Walmart makes move to India’s retail
Wal-mart Stores Inc. and India’s Bharti Enterprises signed a deal yesterday to jointly build wholesale outlets that will buy goods from farmers and small manufacturers and sell them to retailers through a nation-wide supply chain. This may be lead to the American company (Wal-Mart) in eventually gaining a foothold in India’s massive, booming, but well-protected retail industry.
Current Indian laws do not allow for multi-brand foreign retailers to sell directly to the consumer, but they can run wholesale operations and provide back-end support to Indian retailers. Indian companies are also allowed to operate stores selling foreign brands under franchise from their producers.
The deal between Wal-mart and Bharti Enterprises appear to have worked through these regulations. The deal consists of two separate agreements. Under the first agreement, the two companies will set up “a 50-50 venture for wholesale cash-and-carry and back-end supply chain management operation in India,†a joint statement said. The second agreement would allow Wal-mart to share its technology and expertise with for a chain of retail stores that Bharti plans to build through its fully-owned subsidiary — Bharti Retail Ltd. It isn’t clear as of yet whether Bharti will be able to display the Wal-Mart brand.
The deal faces political opposition and scrutiny from the government. But if passed, the first wholesale cash-and-carry facility is planned to open by the end of next year. A typical wholesale facility will stand between 50,000 and 100,000 square feet and sell a range of fruits and vegetables, groceries and staples, stationery, footwear, clothing, consumer durables and other general merchandise items. The joint-venture will also help drive efficiencies across the supply chain and work toward the betterment of India’s farmers, manufacturers and retailers.
Wal-Mart is not the only company targeting India’s booming retail industry, which is estimated to be worth more than $250 billion and growing at 20 percent every year. Global retailers like Carrefour SA of France, Tesco PlC of Britain and Metro AG of Germany have lobbied the Indian government to liberalize retail trade.
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