 |
| Family |
|
 | Main Page |
|
| Cascading |
|
| Voltface |
|
| CampusBuzz |
|
| Limelight |
|
| URL |
|
| Brainwave |
|
| Insight |
|
| Technova |
|
| Perspective |
|
| X'Pressions |
|
|
|
|
|
|
|
|
|
| IIITA's e-Magazine |
|
 Oct-Dec 2007 Vol 4 Issue 15 |
|
|
|
|
Insight |
|
|
|
| The BIG BROTHER of RETAIL is finally coming to India…
by Neha Gupta
MBA-IT 1st Sem, IIIT-Allahabad
|
When John B. Menzer, President and CEO of Wal-Mart International, first made a business visit to India, he made it strikingly evident that the retail giant is now eyeing he Indian market. After a lot of lobbying the government on the FDI issue when he finally left, everyone had just one question to be asked-
“When will Wal-Mart’s time come...?”
With the answer to this question August 6, 2007 has booked a place for itself in the retail market history of India. It was on this day that the World’s Biggest Retailer made an official announcement of its entry in the Indian market via a 50:50 JV with Sunil Mittal’s Bharti Retail.
Current Indian RETAIL SCENARIO……..
The retail sector in India is growing at more than 5% annually accordingly to the KSA Technopak and is worth $206 billion currently. And the happy part is that it is the organized sector retail sector in India that is gaining ground and, earning profits and the future seems to be more alluring for them.
The market is experiencing a paradigm shift in the consumer behavior. Savings have been on the drop, especially with the urban consumers. They are looking for newer and better brands, still wider variety to choose from and finer prices.
Wal-Mart’s Indian ties…….
Bharti Wal-Mart India Pvt. Ltd. is a wholesale cash and carry business with back-end supply chain management. They plan to:
Open 10-15 cash and carry facilities over seven years.
First store is planned to open by end of 2008 in a Tier II city in the North India.
Bharti has entered into a franchise agreement with Wal-Mart which will provide technical support to Bharti Retail.
The venture is a business-2-business setup and will cater to hotels, restaurants, kirana stores, small businesses, education institutions and big retailers. The venture will also support farmers and small manufactures who have limited infrastructure and distribution strength and he supply chain will enable min wastage, particularly fresh foods and vegetables.
The cost savings that will accrue to it due to its excellent supply chain management strategy, that has worked so well in US, will help reduce monthly expenditures f consumers by somewhere between 5-15%.
Wal-Mart’s Business model:
Wal-Mart’s business model is founded on “everyday low prices for consumers and squeezing costs out of the system”. The margins with Wal-Mart are almost non-existent. The only advantage is that their overhead costs are met and they can save their fixed expenses. Wal-Mart shops in huge volumes and though the margins are minimal they have the effect f shaping up his entire sector and increasing its efficiency. However this is a general model that has worked well in US which does not necessitate that it will work with the Indian markets.
There’s considerably more difference in the way people shop for products than their underlying preference for the products themselves which makes it more difficult not just for Wal-Mart in particular, but for any retailer to be truly global.
Points to care about……
What we need t understand here is that the diverse and heterogenic nature of India is going to be very crucial for any play who enters the markets here. There are about 6000 castes and sub-castes in 28 states. Every community has is own tastes and each state its own nuances. Further the transport, warehousing and distribution infrastructure can pose further problems.
Wal-Mart after facing stiff opposition from Indian retail chains has taken a back-end entry in to the market in this JV with Bharti where the latter will huge the front-end owing and running of the stores. Looking at the fact that the Wal-Mart’s low price strategy hasn’t clicked always it need to do a lot of homework to adapt the local markets and its needs. India is a very price sensitive market and therefore Wal-Mart has to design its strategy accordingly. They need to adapt and format to the needs of the market.
There remains opposition to allowing FDI in retail on the context that it will result in 1000s going jobless with traditional mm-and-pop businesses having to close down if the retail market is opened. However if we look at the sectors, such as insurance, banking, civil aviation etc, that have been opened considerable have been successful and it is the customers only that have benefited. We can only wait and see if 100% FDI is allowed in retail and the effects that will follow.
|
| |
|
|
|