After a long lull, one can finally see some action at Walmart’s India headquarter. But that action seems pretty lackadaisical by Walmart’s standards... Is everything alright? by Savreen Gadhoke
Here comes the good news – they might have some critical sense in their caution. India has also been leveraged by Walmart to a large extent to be a global supplier. During the launch of the second cash-and-carry, Scott Price, President & CEO, Walmart Asia confirmed this, “India is already exporting goods worth $125 million to Walmart stores across the globe and we hope to take this figure to $1 billion in the next few years.” Even though that is an extremely small part of this Bentonville behemoth’s global sales (for fiscal 2010) of $405 billion, it’s a good start.
But some of Walmart’s moves have been well targeted and praiseworthy competitive. Strategically located in the midst of the agriculture capital of the country (Punjab), Best Price Modern Wholesale store has had the benefit of locally sourcing fresh fruits and vegetables from farmers under its ‘Direct Farm Project’. With each store demanding $6-7 million for setting up, nearly 90% of the 6,000 SKUs (stock keeping units) stacked in each of the stores are sourced locally. This makes Bharti Walmart competitively priced against local wholesalers and the store, therefore, is able to pass the cost benefit to its customers, which comprises resellers, horecas (hotel, restaurant and catering sector), institutions, et al. For instance, Bharti Walmart is able to sell FMCG products 10% cheaper and food grains & cereals at 2-5% less price than the local wholesaler. Prices in apparels and merchandise segments too are 25% cheaper.
Moreover, for the entire Punjab, Haryana and Delhi region, Walmart has one distribution centre in Bannur. This too saves considerable cost. But that also exposes the current chink – over-dependence of the retailer on just one region. Even the up-coming stores are expected to be launched in Punjab, Haryana, Delhi, MP & UP clearly signifying Bharti Walmart’s extra reliance on north India. Experts like Rajesh Tanwar, Director, Integrated Retail Solutions, comment how the vagaries of monsoons could play havoc with Bharti Walmart’s supply dynamics in any year or even quarter. And other issues like competition (Tata recently announcing plans to launch its first C&C store by the end of this fiscal) fighting for similarly located resources could force Bharti Walmart in a corner.
Here comes the good news – they might have some critical sense in their caution. India has also been leveraged by Walmart to a large extent to be a global supplier. During the launch of the second cash-and-carry, Scott Price, President & CEO, Walmart Asia confirmed this, “India is already exporting goods worth $125 million to Walmart stores across the globe and we hope to take this figure to $1 billion in the next few years.” Even though that is an extremely small part of this Bentonville behemoth’s global sales (for fiscal 2010) of $405 billion, it’s a good start.
But some of Walmart’s moves have been well targeted and praiseworthy competitive. Strategically located in the midst of the agriculture capital of the country (Punjab), Best Price Modern Wholesale store has had the benefit of locally sourcing fresh fruits and vegetables from farmers under its ‘Direct Farm Project’. With each store demanding $6-7 million for setting up, nearly 90% of the 6,000 SKUs (stock keeping units) stacked in each of the stores are sourced locally. This makes Bharti Walmart competitively priced against local wholesalers and the store, therefore, is able to pass the cost benefit to its customers, which comprises resellers, horecas (hotel, restaurant and catering sector), institutions, et al. For instance, Bharti Walmart is able to sell FMCG products 10% cheaper and food grains & cereals at 2-5% less price than the local wholesaler. Prices in apparels and merchandise segments too are 25% cheaper.
Moreover, for the entire Punjab, Haryana and Delhi region, Walmart has one distribution centre in Bannur. This too saves considerable cost. But that also exposes the current chink – over-dependence of the retailer on just one region. Even the up-coming stores are expected to be launched in Punjab, Haryana, Delhi, MP & UP clearly signifying Bharti Walmart’s extra reliance on north India. Experts like Rajesh Tanwar, Director, Integrated Retail Solutions, comment how the vagaries of monsoons could play havoc with Bharti Walmart’s supply dynamics in any year or even quarter. And other issues like competition (Tata recently announcing plans to launch its first C&C store by the end of this fiscal) fighting for similarly located resources could force Bharti Walmart in a corner.
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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