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Walmart stores to have an Indian touch

Source : BUSINESS_STANDARD
Last Updated: Mon, Sep 17, 2012 19:28 hrs
Customers wait to pay for their goods at a Best Price Modern Wholesale store, a joint venture of Wal-Mart Stores Inc and Bharti Enterprises, at Zirakpur

The large format of Walmart Supercenters, referred to as hypermarkets spread over 100,000 to 260,000 sq ft, which you find in the US and other parts of the world, may give it a miss in India. The bigger stores were not likely to come up even on the outskirts of cities as it was tough to get that much land anywhere, Rajan Bharti Mittal, vice-chairman and managing director of Bharti Enterprises, told Business Standard.

The world's largest retail chain, Walmart, is in a 50-50 joint venture with Bharti for cash-and-carry business and also for providing back-end support to Easy Day stores. The two are expected to extend the joint venture to front-end retail in the coming days, and Walmart may decide to invest in Easy Day, which is being run by Bharti Enterprises.

Asked whether the chain was planning to introduce hypermarkets in India, a Walmart spokesperson said: "It is too early for us to discuss future plans." Hypermarkets, on an average measuring close to 200,000 sq ft, stock all that a discount store and supermarket do and in addition have garden centres, pet shops, pharmacy, optical centres, photo processing lab, phone stores, salons, bank branches and fast food outlets. There are an estimated 3,029 Walmart Supercenters in the US as of March 2012.

Neighbourhood stores and compact hypermarkets (or supermarkets) are what people in India will get to experience of the Walmart brand. Neighbourhood stores are typically of around 3,000 to 4,000 sq ft size and the compact hypermarket outlets measure anything between 40,000 to 50,000 sq ft.

In fact, there may not be anything really American about the Indian avatar of Walmart. That includes the products that one would get to buy from there - 90 to 95 per cent of it would be sourced from India, claimed Mittal. Whether it's in Brazil or Mexico, Walmart sources locally, he pointed out.

And Walmart may not find any mention in the store name at all, though the two sides are yet to discuss the matter. "Walmart is not in the habit of insisting on its brand name," pointed out Mittal. In the UK, Walmart stores are called 'Asda', in Mexico 'Walmex', and 'Seiyu' in Japan.

So, will the Easy Day stores remain just the way they are even once Walmart invests in it? To that, Mittal said, there would be improvements in systems and processes. Also, one could expect a greater level of innovation and technology integration.

Neither Bharti nor Walmart wanted to give any time frame by when the joint venture could be signed. "Soon," is all that Mittal would reveal at this point. And, which side is flying for the deal talks -Walmart or Bharti? "Nothing decided yet, and most of the things can be done over video-conferencing these days," Mittal pointed out.

On the negotiating table would be critical matters like equity holding of the two partners, investment to be made, states in which one should go, and company structure to suit the friendly states and the no-go states. As for the condition that each state will decide whether to allow foreign direct investment (FDI) in multi-brand retail or not, Mittal said the company would present its case to all, including those on borderline like Punjab, which is yet to say a yes or a no to FDI in retail. Bharti group's Easy Day operates maximum number of stores, close to 70, in Punjab alone.

Refusing to call the state issue a major challenge, Mittal said: "Any way, one has to go to the states for obtaining as many as 26 licences before opening a store." Won't it be a limiting factor for a foreign investor to grapple with the state clause, especially if the ruling party loses in the next state election? "We don't expect any over-turning…so many reforms have been introduced at the Centre under different regimes, but anything that sovereign has decided has not been taken back."


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