After a long lull, one can finally see some action at Walmart’s India headquarter. But that action seems pretty lackadaisical by Walmart’s standards... Is everything alright? by Savreen Gadhoke
And unlike the purchase culture in developed nations (where purchasers do not mind driving to a Walmart located out of town), in India Bharti-Walmart would have to take up real estate closer to city if not within the city itself, as buyers in India do not prefer going way out of their city/town simply to purchase wholesale goods. That itself will demolish cost efficiency calculations due to real estate costs. “Considering the requirement of 50,000-100,000 sq. ft. to open new stores, it will be difficult to obtain land in and around the major metros and there’s a possibility that Bharti Walmart may settle in for Tier II cities to set up stores,” says Vivek Mittal, CEO, Realty Stocks to B&E.
Though it’s not going to be easy for Bharti Walmart to replicate its facilities like direct-from-farm sourcing in other parts of the country, it’s becoming evident that even in the two-shop model, Walmart’s strategy of having good supply chains, warehouses, offering customised products according to the localised and cultural needs of consumers at low cost has given it an edge over its competitors. One can’t blindly ignore the fact that the retailer has wide experience of nearly 14 years of successfully operating in another emerging Asian economies like China.
And India, to its worse credit, brings it with its own share of problems related to politicking, lobbying, rent-seeking, and the legacies of licence raj. It was not that distant in history when Mayawati, the Uttar Pradesh CM, ordered the closure of all retail stores of Reliance Fresh and Spencers due to their sudden growth. Given that, a slow start is better than a devastated start anyday!
And unlike the purchase culture in developed nations (where purchasers do not mind driving to a Walmart located out of town), in India Bharti-Walmart would have to take up real estate closer to city if not within the city itself, as buyers in India do not prefer going way out of their city/town simply to purchase wholesale goods. That itself will demolish cost efficiency calculations due to real estate costs. “Considering the requirement of 50,000-100,000 sq. ft. to open new stores, it will be difficult to obtain land in and around the major metros and there’s a possibility that Bharti Walmart may settle in for Tier II cities to set up stores,” says Vivek Mittal, CEO, Realty Stocks to B&E.
Though it’s not going to be easy for Bharti Walmart to replicate its facilities like direct-from-farm sourcing in other parts of the country, it’s becoming evident that even in the two-shop model, Walmart’s strategy of having good supply chains, warehouses, offering customised products according to the localised and cultural needs of consumers at low cost has given it an edge over its competitors. One can’t blindly ignore the fact that the retailer has wide experience of nearly 14 years of successfully operating in another emerging Asian economies like China.
And India, to its worse credit, brings it with its own share of problems related to politicking, lobbying, rent-seeking, and the legacies of licence raj. It was not that distant in history when Mayawati, the Uttar Pradesh CM, ordered the closure of all retail stores of Reliance Fresh and Spencers due to their sudden growth. Given that, a slow start is better than a devastated start anyday!
Savreen Gadhoke
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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