has been good so we shall continue to be on this path in addition to whatever FDI allows us to.”
Abhishek Malhotra, a partner at consulting firm Booz and Co., said Bharti Walmart said that while retail in India is attractive, wholesale could be a viable business as well.
“Even if they are allowed in (to invest in multi-brand retail) more and more such foreign companies will continue to operate in that space,” he said.