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Rediff.com  » Business » Fuzzy retail policy makes Walmart move to slow lane

Fuzzy retail policy makes Walmart move to slow lane

April 25, 2016 11:49 IST

Walmart

The company claims it is in India for the long haul -- unlike French chain Carrefour, which exited the country in 2014.

American giant Walmart wants policy clarity for the entire retail sector before expanding its India business, as it’s keen to become the leader in both physical and online spaces.

The $482-billion group, which operates chains of hypermarkets, discount department stores and grocery stores, has its headquarters in Bentonville, Arkansas, US.

It entered India in 2006, with the aim of tapping the promising consumer market through multi-brand retail.

But, till now, policy restrictions have been a hurdle.

E-commerce is another focus area for the company, which aims to grow internationally in it.

But, Walmart has encountered regulatory hurdles there, too, as foreign investment is not permitted in this segment in India.

At present, it operates only in the cash-and-carry space with 21 stores in nine states, of which the last one was opened in Agra in August last year.

But, the company claims it is in India for the long haul -- unlike French chain Carrefour, which exited the country in 2014.

Krish Iyer, president and chief executive officer, Walmart India, told Business Standard, “For us, India is a long-term commitment.

We are continuously growing our cash-and-carry business to serve our members, including kiranas (local retail stores), O&Is (offices and institutions) and HoReCa (hotels, restaurants and caterers).”

Sources, however, said the American giant had kept its expansion plans on hold because of ambiguities in policy.

At a time when Chinese e-commerce major Alibaba is planning a direct entry into India, Walmart is unlikely to be happy with only a small share in the $600-billion (about Rs 40 lakh crore) retail sector in the country, said sources.

The Chinese group -- a rival of Walmart -- recently announced that its gross merchandise volume, the sum of the value of goods sold on a platform, was $463.6 billion.

It claimed it had surpassed Walmart’s numbers, though it is yet to announce its last quarter result.

In 2015, Walmart recorded revenue of $482 billion; its Chinese challenger could touch $490 billion by the end of the financial year 2015-16, claim analysts.

Asked if Walmart was planning to go slow in India, Iyer said the retail chain plans to open 49 more such stores by 2020, and was “well on track” to meet the target.

He also cited the National Democratic Alliance government’s focus on “ease of doing business” as an encouraging step, when asked if policy ambiguity was a hurdle for the expansion plans of the company.

“We are encouraged by a positive and supportive environment in the country,” said Iyer, adding the Make in India initiative was a “comprehensive and unprecedented overhaul of dated processes and policies.

It represents a complete change of the government.”

He also discussed the “minimum government, maximum governance” initiative and described the decision to allow 100 per cent foreign direct investment in marketing of food products produced in India as “very progressive”. Iyer emphasised that Walmart’s plans in India are all on track.

“Walmart has signed MoUs with Andhra Pradesh, Karnataka, Punjab and Haryana, and our team is working on identifying sites all over India.

"Asked about the number of stores Walmart plans to open in India in 2016, Iyer said: “We are currently building a pipeline and we have signed term-sheets for stores in various cities around the country.

"It takes about 30 months to open a store.”

He added: “We look at the Indian market with a long-term commitment.”

So, is Walmart planning to enter e-commerce through the marketplace model, followed by Amazon India, Flipkart and Snapdeal, among others?“At present, we don’t have any plans to start a marketplace.

We continue to study the developments in the regulatory space in this area,” said Iyer.

On plans for multi-brand retail, the one category that Walmart had aimed to be a market leader in right from the beginning, Iyer said, “India is a long-term commitment for Walmart and we are continuously growing our B2B cash-and-carry business in the country.”

He added the group “continues to study the developments in the regulatory space and at present there are no plans on multi-brand front.

"The preceding United Progressive Alliance government had permitted 51 per cent FDI in multi-brand retail in 2012, with the condition that each state would decide whether or not to have foreign stores and that 30 per cent of sourcing must be done from India.

The current National Democratic Alliancce government is opposed to any FDI in multi-brand, because of the fears of local retailers that many thousand jobs may be lost if foreign chains such as Walmart were to enter.

But, the government has not made any change in the multi-brand rules on paper yet. The only international chain operating multi-brand stores in India is UK’s Tesco, in a tie-up with Tata group’s Trent.

THE JOURNEY SO FAR. . .

Since entering India in 2006, Walmart has opened 21 cash-and-carry stores in nine states:

2007
Formed a joint venture with the Bharti group to run cash-and-carry business and give back-end support to Bharti’s retail

2009
First Walmart-Bharti outlet, Best Price Modern Wholesale, opened in Amritsar

2013
Joint venture between Walmart and Bharti called off

2015
After a gap of 4 years, the group opens a store in Agra in August
Expansion freeze and internal probe to check if its unit had flouted anti-bribery laws

2016
India investment is about Rs 2,500 crore (Rs 25 billion)

Nivedita Mookerji in New Delhi
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