Wal-Mart Enters India Market

Wal-Mart is planning for an entry in Indian retail market and has initiated an agreement with Bharti Enterprises, an India-based company, for a retail venture on a wholesale cash?and?carry basis. According to Sunil Mittal, Bharti Enterprises Chairman, this will be a partnership of equals (50:50). While Wal-Mart will provide backend logistics support involving sourcing, Bharti will handle the front-end retail aspect and set up “several hundred” stores across India, the first of which is scheduled to open next year. The initial investment will be of over $100 million, a figure that is expected to grow manifold in the future. Bharti Enterprises will open the retail shops under Wal-Mart’s franchise. The venture would mainly source products from India and adopt all retail formats, including hyper markets and super markets.

Wal-Mart’s entry into India with the Bharti group will be a first-of-its-kind for the US retailing giant. Wal-Mart has always preferred to enter a new market on its own. But government regulations in India (which only allow foreign direct investment of 51% in cash-and-carry and single brand retail) coupled with Wal-Mart’s earlier experiences in other markets prompted it to tie-up with a local partner.

Wal-Mart first forayed outside the United States in 1991 with a Sam’s Club outlet (cash?and?carry format) store in Mexico and is at present the biggest retailer in the country. However, the experience of the retailer hasn’t been smooth in other markets. Wal-Mart exited its business in South Korea in May this year and sold its 16 stores to a local company Shinsegae for $860 million.

In earlier days, Wal-Mart made the mistake of taking its structure, product mix and corporate culture to other countries like Indonesia and Germany where it did not work too well. Now the retailer has learnt from its experience and localized products form a significant part of its product mix in different countries.