Culture clash on the horizon as Wal-Mart comes to Índia
Wal-Mart, the world’s largest retailer, announced its entry into India yesterday through a cash-and-carry joint venture with Bharti Enterprises, the industrial group that owns the country’s largest mobile phone network.
The American group signed an agreement to open a chain of wholesale stores serving small shopkeepers, fruit and vegetable resellers, restaurants and other business owners, and retail outlets owned and operated by Bharti.
Up to 15 stores, each between 50,000 and 100,000 sq ft and selling groceries, clothing, stationery and consumer durable goods, are planned initially, with the first opening late next year or in early 2009.
The 50-50 wholesale joint venture is to be branded Bharti Wal-Mart and will employ about 5,000 people over seven years. No financial details were disclosed yesterday, but Bharti had said previously that it would spend up to $2.5 billion (£1.2 billion).
The companies said that they would invest in an “efficient supply chain”, linking farmers with retailers in a country where poor logistics causes more than a third of all fresh produce to be wasted before it can be sold.
“We will help drive efficiencies and work towards the betterment of India’s farmers, small manufacturers and retailers, in line with our global vision of saving people money so they can live better,” Mike Duke, Wal-Mart’s vice-chairman, said.
The deal allows Bharti, a retail novice, to use Wal-Mart’s expertise in supply-chain management and logistics in its own supermarket chain. In return, Wal-Mart gains entry to a $300 billion retail market that is forecast to nearly triple in size by 2015 as India’s rapidly-growing middle classes adopt Western shopping habits.
Indian law prohibits multibrand foreign retailers from investing directly in the retail sector, forcing them to sign franchise deals with local partners. Bharti had also been in talks with Tesco and Carrefour.
Foreign investment in retail is a politically sensitive issue in India, where only 3 per cent of the market is accounted for by the so-called organised sector. Most of the trade is still handled by an estimated 12 million family run stores and countless street hawkers.
The Government has not objected to the Bharti deal with Wal-Mart, but it is likely to take a closer look given the anticipated resistance among a key voting constituency. Opponents say that many traders will be put out of business by predatory pricing and that the livelihoods of 40 million people dependent on small-scale retailing will be jeopardised.
“Wherever big format chains enter, there are large-scale closures. This is very wrong and will be detrimental to the Indian retail trade,” Chandrakant Shanghvi, whose organisation represents about 100,000 traders in the western state of Maharashtra, said.
Nationwide protests by shopkeepers are planned on Thursday, the 65th anniversary of Mahatma Gandhi’s Quit India Movement against the British.
(Published by Times Online, August 7, 2007)