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Business News/ Companies / News/  Walmart's traditional victims become its allies in India
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Walmart's traditional victims become its allies in India

Walmart, which has put mom-and-pop stores out of business in the US, is a supplier to kirana stores in India
  • Barred from opening retail stores, Walmart started its wholesale business in India in 2009 and bought Flipkart last year
  • Walmart India CEO Krish Iyer. (Ramesh Pathania/Mint)Premium
    Walmart India CEO Krish Iyer. (Ramesh Pathania/Mint)

    Mumbai: Walmart Inc. is making friends in India with the kind of competitors that it spent decades putting out of business in the US—mom and pop stores.

    These unlikely allies are part of the latest attempt by the Bentonville, Arkansas-based behemoth to crack India’s giant consumer market, taking on e-commerce rival Inc. and Asia’s richest man, Mukesh Ambani.

    Years of lobbying by global retailers failed to persuade the Indian government to open its market to foreign competition, because of fears that it may put out of business many of the 12 million neighbourhood stores that account for almost 90% of the country’s retail sales. Walmart’s attempt to build an e-commerce business was also hampered by new regulations.

    So the US company is now rolling out a plan to more than double its wholesale chain in India over the next four years—supplying the local storeholders instead of competing with them. The move intensifies the three-way brawl with Amazon and Ambani. Each has a different strategy, but they all need to woo the owners of the ubiquitous neighbourhood shops.

    “Our single biggest agenda is: ‘How can they become more loyal to us?’’ Krish Iyer, chief executive officer of Walmart’s India unit said in an interview in the company’s newest outlet in the southern city of Karimnagar. “The expansion phase will continue because the opportunity in India is huge."

    Barred from opening retail stores, Walmart started the wholesale business in India in 2009, but continued to try to find a way to sell direct to the public. Its most recent attempt—the $16 billion purchase of homegrown e-commerce leader Flipkart last year—was dealt a blow when the government came out with new rules designed to protect the 12 million small shopkeepers from online competition too.

    Walmart’s biggest competition comes from Ambani, who isn’t subject to the restrictions on foreign companies and already controls India’s largest bricks-and-mortar retail chain, as well as a network of wholesale stores that is twice the size of Walmart’s. Now, Asia’s richest man plans to use his 290 million-subscriber mobile phone network to create an e-commerce giant. India’s small shopkeepers are key to that too.

    Meanwhile, Amazon is working to recruit shopkeepers in small towns and villages, arming them with smartphones to place orders for local residents and relying on them to deliver goods in communities that often have no street names or house numbers.

    Amazon and Reliance Retail did not reply to requests for comment.

    “More and more aggressively they are trying to on-board kiranas," said Rajat Wahi, a partner at Deloitte’s consumer services practice in New Delhi. “All the volumes go through that channel, albeit in very small lots. So the objective of these players is: how do I get more active selling to these mom-and-pop stores."

    Walmart’s Iyer wouldn’t say how much the firm is investing to win these shopkeepers over, but he said 26 more of its Best Price wholesale stores were planned by 2023, with each location costing between $8-10 million.

    Walmart’s strategy allows shopkeepers to see and touch items before purchasing—unlike Amazon—and doesn’t compete with its customers by selling direct to consumers—which Ambani does. “Our members when they come here, they will not find their customers shopping in the store," Iyer said, without naming any competitor. “I’ll sell only to small resellers."He said no integration with Flipkart is planned—the e-commerce firm has its own board and CEO, while Walmart India is a wholly owned subsidiary of the US parent.

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    Updated: 05 Apr 2019, 04:07 AM IST
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