Wal-Mart's entry into India through an agreement with the Bharti group is a first-of-its-kind for the US retailing giant. The Arkansas-based retailer has always preferred to enter a new market on its own.
But government regulations in India (which only allow foreign direct investment of 51 per cent in cash-and-carry and single brand retail), coupled with Wal-Mart's experiences in other markets, prompted it to tie-up with a local partner.
Wal-Mart, which first forayed outside the United States in 1991 with a Sam's Club outlet (cash-and-carry format) store in Mexico, is currently the biggest retailer in the country. But it hasn't been as smooth for the retailer in other markets.
In May this year, Wal-Mart exited its business in South Korea after selling its 16 stores to a local company Shinsegae for $860 million.
That was followed by its exit from Germany in June, where it incurred a loss of $1billion and sold its 85 outlets to Metro AG. As analysts point out, in India, consumer preference varies across regions.
Even within a region, one sees different patterns, which make it imperative to have a local partner on board to understand the market.
However, for Wal-Mart, which already sources products from India and can bring in efficiencies in the supply chain, the benefits will not be as widespread as the company has seen in the US or Europe.
"There is far more similarity between different countries in Europe, where Wal-Mart can take advantage of a common supply chain," said a retail analyst, adding that in Asia, it would be next to impossible to stock too many common products in different countries across the region.
In the early days, Wal-Mart made the mistake of taking its structure, product mix and corporate culture, the way it was in the United States, to other countries like Indonesia and Germany, where it did not work too well with the local staff.
Now, the retailer is wise from its experience and localised products form a significant part of its product mix in different countries.
