American retail giant Wal-Mart has traveled a long road from Bentonville, Arkansas to Amritsar, Punjab. Wal-Mart’s entry this week into the Indian retail market is extremely significant for both. India has a fractured retail distribution system and Wal-Mart is a pioneer in developing the concept of supply-chain management. At this point Wal-Mart is not allowed to open any retail outlets but has set up a wholesale store instead in the city of Amritsar. Even this modest entry is subject to not using the Wal-Mart brand name, instead a hybrid “BestPrice Modern Wholesale” was all that was permitted!
The Amritsar store is a joint venture between Wal-Mart and Bharti Enterprises. The Arkansas retailer plans to open 10 more outlets in India in the next couple of years. The total retail market in India is currently estimated between $350 billion to $400 billion that might grow to an estimated $1 trillion by 2020. According to Financial Times, Britain’s Marks and Spencer and Tesco have also concluded alliances with local Indian partners. It is a matter of time before other global retailers like Target join the fray. China and India offer the largest retail market on the planet!
India’s restrictive commercial laws prohibit most foreign companies from setting up shop to compete with domestic retailers. One of the reasons for that could be the legendary procurement practices of Wal-Mart known for squeezing efficiencies and profits out of suppliers and supply chains. This could drive the marginal farmers to virtual destitution. The other could be the obvious monopoly over the supply chain. These are valid reasons for any government to be skeptical of this new paradigm. There are equally compelling reasons in favor of such operations to minimize the wastage in the Indian agriculture sector including the horticulture.
Indian horticulture (fruits & vegetables) contributes 30% to the total Indian agricultural GDP of $360 billion. In other words non-grain crops in India produce a whopping $120 billion (70% of Pakistan’s entire GDP) in the total of $1.2 trillion Gross Domestic Product of India. Out of this $120 billion horticulture crop of India, 30% is wasted in the market supply chain. This translates to crop wastage of approximately $30 billion every year. This happens because of poor transport, insufficient warehousing and no significant refrigeration facilities. If Wal-Mart could reduce this wastage by even a small percentage, the entry of this American retail giant would be a boon to the Indian small and marginal farmers! The opponents must THINK about it!
Filed under: Corporate India, Indo-US relations Tagged: | Amritsar, Amritsar Punjab, Arkansas, Arkansas retailer, Arkansas to Amritsar, Bentonville, BestPrice Modern Wholesale, Bharti Enterprises, China, Financial Times, fractured retail distribution system, Gross Domestic Product of India, Indian agricultural GDP of $360 billion, Indian horticulture, Indian partners, Indian retail market, Marks and Spencer, retail outlets, supply-chain management, Target, Tesco, Wal-Mart
