The Hindu Business Line : Cash in and carry the day?

The entry of the world's largest retail chain Wal-Mart into the Indian bazaar is sure to cause some waves. The obvious consumer benefits of mass retailing have been reiterated often — lower prices, wider range and consistent quality. Yet, all parties concerned may be in for some surprises. The Indian housewife has a way of defying the stereotype. For a start, the proposed format of cash-and-carry store, a no-nonsense outlet selling huge quantities at low margins with little fanfare, is unfamiliar. Second, having been pampered by the new wave retail outlets, which are air-conditioned fantasylands for them to wander in, housewives might find these outlets less attractive. Above all, it remains to be seen how consumers take to buying larger pack sizes even at admittedly lower-than-normal bazaar prices; this is an economic as well as a cultural issue.

Signs so far are that Wal-Mart's forays away from the US have not always been successful; the company has tended to partner local brands, as with ASDA in the UK, where American-style selling was cold-shouldered by the shoppers. Apparently, the company has not done too well in Germany and Korea either. Even today Wal-Mart sells only a fifth of its worldwide turnover outside the US, and only in ten countries so far; unlike other American giants such as GE, which has nearly 90 per cent of its business outside the home country. In the US, Wal-Mart is a marketing case study and a legend, but slightly suspect in other aspects as an employer and buyer. The consumption of everything, from toilet paper to analgesics, being on a scale far higher than anywhere else in the world, these stores are nonetheless godsend for the US family budget. Everyday low prices and constant monitoring of inventories by real-time information are well-known practices that sustain this business model.

Reactions to Wal-Mart's arrival in India will naturally be a mix of eager anticipation and anxiety. Small entrepreneurs and purely Indian retail companies may well have some genuine reason to fear — the unbeatable combination of more consistent quality delivered at reasonable prices. The middle-class, the driver of consumerist expansion, might rejoice at the opportunity to shop for a wider range of products but the real benefits to the economy should come from the managerial efficiencies ushered in. Wholesale trading or mass retailing is essentially a volume game and bulk-buying that commits captive suppliers to a level of standardised quality and steady output are its core themes. India not only represents a $250-billion retail market, but also a fast growing source for merchandise — estimated at $1.5 billion this year — though nothing compared with the $70 billion from China. Finally, the building of scores of small businesses into a modern supply chain system is an outcome even the diehard critics would welcome.