Friday, December 08, 2006

WAL-MART JOINS INDIAN RETAIL REVOLUTION

Wal-Mart, world's largest retailer(turnover USD 315 BN, Mcap USD 193 BN and employing employing 1.3 MN people in US) recently moved a step forward to enter India.
According to a Confederation of Indian Industry report, there are 5.5 outlets per 1000 Indians, which is the highest in the world(Figure that out for a billion Indians!). It speaks volumes about the size of these outlets and their capacity to offer the best to their customers. It also means that distribution costs are very high for companies retailing via these shops. Last few years of GDP growth rate in the range of 8% means that there is much higher attraction in entering this market (Infact, it is nudging 9% levels now). Indians are shopping than ever before. The Indian shopping season, which centers around Diwali, was a record for cellphone industry this Diwali as estimated one million phones are reported to have been sold on one single day!(Market leader reportedly Nokia sold over 4,00,000 phones on Oct 19).
The interest among the business houses towards retail is understandable. There is aleady a move towards large format stores and malls which are emerging in major Indian cities. There are several chains of stores in the apparel and grocery business already such as Lifestyle, Shopper Stop, Spencers etc.Then there are players such as Viveks in the electronics business.
Recently, players such as leading Indian business houses such as Reliance have entered the retail business. Reliance already has several stores in Hyderabad, a city which it has decided to pilot. There is still cap on the proportion of money that foreign businesses can invest(percentage of a venture) in India. To get around this restriction, Wal-Mart recently tied up with a leading Indian business house Bharti lead by its highly respected CEO, Sunil Bharti Mittal. Mittal runs one of India's largest mobile companies(Or it is the largest?).

So what changes? Do the small retailers vanish overnight? Does the customers start benefiting instantly? I would say no. McDonald's did not change Indian food habits. On the other hand, McDonald's changed its menu over a period of time to introduce items on the menu that draws from Indian cooking. Even after a decade of entering India, it has a handful of outlets in just a few cities and still servces to a niche segment. And secondly, India has over 700 towns. A Wal-Mart store in every such town does not look like an instant reality.Perhaps in the larger metroes, it may be a good alternative.
And then, there is the question of buying behaviour.Many Indians like me, have a lontime relationship with a neighbourhood grocer who delivers stuff on a phonecall. It is too pampered a habit to change easily.(Agreed, Wal-Mart is not grocery shop alone)
Unarguably, Wal-Mart's scale of operations would bring in supply chain efficiencies which they can pass on to the customers. There is very high buzz in industry circles on this retail thing, which is a paradigm shift from the past when every business house wanted to be in manufacturing or services area. Needless to say, these days nothing seems to excite our business houses than retail. And the customer is watching, waiting to be wooed!
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1 comment:

Mayank Krishna said...

Just as Mcdonald had to change its menu to win Indians, all the retail players may have to experiment with formats to win the the Indian consumer's hearts and wallets. It is very likely that the format(s) that will be a hit in India may not have been tried anywhere else in the world. Innovation and experimentation may decide the course.

We Indians are different, and our needs are different!