Wal-Mart's New India Push
S Robson Walton, chairman of Wal-Mart Stores, met Prime Minister Manmohan Singh in New Delhi on Wednesday, in what is seen as an effort by the world's second-largest company to press its demand for permission to invest in multi-brand retail.
The $404-billion Wal-Mart, which has a joint venture with the Bharti group that runs the country's largest telco for cash-and-carry wholesale trade and a franchise agreement for front-end retail, has been lobbying hard with the government for permission to allow foreign direct investment (FDI) in multi-brand retail.
Rob Walton, the eldest son of Wal-Mart founder Sam Walton, who took over as the chairman of the board of directors at Wal-Mart in 1992 following his father's death, is credited with the retailer's successful expansion in international territories. The company has over 8,000 retail units under 53 different banners in 15 countries and sees emerging markets as a significant source for growth.
This is Mr. Walton's first visit to the country. It highlights the importance of India, the second-fastest growing economy after China, in Wal-Mart's scheme of things.
According to people familiar with the matter, Mr. Walton impressed upon the prime minister the benefits an organised retailer like Wal-Mart can bring to farmers as well as small and medium enterprises and in job creation.
The retail sector is considered to be the top job-creator in developed economies—Wal-Mart alone employs 2.1 million people globally—and leading international retailers have also helped in the creation and sustenance of a large chain of manufacturers in India, which export apparel and many other household items to developed economies.
"We're stepping up growth in our international operations to take advantage of growing economies and opportunities in emerging markets such as China and Brazil," Wal-Mart executive vice-president and chief financial officer Tom Schoewe said in a statement two weeks ago.
The Indian market, too, is crucial for Wal-Mart but current Indian laws don't allow foreign retailers to open multi-brand stores. Foreign investment is allowed only in single-brand retail to the extent of 51%.
Wal-Mart's key executives have been visiting India in a bid to test the local political and business climate. With the arrival of Mr. Walton, it seems Wal-Mart is stepping up its efforts. Just four months ago, Doug McMillon, the CEO of the company's international business, was in India meeting agriculture and commerce ministers.
The conversation last time veered on the Indian establishment asking the retailer to strengthen the supply-chain that could benefit Indian farmers. Mr. McMillon had then said Wal-Mart's progress in India would have no dollar constraint. "We have a $4.8-5.3-billion fund earmaked for our international business. India can use as much as it wants," he had said.
Wal-Mart announced its alliance with Bharti in 2006, but has opened only one cash-and-carry wholesale store since. Mr. McMillon had then said the company was not in a hurry. "Our aim is to get it right."
The Indian retail landscape is filled with newcomers still trying to find a grip on the fast-evolving market. Future Group, India's largest retailer, runs several retail formats under the Big Bazaar, Home Town and eZone stores, while India Inc's big names Reliance Retail and Aditya Birla Group have their own chain of stores under brand names Reliance Fresh and More, respectively.
While Wal-Mart has a tie-up with Bharti, UK retailer Tesco has tied up with the Tata group's Trent and Carrefour is in talks with Future to firm up an alliance.