Walmart in India – What Price, Retail Heaven?

Writing in Forbes, Gary Weiss continues with his pieces on Walmart’s entry into India, and predictably, paints a doomsday scenario. Rediff reprinted the column, and has been inundated with comments, many of them thankfully coherent and thoughtful, unlike the juvenile rants that follow most other Rediff articles.

To say that Gary has a bone to pick with Walmart is an understatement. I counted five different posts on Walmart’s India venture on his blog itself, none taking too kindly to the idea.The fact that his latest book is titled Wall Street Vs. America: The Rampant Greed and Dishonesty That Imperil Your Investments, should give us an inkling of what to expect when he takes on Walmart.

But rabid leftist he is not. And even though Walmart-bashing is one of the most popular pastimes in the United States, his opinions, after more than 20 years of business reporting, carry weight, and usually make a lot of sense.

But I have a few issues with this particular column.

For starters, the patronizing is laid on a bit too thick. The stereotypes are back in force…”morning at the Taj Mahal, afternoon buying glue!”.
And of course, the backbone of this article, the fact that Walmart’s entry will cause India to lose its exotic ‘bazaars’:
“what happens to the markets–or bazaars as they are known in Farsi-derived Hindi?”
“In India, ‘Main Street’ is not a street, but a bazaar.”
“…the bazaar is an institution, a way of life. And, in the view of a growing number of people in India, it is endangered by Wal-Mart.”
“The difference is that when people lose their jobs in India, they sometimes starve.”

Though the image of an India with lanes and bylanes of canvas-shaded shops selling their mysterious wares and perhaps a vieled woman or two haggling over the prices of earthen pots and a pound of exotic spices undoubtably appeals to the quaint stereotype in many a westerner’s mind, it is not necessarily true, as anybody who has spent any length of time in India will tell you. 
To be fair, this may be a rather harsh reading of the author’s intent here. His concern is genuine, and is shared by almost everyone, the Government of India included.

But perhaps we are getting ahead of ourselves. A couple of points here.

Maybe we should ask ourselves whether the retail powerhouse will survive India, instead of the other way round. Walmart hasn’t exactly blazed a trail of success with its international ventures. Germany and South Korea have been the more high profile failures, while its cultural gaffes during its intial days in Canada aren’t so well known. A reader of Gary’s column pointed out how publicity flyers were sent out — in English, in French speaking Quebec.
The retailer may find out that India is a different beast altogether, though one hopes, with Bharti managing the front end of the venture, they will not make the most common mistake that multinationals tend to make in India: considering the whole country to be one monolithic social unit.

Walmart, however, is nothing if not adaptable. I remember watching a documentary on MSNBC featuring Walmart’s expansion in China, where their officials were showing the reporter around the store’s meat and seafood section. Apparently, pre-cut and packaged meat does not appeal to the Chinese consumer. Walmart did a bit of local research in the street markets around the city. As a result, that section of the store had tanks of live fish and eels and live poultry. Don’t expect to see that in your friendly neighborhood Walmart in small town USA. Similarly, bags of wheat may sell briskly in Walmart Gurgaon, but not necessarily in Tiruchirapalli. A seafood section in Baroda might as well not be put up, if they don’t want vegetarian Gujaratis to boycott the franchise, and a store without a fresh-water fish section may come under attack by militant Bongs in Kolkata!

Secondly, small retailers in India are not going to go out of business any time soon. Their USP is their personalized service. And that means much more in India than its American equivalent…helping you fill your bag at the end of the checkout line. The reasons you go to your neighborhood grocer in India are multiple. The personal touches are many, from the fact that you can ask him to stock your favourite brand of alu bhujia, to the small chit-chat you can have with him about the falling fortunes of the national cricket team. Add to that services like dropping off your grocery list on the way to work and having everything delivered  home at no extra charge, and you have a virtually unbeatable range of services.
The most important benefit of shopping at your neighborhood lalaji’s is undoubtedly the extension of credit, which is almost always done on a personal trust basis. And it is not always due to inability of the customer to pay up. More often than not, it is a matter of convenience, paying a single bill at the end of the month. And how many times has that bill been delivered home and the payment picked up by Lalaji’s son?
With no national identification numbers, such as SSNs, no concepts of credit ratings of customers, and very low penetration of organized credit services, I don’t see how Walmart or any other big retailer can offer this level of services in the forseeable future.

IMO Gary Weiss’ argument suffers due to a limited understanding of Indian society. In the United States, Walmart targets its business at the lower middle-class. From what I have observed in the last few years here, where you shop in the US is totally class driven. One really doesn’t expect to see BMW driving upper middle-class WASPs buying their weekly groceries at Walmart. I’m sure the folks at Bharti and Walmart are not oblivious to it, but the typical Walmart shopper in India will be very different. She will be from the elite or upper middle-class. One of the main reasons she will shop at Walmart, at least initially, will be for the ‘global’ (read American) shopping experience, and to see and be seen there. No this is not stereotypical (I don’t mean to be sexist either…the female gender used here is simply as a manner of speaking). A few hours at any mall in urban India will make this abundantly clear even to the most casual observer. This will drive the initial crowds, but quality and of course, prices, will drive things once the dust settles down.

The point is that there will still be a very large chunk of society that will feel out of place and intimidated buying their weekly alu-peyaaz among the tall aisles and shiny floors of a Walmart or Reliance superstore. This section of society will still be served by the neigborhood lalaji and all the so-called mom-and-pop stores that dot small (and large) town India.

Also, Indians traditionally do not buy supplies in bulk. Most drive small cars (we are talking about potential Walmart customers here). There are no vast parking lots to speak of in Indian towns and cities. Most customers will park at a distance and walk down to the stores or drive two-wheelers to get there. The expectation that customers will walk out of stores pushing carts filled to the brim with household supplies and groceries may be slightly misplaced in the Indian context. Groceries are bought weekly, or bi-weekly at the most. And it may be optimistic to assume that every time the customer is going to make the trip braving traffic and a parking nightmare to shop at Walmart, when the corner grocer has most of the things she needs.

Unless the price incentive is too strong to resist.

Which brings me to the next question. Just how low can Walmart price commodities in a country like India? Their biggest advantage traditionally has been the efficiency of their supply chain. Which is perfectly understable in developed countries where cost of manual labour is high. In India, any advantage of using their legendary supply chain management methods is likely to be negated to a large extent by the low cost of labour available to competitors.
Another point to consider: manufacturing location. Quite a large number of goods available on Walmart shelves in the United States are cheap because they are produced at low cost locations…such as India. So what happens when you are trying to sell in India too? A shirt which you are selling for Rs.500 can be just as easily sold by a competitor for Rs.500. The only worthwhile advantage you can have is your scale of business, and that remains to be seen.

All said and done, I hope Walmart succeeds in India, for the sake of the Indian consumer. Indian organized and unorganized retail needs the competition, and the adoption of standard business practices. Quality standards need to be adhered to and enforced, and the days of the customer always getting the short end of the stick should end. This can only happen when an international business presence the size of Walmart sets up shop in India, and brings with it its business practices…hopefully only the good and not the bad.

But that may be too much to ask for from this global behemoth.

~ by Shubho on April 1, 2007.