In order to scale up its current model of wholesale business, Walmart, is launching its business operations in Hyderabad and Lucknow from next month, as reported by Times of India. Also, it has appointed Krish Iyer as the President and CEO for its India operations.
Reliance Industries Limited is also planning to launch multi channel shopping in the coming year and the Future Group had launched its e-commerce business with Big Bazaar.
FinancialExpress says: Walmart’s scale-up plans for the wholesale business comes at a time when India’s top 10 modern food retailers are reported to have accumulated losses of Rs 13,000 crore ($2.2 billion) during FY14, according to estimates by ratings firm Crisil. The losses are despite cumulative revenues estimated having surged sharply from Rs 3,000 crore ($500 million) in 2008 to Rs 23,500 crore ($4.05 billion) last year.
Significantly, for Walmart, food and groceries account for more than 50 per cent of revenues. Crisil had studied India’s top ten food retailers, including Walmart unit Best Price Modern Wholesale Stores, Metro Cash & Carry India (a unit of Germany’s Metro AG), Aditya Birla Retail, Bharti Retail Ltd, Reliance Fresh Ltd, and Trent Hypermarket Ltd.
On May 27, the new commerce and industry minister Nirmala Sitharaman had reaffirming the BJP’s stand on FDI in multi-brand retail and said that foreign players will not be allowed to open retail stores in the country.
Hindustan Times says: Walmart India at present operates 20 wholesale cash-and-carry stores under the “Best Price Modern Wholesale” brand. The company recently said it plans to open 50 more such stores over the next five years.
More from Times of India: In an interview with TOI, Krish Iyer talks about the roadmap ahead. Excerpts:
A year in Bentonville has taught me a lot about setting up the business here. We already have a good business model in place. We have a capable team. The wholesale market in India is pegged at a healthy $300 billion and the top five players including us have a combined market share of just around $2.5 billion. So, the opportunities to grow are huge. We now have 20 Best Price stores in nine states and we plan to add 50 more by 2020. We are building the pipeline in terms of location and getting the approvals in place.
What is your India strategy?
In terms of our strategy, we are broadly looking to answer three questions: What are you allowed to do? What is the size of the price? And what are you good at? We are focusing on all three at the moment. Around 70% of sales are to kirana stores and we are also helping people open new stores, which are modern. Starting from the layout and fixtures of the stores to educating them on inventory management, it’s a step that will pay us dividends in the long run. The remaining 30% is to restaurants, hotels, offices and others such as the Army.
Are you planning to buy out any of your competitors’ stores?
We are focusing on organic growth. Acquisitions in a market like India cannot be very strategic since there are a lot of factors involved, including location and size, among others. However, we would not rule out any opportunities.
Have you firmed up your e-commerce plans?
We will be launching our B2B e-commerce operations in Hyderabad and Lucknow Best Price Stores from next month as pilot projects. And we have plans to ramp it up in the subsequent months. We are hoping that this move will help retailers optimize their inventory management. They will not have to stock up and can place orders with us on a daily basis. Of course, in the beginning, we will have to educate and handhold them.
The government may allow FDI in B2C e-commerce. Do you plan to be in that space? And what about multi-brand retail?
It’s a different ball game and we will explore it when the opportunity arises. On multi-brand retail, we will monitor the space and continue to engage with the stakeholders. We are focused on doing things the right way.
Most players in modern trade are bleeding because they have not been able to crack India’s food business, which accounts for nearly 70% of the overall retail business. What are you doing about it?
More than half of our business comes from food, whether it is packaged or raw. Essentially, the business model has to be right since the margins are very thin in the food business. International expertise does help though. At present, we are trying to manage cost efficiency and work on variables such as customer service.