Would Wal-Mart be a success in India?

26 12 2006

In November 2006, Bharti Enterprises and Wal-Mart annonced their partnership to the enter the Indian retail market. The question is – Will Wal-Mart be a success in the Indian retail industry that thrives on small retailers or will it be forced to pull out like it had to in Germany and Korea? Will it avoid the mistakes that it committed in these two countries? And with Reliance entering the Retail Market bandwagon with their flagship store in Hyderabad, how stiff is the competition for Wal-Mart?

One thing, that would work for Wal-Mart is the huge hype it has created among the Indian people. Wal-Mart thrives in low-cost business model here in the US but its foray into the high end fashion and the urban marketplace was not well accepted. Indian people are aware of the brand called ‘Wal-Mart’, even when there are hardly any products with that brand name. With that name it will be able to attract thousands of people to its stores. But again, will the people go there to shop for their regular groceries or will it just another tourist attraction where people go in to check out the store for its size and its uniqueness compared to the Indian stores? Just like the Inorbit mall in Malad, Mumbai which has become more of a tourist place and a weekend hangout for most of the families, Wal-Mart should try and avoid being such a place.

Wal-Mart needs to understand the Indian customer culture which is low-cost and quick shopping. Indians are not used to spending a lot of time for their regular groceries. They know their products and their brands. They hardly venture out to try new brand of products. Indian work life tends to go beyound the 9 to 5 routine and add a 2 hours of travelling back and forth from work makes it a pretty long day. Most of the small retail stores around the apartments and the houses know the local families around the region and know their line of products. Their shopping cart is ready with one phone call and ready for pick-up or is delivered right at the door-step with no extra charge. Most of the low-income families and the lower-middle and upper middle class families stick to one grocery store and usually shop on credit on a month to month basis. Indians are still not high users of the credit cards, they still prefer using cash for their day to day needs and most of the shopping. Would Wal-Mart be able to provide month to month credit for these families for their shopping? My guess is, No. Most of the discount retail stores sell their products in ‘Buy 3 get 1 free’ or ‘ Buy 5 for X amount’ model. If a person needs to buy just one, he ends up paying the regular price which is same as his local grocery store. So why would a person go to Wal-Mart or the other big discount retail store just for one item?

Big urban cities like Mumbai, Delhi, Chennai, Bangolore, Pune are the obvious choices for Wal-Mart to set up its flagship stores because of the high population. But, the question is how would Wal-Mart find a big enough place to open its stores in a city which is so cramped up for place? Would it have its huge parking lots like it does in the US or would there no parking lots and just street parking? And say, if they manage to get some parking space in front or back of the store, would the parking space be free or like major malls, people would have to end up paying for parking? If I end up paying Rs. 10 for parking at Wal-Mart and end up saving Rs. 5 totally in my grocery bill compared to my local grocery store, what’s in it for me to make my trip worth to Wal-Mart? Wal-Mart has the best supply chain model in the world. But, would this model be as sucessfulin India? Did they take into considertion the high-traffic, the bumpy rides and the construction work happening at every corner of the city which delays even the person walking on the street?

Hence, understanding the Indian Customer culture is High importance to Wal-Mart. Sure Indians are looking for a better shopping experience but not at the expense of the shopping culture. They are not willing to make changes in their shopping habits but are open to new avenues for shopping. And with Pantaloon’s group ‘Big Bazaar’ planning to open stores nation-wide and Reliance Retail picking up pace with their stores, and Birla Group deciding to venture out too in this industry, how tough will it be for Wal-Mart to sustain in the Indian market? Time will tell.

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2 responses

4 01 2007
Gita

What about setting up a whole sale store and giving it a retail environment where people can always get discounts and deals on what they buy? For eg. something like Costco…

These are some of the advantages:

1. You can buy things in bulk…like big can of oil, 30 soap tikkies for which they can get 3 free etc… and reduce your time to go and buy some basic essentials from a small store…since Indians dont have the time
2. Walmart can provide discounts on these (cos they are cutting down on the regular retail Supp. chain costs and ofcourse various other handling costs)
3. Also, they can set something up in a slightly far away location (like costco) so parking shouldnt be a problem (meaning free parking and all that)
4. Also open a cafe with it…so people who go do wholesale shopping can eat in the cafe….or maybe even open cafes to McDonalds…etc…

This will change people’s pattern of shopping- which is mostly retail and will provide Walmart an advantage of branding a “wholesale” store, which is now mostly on streets and small stores…

Walmart cannot compete with the small street shops and neither can it compete with the big brands…but there is definitely a market in between…

4 01 2007
pReM

Well, Wal-Mart definitely can bridge the gap and be the whole sale store. But, apart from upper middle- class and the upper class there are hardly any families that buy wholesale goods. They prefer to live on a month to month basis. So, Wal-mart has to decide their target market and then decide on their offerings.
Also, considering that Indian people like new brands and new products and have the knack of using them, I don’t think they would like to buy 30 soap tikkies for 3 free ones and be stuck with using the same brand of soap for over 2 to 3 months.
Setting up in far away locations would result in commuting costs and time. Plus if i go to shop for like a year worth of stuff, it requires that you have a car and take that stuff home with you and not use the local transportation. In the end, I might end up saving 200Rs. on Wal-mart shopping but spend 150Rs. on traveling. Now, the question is it worth spending so much time in traveling & in shopping when the net save is just 50Rs.

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