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Walmart retail in India -- A tough choice to pick



Walmart name and it's existence in my life took shape in 1996-1997 when my brother in law landed in United States. I still remember when my Brother-In-Law gifted us a book of America and it's beautiful images, which was bought from Walmart. Till then, I had no idea what Walmart was and what Sam Walton did to revolutionize the retail experience in United States. The real grasp of what Walmart does on a day to day basis to an average american and in general the United States economy, did not impact me till I landed in this country almost a decade back. 


Almost a decade later, we have Walmart knocking doors at India's footstep. India too is looking to revamp and open up it's entire retail model at the same time. The decision of Indian government to allow foreign direct investment (FDI) in retail is the most radical reform it has undertaken since 1992. What is so different about the proposed revamping of the retail space is how a FDI can directly buy from the local farmers, which was never the case with any other sector that was revamped. With the proposed change our current prime-minister, then the finance minister had opened up the gates to capitalistic India and in the process changed our lives completely. With the changes it is seeking currently in retail, it has attained the most politicized battle catering to sectional interest. Everyone wants to eat the pie of almost $535 billion retail space - 14% of India's GDP. No wonder it's a highly politicized battle. 


I am torn over the issue.


The heading says it all. I am torn over the issue. At one point, I see the local kirana's/small retail/small business merchants facing another level of competition in just a few years. With the rise of 2nd tier players like Star Bazaar, Food World, Spencer etc. the competition has already hit the small merchants. With Walmart, it will definitely see it take the next step. India is huge. With a population of 1.25 billion people and rising, the opportunity is huge. One part of the heart feels for almost the 15 million small retail stores who are employing more than 45 million people on jobs. The retail in the metro's are the most venerable. I cannot see them compete against a well machined supply chain organization like Walmart, where they can beat any price point to compete in the market. Not only is their supply chain the best in the business, but their vendor management to bargain for the best prices for their products is worth mentioning. Also with the proposed change, the ability to farm-to-fork supply chain model, will benefit the big players, rather than the small merchants. 
On the other hand, I have seen the benefits of Walmart, which directly benefits consumers. You. With a better supply-chain and the ability to negotiate prices at cheaper price-points with their vendors, the benefits are passed on to consumer. It reflects in the prices. "Always Low Prices" is posted everywhere in any Walmart I have been in the past 10 years and it is true in most cases. Most Walmart's are build in suburbs. With any Walmart, I have seen jobs. I have also noticed that it's not just the job that has been created in the area, but the entire area sees a seachange in its landscape. New stores, restaurants and small strip malls are a common sight when there is a Walmart. I have noticed Walmart employing not only the young generation, but an older generation who is keen on working in retail stores to meet their ends meet. The technology on which retail works (bar code, bar code scanners, retail software and so on...) is streamlined and becomes cheaper for smaller merchants to utilize that streamline their business. With the new model of directly talking to farmers, I see the benefits to the farmers too. As Walmart gets involved with local farmers in spreading knowledge, I can see more productive technologies implemented by the farmers to reduce waste, thus profiting them.


That is the reason I am torn. At one hand, I want to protect our small merchants, but at the same time, I have seen the benefits directly affecting the consumers. 


Same script, Different movie.


My sister had gifted me a small mp3 player in 2000-2001. It was from Rovio. It stored some 40 songs and was an expensive device then. There were many similar devices like Rovio back then. Then came iPod. Everyone knows that story.


Nokia was my brand in 2000s. I was a loyal Symbian user. I loved its sturdy design and its ease of use. It had a global market share of some 80%. Communicator 9000 was my dream device or a halo device. We all know the story today.


What comes closest to our retail space, is what happened with small bookstores. Small Bookstores were the only way one could get a complete book buying experience. Then came the giants. Borders and Barnes & Noble. It was nicely depicted in the movie, "You Got Mail". These giants changed the landscape of the entire retail sector for small bookstores. It was impossible for the small merchant to compete to a discounted model. 


Print business is the same. Newspaper are struggling to compete against Web and is dominated by Google and it's auction based ad-business model.


If you read why the small bookstore did not survive with the arrival of large discounted stoes, then one thing was pretty obvious. They never changed their business model - ever. They never adapted to a new business model even when they were thriving and knowing that the big retailers were on the verge to wipe away their livelihood. 



The bottom line - any industry that is ripe for disruption, is going to be changed forever. The opening up of our economy in 1992, and the move to capitalism was going to take some casualties on it's way. That was evident even back then. We choose to tread that path. 



Comments

  1. If some small retail merchants start working at Walmart, and other small retatil merchants build their own Walmarts, that'll solve the problem, wouldn't it?

    ReplyDelete
  2. Thanks for checking in. I can see two things happening with the change. The retail merchants becoming vendors in specialized products with Walmart. It's not like every single merchant is going to be affected by Walmart. The rural India, won't bear the brunt directly. I am not worried about the employees working with merchant. They will get jobs. A better one at that.
    I am sure some small retail merchant with the ability to think big, will do good in order to compete. Lets see how this goes down.

    ReplyDelete
  3. This is how its going to go down:

    Wallmart will never be allowed to enter India

    This corporate beast is pure poison for every economy it enters, and this beast will be put down before it bites into the lives of the innocent "common" people of India.

    ReplyDelete
  4. Thanks a lot for your comments Shiva. Your points are taken. The crux being Walmart being evil and it only cares about Profit.

    Walmart like any other corporations in United States or India, is only going to think about profit at all cost...within the fragile legal terms. If that includes undermining price cuts to vendors and local producers, they will do it. If it means, that they can get the same product from China at lower cost and yet make profit, then they are going to pursue that. We are living in a capitalist world today, where few people/shareholders/venture capitalist are calling the shots to determine the world economy for their own benefit. I don't want to go that path.

    Sometimes we have double standards about everything in life. We are perfectly fine that companies like IBM/Accenture and the big 5 can come in to our country, establish firms, tap our talent and sent the profits outside India. We are just not fine enough when a retail sector is opened up to increase the competition.
    I am not against Walmart not being in India. Walmart has it's own problem, just like any major organization. I am all for competition. Like I said in my blog, there are various sectors in India which are really ripe for disruption. Retail is one of them...With Walmart or no Walmart.

    ReplyDelete
    Replies
    1. Yet, we have no reached to a conclusion. A near perfect trap has been created for the common people, and the people on the top who are in it for their own personal greed are being puppeteered by foreign agencies so they can sell off their "Chinese Slave Labor Produce".

      As for the Double standards that you talk about in other sectors...

      The manipulation is the same, they have created a trap that you walk into yourself, and there is no way out of the trap because it keeps you alive but bleeds you dray at the end.

      I am proud of you if you support such a system.

      Standing on neutral ground means neutral existence.

      The question is simple..

      Do you stand for your own personal interests or the interests of the people who have no one to turn to?

      Delete
  5. Can Walmart beat the convenience of calling my local kirana wala and asking them to deliver bread and eggs at 7:00 AM in the morning or just a milk packet at 22:00 in the night. If yes then I am worried about Walmart steam rolling over the Kirana's. Else Walmarts can come and go but the kirana's will stay.
    As it is with the Indian Retail Giants, people have realised that we do not have supersized fridges to store the stocks for weeks on end which we end up buying when shopping at the Indian Retailers. The Local Kirana's Fit the Just-In-Time Inventory Supply Chain Beautifully. :)

    ReplyDelete

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