Wal-Mart Stores, blocked from opening retail outlets in India, is reaching consumers in the world's second most populous nation by supplying their stores and restaurants.
The world's biggest retailer and rivals including Carrefour and Metro AG can't sell more than one brand under one roof in India. They're allowed to set up wholesale outlets and Wal-Mart's joint venture with billionaire Sunil Mittal's Bharti Enterprises plans to triple its locations this year.
Setting up such businesses will help overseas companies prepare for when India relaxes its rules on retailing, which may happen by April, according to Junior Trade Minister Jyotiraditya Scindia. Retail sales in Asia's third-largest economy may grow to $785 billion (Dh2.88 trillion) in 2015 from $396 billion in 2011 if the restrictions are eased next year, according to a report by Business Monitor International.
"We're filling a gap in the country which has existed for several years now," Raj Jain, chief executive officer of Bharti Walmart, said in an interview. Wholesaling in India could be "gigantic," and the venture will stay in the business even if retailing rules are relaxed, he said.
Shoppers at a Wal-Mart store in Zirakpur in India's northern Punjab state said they're drawn by low prices and convenience. They can only enter the store by showing ID cards that require documents proving they own a store or a restaurant.
Pankaj Goel, 36, said he makes a 10km trip to the store daily to buy supplies for his restaurant, Food Max.
"I find all the supplies I need here, so I can do all my shopping in one place," he said as he piled up cucumbers, mushrooms and lemons into two carts being pushed by store staff. "It's cheaper than buying from the market."
The 55,000 square foot Wal-Mart in Zirakpur resembles a warehouse, with high ceilings and wide aisles to handle forklifts.
Labels list wholesale and retail prices, as well as the difference, to show customers how much they can make when they sell the products on to consumers.
The Zirakpur outlet adds 15 to 20 more every day, Yogesh Kumar, its general manager, said.
Bharti Walmart already has as many as 180,000 customers in India, according to Jain.
Bharti Walmart opened its first store in India in 2009. It has six wholesale outlets and plans to increase that to 18 by the end of the year, spending as much as $75 million on the expansion. As many as 12 more outlets may be added in 2012.
"We're accelerating our programme because we think we can get larger scale here than we had originally anticipated," Jain said. "Even if retail opens, I cannot see us not doing our wholesale business because the opportunity is huge."
For Wal-Mart and Carrefour, the world's two biggest retailers, running wholesale operations in the South Asian nation of 1.2 billion people helps them develop supply chains and gain a foothold in the country. India was the third-most attractive retail market among the thirty largest emerging markets, US consulting group AT Kearney said in a report.
Small, neighbourhood shops that sell a limited range of items control about 70 to 80 per cent of India's retail industry, say analysts, including KPMG's Anand Ramanathan.
Wholesale stores boost product distribution in remote areas, said Ramanathan, based in Bangalore.
About five million stores are, "outside the direct coverage of large consumer-goods players," such as Hindustan Unilever, India's biggest maker of soap and detergent, he said.
Paris-based Carrefour set up its first India wholesale store in December. Reliance Retail, a subsidiary of India's Reliance Industries, will open wholesale stores ‘soon,' billionaire Chairman Mukesh Ambani said.
Future Group, the holding company for Pantaloon Retail India, India's largest publicly traded retailer, operates 169 Food Bazaar Stores in India.
The business of supplying smaller stores has, "very big potential," Saloni Nangia, senior vice president at Technopak Advisors, said.
From / Gulf News