Best Price Modern Wholesale (Wal-Mart) in India

The first (and only) Wal-Mart store in India is located about 500 kilometers north of New Delhi, on the Grand Trunk Road near the Holy city of Amritsar that Rudyard Kipling spoke of nearly a century ago.
Interestingly, to deflect the attention of politicians and activists who oppose the entry of foreign multi-brand retailers, the store isn’t called Wal-Mart. After many surveys and much research, it was named Best Price Modern Wholesale.
The endeavor is a joint venture between Bharti Enterprises and Wal-Mart. Bharti owns the largest mobile phone GSM service in India. Until this stores opening, Wal-Mart's retail presence has been limited to providing retail items to their partner Bharti’s chain of 25 Easy Day grocery stores that opened last year.

This store however, is not a standard Wal-Mart such as the ones you see in North America. India has legislation that prohibits foreign companies from having direct competition with the domestic retailers and allows only limited foreign ownership as well. This store is not a retail store that will compete with other local retailers. This store is a cash-and-carry wholesaler that will mostly sell to vegetable vendors, hospitals, hotels, restaurants and other companies.
In order to buy from this store, you must be a business owner, a business owner’s family, or one of three of the business owners’ friends. This was a requirement that was meant to appease the local shop owners who saw the Hyper store as a threat to their businesses.

Wal-Mart has had ties with India for some time. Indian suppliers have been providing cloth, clothing, home products and jewelry for the last two decades. They’ve also been working for the 3 years before opening behind the scenes to develop additional suppliers. These new suppliers will help them stock the shelves of their new store in Amritsar with fresh produce and staples like lentils, wheat and rice. One of their stated goals is to provide localized store brands that will sell for 20-30% less than the leading brands, while being customized with taste, style or size for the local area.

Raj Jain (president of Bharti-Wal-Mart) claims that… “We’ll be able to deliver a different seasoning for noodles every 100 km - all with an appreciation for variations in local cultures and tastes.” “India is not a homogeneous market, so ours is not a cookie-cutter approach from the U.S."

Table 1 Comparison Demographics between India, Germany and S. Korea

The goal is to not fall into the same traps that occurred in Germany and South Korea. They dropped the ball in both countries by trying to superimpose their successful U.S. operations on to a different culture where there wasn’t a good fit and ended up losing the game. They were forced to shut down the stores and pull out of the countries. With a middle-class population of over three-hundred million, India is a country where they have to get it right. Currently, their long term plan has them expanding with ten to fifteen more stores within the next seven years.

There may be other factors though that could prevent this growth. Finance Minister Pranab Mukherjee said he lacks support from lawmakers to allow more foreign investment in retail and insurance. Three years after opening the first collaborative wholesale cash-and-carry store, they still only have the one store.

Other resistance is building to stymie Wal-Mart Stores Inc.’s expansion in India. India Foreign Direct Investment Watch, a national coalition of labor unions, environmentalists, nonprofit groups and academics, claims that the company will eventually hurt shopkeepers, even if its store is not open to the general public. They claimed that:

"Wal-Mart's sheer size gives it unrestrained economic power, which allows it to drive down costs in the retail and manufacturing sectors and to enact its own standards with regards to its work force."

Local people around Amritsar appear excited to go to the Best Price store almost as if it’s a Disneyland. It’s quite a change from the wallahs (small shopkeepers) that most are used to seeing. Where-as most Indians are used to shopping everyday for meals, and a going to a different store for different products, the Best Price is truly one-stop shop. It has forty foot high shelves; they play loud Bollywood pop music and serve Indian thalis (food platters) in the café. The sheer volume of products of all types will take one aback. Frozen foods are wrestling for space along with stoves and refrigerators. The customers seen here can be as diverse as the hotelier who needs to buy a ton of wheat or to the local kirana shop owner wanting to stock up on everything from soaps, sache shampoos, hair oil, agarbatti (incense), beedis (cigarettes), matches, biscuits, washing powder soap, tea, and sugar, to some fresh produce. The tags on the items show not only the list price, but also reveal the savings the shopper will have on the wholesale purchase. Quite a difference…

It’s not just the customers that are affected by the enterprise. Their new employees are also being inspired.

Amandeep Kaur, the youngest of three daughters from the small village of Nangal Pannuan could have been married off early like her sisters and started bearing children and serving their families while ignoring her education, but instead she joined the organization after graduating from the joint Punjab-Bharti Wal-Mart Training Center. The 23 year old now shows up to work at the Amritsar Wal-Mart in tee-shirt and jeans. She just recently won an internal dance competition and the prize was a company sponsored trip to the United States. Amandeep believes she has found her calling in retail management, and has enrolled for an MBA degree from Indira Gandhi National Open University. Her neighbor, Kuldeep Kaur, whose father drives an auto-rickshaw in Majithia, manages the front desk at the store. Kuldeep is studying hard to be a graduate. "It was a totally new world for me, so very different from my village and the atmosphere I grew up in," says Kuldeep.

Will more Wal-Mart stores open up? Will Wal-Mart get to put their name on their stores? Will their world-class supply chain management skills lead the way for Indian companies? Will the new model of integration of the store culture with the host country be successful? These are all questions that can’t be answered until a little more water has passed under the bridge. Only time will tell.

Sources:

http://timesofindia.indiatimes.com/city/chandigarh/From-pind-to-US-via-Walmart/articleshow/5656157.cms

http://beta.profit.ndtv.com/news/show/bharti-walmart-jv-to-invest-100-mn-sources-26333

http://walmartstores.com/AboutUs/276.aspx

http://indiamicrofinance.com/blog/marketing/marketing-interviews/interview-with-raj-jain-bharti-wal-mart-chief.html

http://www.businessweek.com/news/2010-03-01/mukherjee-lacks-magic-number-in-house-for-carrefour-wal-mart.html

http://www.emeraldinsight.com/Insight/viewContentItem.do?contentType=Article&contentId=1737926

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/12/AR2009071202176.html