Wal-Mart tip toes into India
April. 8 – Launched amongst mass protests to protect India's mom & pop retail stores, Wal-Mart has shipped its first consignment of Procter & Gamble’s personal-care products to Bharti-Wal Mart, a joint venture for the cash-and-carry and logistics initiatives, the Economic Times reported on Tuesday.
In a desperate bid to enter the US$350 billion retail market in India, the US$340 billion retail giant entered into a 50:50 joint venture with the Bharti group’s retail arm in 2006. While the joint venture will focus on B2B business, the Bharti group plans to launch small-format retail stores shortly. The officials said P&G India is helping Wal-Mart understand the nuances of doing business in India.The Wal-Mart official who spoke to Economic Times said the first cash-and-carry store is expected to open by 2009. “It is too early for us to comment on the details of our cash-and-carry format,” said an official.Wal-Mart’s foray into the buoyant
Indian retail sector has spurred British retail giant Tesco, (whose negotiations with Bharti retail fell through) to follow suit. Last week a British financial website announced Tesco was in exclusive negotiations with an Indian retailer to sign a joint venture as soon as possible.
Andrew Higginson, Tesco's strategy and finance director, said: 'We would never comment on specifics but are pleased with the way discussions are going.'
The website also said – Tesco is in exclusive negotiations with the secret party after working its way through a 'shortlist' of 30 potential partners. An agreement is expected soon, confirming the joint venture.
The present Indian policy restricts FDI in retail to single-brand ventures, with a foreign shareholding cap of 51%. However, 100% FDI is permitted in wholesale cash and carry, where one can only sell to retailors and distributors, and not to consumers. Besides, 100% FDI is also allowed under the automatic route in warehousing services and refrigeration of agricultural products. Therefore, from a regulation point of view, Wal-Mart can hold a majority stake in the cash and carry venture.
The Bharti-Wal-Mart alliance is set to alter the retail lansdscape in India. Given its expertise in retailing and sourcing efficiencies, Wal-Mart is set to give a tough time to Indian retailers and even the aggressive Reliance Retail is learnt to have put its roll-out plans on the fast track so that it is off and running before Bharti-Wal-Mart starts its operations.