The dream of walmartization

Wal-Mart which has been one of the favorite picks for anti-globalization campaigns, trade union agitators, environmentalist and feminist, is coming to India. Wal-Mart, is to launch it’s first cash and carry or whole sale shop by early 2009. Reports suggest that the first Wal-Mart will be in West Bandra in Mumbai. The retail giant was looking for a close to 100 per cent ownership as in China. But the Indian Foreign Direct Investment(FDI) guidelines prohibit foreign multi-brand operators. And single-brand operators are allowed 51 per cent stakes in the joint venture.

Dubbed as the “biggest retail launch in India”, Reliance has forayed into hypermart and business to business services with Reliance Fresh in 2006. Besides, Reliance would do anti-FDI lobbying to pre-empt the multinational’s entry into India’s retailing sector. To evade these problems, Wal-Mart has entered into a 50:50 joint venture agreement with Bharti Retail, the subsidiary of telecom major Bharti Enterprises.

The higher price of Indian goods and low design quality of its products, had made China a favourite sourcing destination. But, the gradual increase in cost of Chinese goods had made Wal-Mart to source more and more from India. Today, Wal-Mart sources goods worth INR 15,00 cores from India, most of which comes from the states of Punjab and Haryana. The joint venture above all, will serve to boosts its exports from India.

The idea is to open up Bharti Retail franchisees backed by Wal-Mart, simultaneously investing its capital in cash and carry stores, which will cater to the shopping instincts of the urban elites. The cash and carry facility will procure produce from manufacturers and farmers directly and will supply to local retailers as well as Bharati Retail. Wal-Mart which is the fourth largest employer of the world, has one of the best inventory system in gauging what consumers need; besides its costs cutting supply chain management and logistics. The GPS enabled trucks, minimal packing process are some of them. This technological support will build the MNCs presence in India, and serving the purpose of cost-effective retailing. Sunil Bharti Mittal, head of Bharti Enterprises is optimistic about opening 10 to 15 whole sale facilities in over seven years.

Wal-Mart had tough lessons in South Korean and Germany and it will not be looking for an immediate ‘walmartization’ of India. In fact its opening of its shops will be without much fanfare. The Bharti is planning to bring in the chain in phases.

The UPA government is careful to avoid any legislation that will trigger mom and pop shop agitations. With the left allies out of the picture the government has shown signs of easing up FDI regulations. The recent move is, the relaxing of curbs on overseas capital in key areas. Once the inward FDI norms are also relaxed, the Wal-Mart will be move closer to a more strategic alliance with Bharti. This would result in the voluptuous Wal-Mart Inc., controlling even the thermostats of Indian shops from its headquarters in Arkansas.

There had been appallingly shallow comments from the Ministry of Commerce and Industry, supporting the joint venture that the coming of MacDonald and KFC has not affected the business of local chat shops. They have seem to forgotten the simple fact that a plate of samosa costs ten rupees, at the most and a McBurger a minimum of Rs. 35. And that one can’t get samosa chat in these Mcshops.

The press-release claims of the transnational agreement that, their cash and carry facilities will benefit local kirana shops, is a lie on face of common-sense. Besides the big-box cash and carry, the chain will also open Bharti retail shops. Coupled with its wholesale supply chain, it will effectively cut-down local competition.
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Organized retail market which accounts only for four per cent of total Indian market, is expected to touch 22 per cent by 2010. Wal-Mart with its effective supply management chain will “organize” India’s retailing market in a more dramatic way than Reliance Fresh has done in two years. Indian local retailers are bound to be displaced.

The cause developmental problems need not be necessarily pinpointed at the policy of the ruling government; it is most often traced to the policy of preceding government.Prime Minister Manmohan Singh had spoken in length about the no-nonsense in opening to globalization during recent ASSOCHAM conference. But, in the present scenario, when the ruling coalition approaching its end of tenure, it is not in the pragmatism of Mr. Singh to be proactive when it comes