Thursday, August 12, 2010


Foreign direct investment in retail sector is still a hot topic of discussion in the corridors of power at Delhi with the opponents taking rigid stands on the issue. Though GOI will have to eventually "give in" to international pressure for opening up its retail sector to outsiders, it has purchased some time by allowing such investments for whole sale marketing with the German player Metro Cash & Carry entering the country in 2002-03. Now it is the turn of the American retail giant Walmart to try its luck through the whole sale route with the hope of eventual entry into the retailing to capture Indian market. But its entry has attracted some undesirable attention from the antagonists of foreign retailers. The joint venture between the American retailer and the local tele-communication icon Bharti group is positioned as a whole sale business entity.

The very definition of wholesale indicates that it is a form of business where the seller offers goods on sale or resale of goods without any form of transformation to retailers, industrial and commercial buyers, institutional or professional users or to other wholesalers. It is very true that wholesale marketing operations do not cover direct sale to the consumers if it is interpreted strictly. How ever in practice such an arrangement has scope for deviation and it should not come as a surprise if some consumers, a minuscule number, get benefit through access to such wholesale outlets. Government of India policy at present lets only "single brand" wholesalers, whatever that means, to enter India through a local majority stake holding partner, for doing business. Probably all the products sold are to be offered under one brand, "Best Price Modern Whole Sale", after procuring different branded products from the manufacturers. Walmart already has a wholesale marketing format working in the US under the bran Sam's Club and the experience it has accumulated in sourcing and organizing merchandise will be of great help in making the new venture a formidable player in the business landscape of India.

According to some critics the entry of Walmart under the garb of wholesale is a truce to establish their dominance in the country and the visibility they get now can be an investment for future as and when the country's retail market is thrown open to foreign companies. What is forgotten is that the stores already opened in Punjab by "Bharti Walmart Stores" carry an amazing range of products hitherto not available in any store in India, offering wide business opportunities to small business sector to expand their business portfolio. The allegation that the new company is doing retail selling in spite of the bar on doing that, is very difficult to sustain just because a few customers get access to their stores and even this happens the volume must be so insignificant that it is not worth bickering about.

Involvement of local wholesalers, some of them involved in speculative trading and price manipulations could be behind such "inspired reporting". Indians are adept in beating any organized system and a few individuals taking advantage of the low prices of goods in these stores should not be the basis of serious accusations. As a precautionary step these stores have stipulated a minimum buying of goods worth Rs 500 at a go which a stiff bar for most of the ordinary consumers in the country.

Walmart entered India in 2009 and the joint venture has already three stores in Amritsar, Zirakpur and Chandigarh in Punjab. The business is transacted based on enrollment of members who have to produce proof of sales tax registration that can qualify them for membership. That the stores have become popular is indisputable as they have been able to enroll 20000 to 35000 members already and are doing brisk business beyond expectations. Another allegation which surfaced recently accuses the company of not checking the credentials and type of business of those who are being given cards to buy from their stores and its system of providing two complimentary cards for every business or institutional membership is being abused by many which is nothing but direct sale to the consumer. it is further alleged that all sorts of businessmen, ranging from property dealers to cloth merchants, have taken membership of these B2B stores and their families are indulging in retail buying. With the store selling only to businessmen, shop-owners and institutional buyers, who hold cards furnished against their sales tax PIN, there are insinuations that PINs are even acquired illegally to qualify for the famed Walmart card.

Without joining the issue on the desirability or otherwise of allowing foreign retailing players into India, it can be safely said that the local stores which are supposed to be affected by the dominance of large retailers do not seem to be too much concerned and on the contrary they are bound to be benefited because of their strength in "personal service" and loyalty from their customers. Besides they can always access good quality products from from the big retailers in metropolitan areas for stocking their shops in remote rural areas where the big fishes may have very little interest. In stead of criticizing such initiatives, there is every justification for encouraging such wholesale market players in different regions of the country which is bound to strengthen the local retail traders in a significant way.


1 comment:

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