Eager buyers, favourable policy: India could be a rare foreign success story for Walmart

Retail giant Walmart’s investments in companies outside of the US have mostly failed to take off.

For example, the Arkansas-based company entered the Chinese e-commerce space with the acquisition of a marginal player, Yihoadian, in 2015. But, within a year, it sold the business to JD.com.

In Brazil, Walmart is looking to sell part off its operations after a 10-year struggle. Poor integration with the local business and a downturn in Brazil’s economy have hurt Walmart’s ambitions in that country.

In Germany, Walmart set up shop in 1997, only to exit in 2006.

The retail giant’s initial period in India too was tumultuous, with a failed joint venture with the Bharti Group and adverse FDI policy forcing it to change its business model. Things began to change after Krish Iyer took charge of Walmart India in 2013.

Four years later, Iyer has led the company’s smart pivot, from its traditional strength of selling directly to retail consumers to selling to small wholesale buyers through its chain of cash-and-carry (CC) stores.

The bets are beginning to pay off: each of Walmart’s India outlets has turned profitable at the store level.

“This year, India was made a priority market for Walmart, which means we’re getting more resources, more talent. This will help in accelerating stuff, and investments in the back-end and the supply chain will happen,” Iyer told BusinessLine in a recent interview.

Walmart has 20 such CC stores in India and is expected to launch another 50 by 2021 at an overall investment of over $500 million. The initial success has given the company the confidence to move into other formats.

Huge potential

The Flipkart acquisition offers Walmart huge potential in the e-commerce space.

Devangshu Dutta, founder of Third EyeSight, pointed out Walmart has been present in India for several years now and has been monitoring consumer behaviour through its CC channel. Arvind Singhal, founder of research and consultancy firm Technopak, said: “First of all, there is no correlation between Walmart’s global buys and (deals) in India. In the US, Amazon had a great headstart and, besides, every physical store has its own online venture, which is not the case in India.”

Experts estimate that the India story will be different from Walmart’s all other global buys. India has a young population, a growing digital payment ecosystem, huge demand coming from the fashion segment and an overall positive economic sentiment.

These are a definite advantage for the US retail behemoth.

While the US is already a saturated market and China’s policies are restrictive for foreign players, India is the only growing and open market that provides fair competition and opportunity to grow, experts feel.

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