Walmart Stores Inc is scaling up its current model of wholesale business format stores in India, undeterred by the policy level roadblocks to FDI in multi-brand retail that has prompted players such as French retailer Carrefour to consider an exit from India and amid reports of mounting losses for the country’s big-box retailers in the food segment.
Krish Iyer, India president and CEO of Walmart asserted that all its 20 wholesale stores in the country are generating profits “at the store level”, something that has prompted the Bentonville, Arkansas-based company to build on this model here. Alongside plans to open 50 more cash-and-carry (wholesale) outlets in India, the world’s largest retailer plans to launch a new business-to-business (B2B) e-commerce platform in Lucknow and Hyderabad in the first week of July, a unique pilot that the company has not tried out anywhere else in the world.
Iyer, while indicating sales through the firm’s e-commerce service will be available only to its registered members, told The Indian Express that Walmart would look at rolling out this service to other cities after the two pilot projects are wrapped up in six months time.
Walmart’s scale-up plans for the wholesale business comes at a time when India’s top 10 modern food retailers are reported to have accumulated losses of Rs 13,000 crore ($2.2 billion) during FY14, according to estimates by ratings firm Crisil. The losses are despite cumulative revenues estimated having surged sharply from Rs 3,000 crore ($500 million) in 2008 to Rs 23,500 crore ($4.05 billion) last year.
Significantly, for Walmart, food and groceries account for more than 50 per cent of revenues. Crisil had studied India’s top ten food retailers, including Walmart unit Best Price Modern Wholesale Stores, Metro Cash & Carry India (a unit of Germany’s Metro AG), Aditya Birla Retail, Bharti Retail Ltd, Reliance Fresh Ltd, and Trent Hypermarket Ltd.
On May 27, the new commerce and industry minister Nirmala Sitharaman had reaffirming the BJP’s stand on FDI in multi-brand retail and said that foreign players will not be allowed to open retail stores in the country.
Elaborating on Walmart’s cash-and-carry format, Iyer said: “We have a good winning business model, so it makes logical sense to invest in this… While, one set of players use the cash-and-carry as a back-end venture that can then supply to the front end, others use it as a profitable model. For us it is a profitable business model by itself. In the past, we used it for supplying to the front end but we discovered that it (cash-and-carry) is a great model for India. So it is a discovery for us and having discovered it, we don’t want to give it up. Our 20 stores are making profits at the store level.”
On the new B2B e-commerce platform, Iyer said the proposed venture will entail a store-pick model and a delivery model. “It will be membership based, so members can either collect goods from the stores or can get it delivered”.
While the retailer gets most of its members within the 0-20 km radius around the store, the proposed model also aims at tapping members from 20-40 kms, who sign up but are unable to visit the stores frequently.