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'Retail policy focuses on the wrong end'

March 28, 2011 10:54 IST
Four years after announcing its wholesale joint venture with Bharti Enterprises, Walmart, the world's largest retail company, is still waiting for the multi-brand retail sector in India to open for foreign direct investment.

Raj Jain, President, Walmart India, and Managing Director & CEO, Bharti Walmart, tells Nivedita Mookerji the delay is due to some erroneous assumptions of what modern retail is meant for.

Edited excerpts:

What is your assessment of the Indian retail market? Has it altered from the time Walmart's joint venture with Bharti was formed?

India is a rapidly evolving retail market. There was a time when so many players got into this area. Many ran out of steam. They entered the retail landscape without fully understanding it.

Over a period of time, they understood that retail is a long-term business. So, we see them either selling out or re-writing their business.

That's part of evolution. I believe India is a unique retail market and India-centric solutions have to be found.

So, do you see plenty of opportunity for consolidation and mergers & acquisitions (M&As)?

Opportunities do exist, but the scope for M&As is limited because of the Indian rules (for the retail sector).

What is your take on the opening of the multi-brand retail sector to foreign investment?

When you look at the Prime Minister's earlier speech or the Finance Minister's Budget speech, it is clear an active debate is on for opening the retail sector (to foreign investment).

Commerce secretary Rahul Khullar has also indicated this. But I would not know how it will translate into action and whether the sector will be opened fully, partially or with a caveat.

What, according to you, is the thought behind the change in the authorities' thinking?

Intellectually, policy makers and politicians seem to believe now that modern retail is as important as any other infrastructure sector (like aviation or roadways). Modern retail is an infrastructure industry, much more than a consumer business.

In the absence of FDI being allowed in multi-brand retail, business, Walmart is present only in the wholesale/cash and
carry segment. What challenges do you face in the wholesale business?

The biggest is the absence of an efficient supply chain. Moving products from one place to another is difficult. Then, there's a complex taxation structure, making things worse. Add to that the worry of real estate (that would be suitable for the wholesale business).

Do you see competition crowding out the wholesale space in India?

I don't think there's so much competition yet in wholesale. Besides Walmart, there's only Metro Cash & Carry.

Carrefour has opened only one wholesale store so far in India.

What are your expansion plans?

We have five stores across three states - Punjab, Rajasthan and Madhya Pradesh. We plan to set up 10-12 new wholesale stores by the end of this calendar year. Next year, again, we plan to have a similar number of stores - 10 to 12.

Where will your new stores be located?

We plan to go to the south and west, after having focused on the north initially.

Will you focus on big cities or smaller towns?

It will be a fair mix. We'll opt for both big cities and smaller towns.

How would you compare the Indian retail market with those in other emerging economies?

I would say India is just about starting on the retail modernisation process. If you look at some other emerging markets like China, Philippines, Indonesia, Brazil, or Mexico, you will find these are ahead of India by anything between five and 20 years. India has a lot of catching up to do.

If you had to give a piece of advice to the authorities on improving the state of retail industry in India, what would that be?

I would tell them we are focusing on the wrong end. Rather than worrying about how FDI in multi-brand retail will impact local stores, we should ask whether we have the right infrastructure to feed and supply food to a billion people in India.

My advice to the authorities would be that foreign investment is important for creating that infrastructure. Without that, there could be significant inflation and non-availability of food stock.

Nivedita Mookerji
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