Daily Archives: December 8, 2007

Walmart in India

Last time I checked Walmart is still going good on its India plans! So the question becomes imprtant. Will Walmart kill all the small retailers as it did in the North America? If you ask me I dont think so. People thought the same thing when retail chains like Sam’s or Food Bazaar cropped up all over India. They said now thats the end of small retailers, at least in urban India. But it turns out thats not the case.
For example, Sam’s Food or the ealrier Food World opened on a road populated by middle and lower middle income groups in Pune. Its venture lasted about an year and then it had to vaccate the premises. On some other road with better income households, all the old retailers are still in business along with Sam’s food.
One might argue that Walmart’s model is different than the exisiting supermarket chains. Its about lower price every day and squeezing costs. However, was it not the case even with McDonalds? Did all the Vada-pav and other small time food vendors go out of the market? Definitely not.
Infact what happened was more interesting. McDonalds, which essentially caters to middle and lower income households in North America, is a fun place to be in for families, kids to collegians in India. When it opened shop in Pune, people dressed up and stood in a line to get a bite of Indianised burgers and other food stuff!
So if Walmart opens shop in India who will go there? Ofcourse people who currently shop in Supermarkets and no small retailer will go out of business.
I agree this is arguement by analogy and hence may or may not hold. However, it seems to be the most likely thing to happen, unless Walmarts revolutionizes the the whole supplty chain. For example if it decides to directly contract with farmers for vegetables and supplying food grains it might be able to lower the prices. But to the extent that families do not care about a few pebbles in the bag of rice from the retailer below the apartment building, Walmart still faces a huge challenge. The prices of Walmart will have to be sufficiently lower to lure the customers who do not value mild variations in quality or are price sensitive.
And then there is this whole issue of how people shop in different societies. Buying behavior in North America is completely different than in India. Will this have any bearing on Walmart’s business prospects?
Well some more thoughts on this later! In the meanwhile if you think of some thing feel free to comment.


Filed under India-US: Some Conundrums