NEW DELHI :
Walmart Inc., the world’s largest retailer, is having a relook at its brick-and-mortar business in India, primarily the performance of its Best Price cash-and-carry format.
On Monday, Walmart India said it has laid off 56 employees at its corporate office in Gurugram, as part of a restructuring exercise that will see it intensify focus on serving wholesale customers through an omni-channel retail model to turn profitable.
“We are also looking for ways to operate more efficiently, which requires us to review our corporate structure to ensure that we are organized in the right way. As part of this review, we have let go 56 of our associates across levels at the corporate office," Krish Iyer, president and CEO, Walmart India, said in a statement on Monday.
“All of the 56 impacted associates—eight in the senior management and 48 in the middle-to-lower management—have been offered enhanced severance benefits and outplacement services to support their transition," he added. Exits at the retailer include executives across supply chain, distribution and real estate.
Iyer said Walmart has been investing heavily in technology in India along with building more stores. “We have recently made significant investments to serve our members better and will continue to do so. This includes investments in our brick-and-mortar stores, as well as in e-commerce. Our members are increasingly becoming omni-channel shoppers. We are thus investing heavily in technology and have a healthy pipeline of Best Price stores."
The layoffs at Walmart’s offline business come almost one-and-a-half years after it took a majority stake in India’s largest online retailer Flipkart in an estimated $16 billion deal. The step underscores the retailer’s plan to cement its position in India’s online retail market, where it competes fiercely with rival Amazon.
People in the know of Walmart’s plans said the retailer is planning to build scale for the future, and is clearly moving towards online-commerce. “The question is of scale now, the sense is that they have been told to focus on driving efficiencies between Flipkart and the wholesale stores here," said a person requesting anonymity, adding that offline retail has higher cost of operations, and setting up new stores can be very challenging.
“Physical stores in India take much longer to break-even for Walmart than what they are used to in many other markets," said another person who has worked closely with the retailer. “Bentonville (Walmart headquarters) is clearly losing patience, and a $16-billion-odd investment in Flipkart is what they want to clearly focus on," he added.
However, Walmart remains committed to growing its business-to-business (B2B) cash-and-carry business in India, Iyer said. The company last year opened six new Best Price Modern Wholesale stores and one fulfilment centre, with sales growing 22% in 2019, Walmart said.
Some future stores could be up for revaluation, said another person aware of the retailer’s plans.
Since it entered India in 2007 in partnership with Bharti Enterprises, Walmart faced several challenges. Subsequently, it parted ways with Bharti in 2013, and decided to go solo with its cash-and-carry stores.
Walmart which competes with Germany’s METRO Cash and Carry and Thailand’s Siam Makro in India, which runs LOTS Wholesale stores, is still making losses. For the year ended 31 March 2019, the total income of Walmart’s 28 Best Price stores was ₹4,095 crore; while losses stood at ₹171.68 crore, according to data sourced from Tofler.
METRO also plans to nearly double its store count in India over the next few years, said Arvind Mediratta, managing director and CEO, METRO. He added that over the years, the presence of a strong sales team, and focussed programmes, designed to digitise and on-board small mom and pop stores, have helped the retailer scale business and get ahead of rivals.