Why the Walmart-Bharti split hurts

The Walmart-Bharti split is not good news. Walmart is one of the world’s largest companies with 11,000 stores and revenues exceeding $400 billion, employing more than 2 million people globally.

Bharti is one of India’s most recognised companies; Bharti Airtel is the telecom leader with 190 million subscribers in India. India is home to the largest number of retailers worldwide — close to 15 million outlets.

Walmart and Bharti are scale companies (which deal with high volumes) and India is a scale market; all three understand the economic and social benefits of scale. Further, the retail market in India is also a big employer. This sector is second only to agriculture, and contributes the most to the workforce in India.

The social media commentary tracked by Autumn Worldwide seems to present a neutral view on this split, with a few negative comments. Why?

The current footprint of the joint venture hasn’t really affected the lives of the average Indian so far, since it’s been restricted to 212 consumer facing outlets and 20 wholesale stores. With this split, Bharti takes ownership of the 212 outlets and Walmart will run the 20 wholesale stores. Had it been one entity, the future impact of this joint venture could have been huge. Despite the split, these two firms share a common philosophy: scale and value.

Retail revolution rethink

Walmart was founded in 1962 and Bharti in 1980, both starting as family firms. Walmart revolutionised retailing first in the US and then globally; Bharti revolutionised mobility in India and is now in Africa. Both companies share a focus on value pricing, innovation and scaled roll-out.

The split is not good for India from a public relations and investment point. Rightly or wrongly, parallels will be drawn to the 1977 situation of Coca-Cola and IBM and government policy will be discussed.

The route into India via joint ventures with big Indian groups will also be debated. This may make some companies planning to invest in India rethink their joint venture partnerships.

Was this parting inevitable or could it have been saved? This split offers lessons in media management and influence, in driving government policy and managing differences.

Lessons in JV

First, this JV was branded a job-killer when it actually would have created more jobs. India saw mass protests against the concept of big retail expansion.

Pundits quoted US reports where mom and pop stores declined by 50 per cent within a decade of Walmart coming to town. This will never happen in India since the mom and pop store in India is far more cash-efficient than the big store.

The Indian provisionstore offers a door delivery system, something every big global retailer is trying to copy. Most multinationals and their executives tend to keep quiet in the face of wrong reporting and unfair criticism. Was there a case for more positive commentary from all concerned?

Governments run differently from large multinational firms. The Government has a hundred opinions from two hundred constituents that it needs to balance. Governments and multinational investors need to invest time and energy to talk to each other, especially in uncharted policy areas.

Talking to each other through the media does not enable a productive relationship or investment. Remember Enron in India? A terrific example of excellent policy management and influence was Pepsi which resolved brand name and export commitment issues.

JV partners constantly seek agreement amongst their many differences. This JV is no different and only the two parties concerned know the truth; the rest is speculation.

The real loser is the retail industry and its ability to grow into a world class system. Walmart, with enormous knowledge and practices across 15 countries, would have brought fresh thinking and innovation to the retail value chain in India, as opposed to doing only wholesale business. Innovations from the retail sector would have spilled over into other sectors. So, in a way, this split doesn’t aid fast learning.

The brand equity of the two partners is not likely to be affected in any way. Neither had sharp and deep affiliations. Hence, both can start the process of brand building from scratch.

However, the impact on employees will be huge. This JV employed about 10,000 people. They will be at the crossroads in terms of emotional commitment and each employee will need to be handled with care.

It is not a happy split for anyone. Walmart and Bharti ran a three-legged race in the retail market; they now want to run separately. Time will tell if this will help them run faster.

(The author is former head of emerging markets for Nokia)

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