India’s market provides tremendous potential, it has always been complex.
Walmart’s growth in India was hindered by its developing rules on foreign
investment, an internal bribery probe, and primarily its faltering partnership
with Bharti Retail.
Lack of Convenience and Difficulty in Access
Traditionally, Walmart stores across the globe are located within a
10-km radius from the city center. Sprawling over an area of 180,000 to 230,000
sq. feet, they usually set up their stores
further from the city center. Moreover, most cities in India have exceptionally high real estate prices,
allowing Walmart to only set up large scale stores outside the city center. Furthermore, at that time, a very small
percentage of Indians owned a car, thereby limiting their target market vastly.
Additionally, with India’s severe traffic congestion, the idea of traveling
long distances for everyday products was not viable. Thus, to travel a small distance of
10km would take approximately an hour, proving to be impractical for consumers planning
to shop for smaller, easily available products.
Walmart faced yet another obstruction
in India due its corrupt government officials. It spent over a million USD in
bribing low-level officials for allowing goods to securely move through customs
and for acquiring various real estate approvals. The retailer was also
investigated by the Enforcement Directorate due to the violation of the Foreign
Exchange Management Act, over an alleged investment of $100 million in Bharti
Group Company. (Business
With an approximate population of 1.2 billion, with 90% of its $500
billion retail done through brick and mortar, Walmart was bound for success.
However due to its regulatory uncertainty and strict government policies, it required
30% of its products to be sourced locally. This did not align
with Walmart’s logistical plan as it had already sourced products and established
contracts from proven quality suppliers.
Moreover, Walmart lacked local political support. For instance, former
finance minister and senior BJP leader Yashwant Sinha stated in an interview
that his party will “not allow Walmart to
come” into the country. Mr. Sinha said that while the BJP will support FDI
in general, FDI in multi-brand in retail will not be allowed.
Failing to Adapt to Local Attitudes
“Many big US companies have struggled
to truly understand what localization means. Calling a Big Mac the Maharaja Mac
should do the trick, thought McDonald’s but it took years before they realized
the serious vegetarianism of the average Indian citizen.” Mutton stated.
“There is an ignorance about the scale
of India. Twenty percent of India is the ‘English-speaking urban upper class’ which is roughly 240 million people. That’s almost the population of USA. That being said, India has only a
fraction of America’s wealth. So, imagine the level of
poverty. And like in America, 1 percent owns most of India. There are many
India’s within India scattered across geography. Which India are you targeting?” Mr. Pattanaik said.
India as a country is highly diversified, and for Walmart to have
succeeded they needed to identify the correct target market. Its products
needed to be tailored to the average Indian’s needs and wants and Walmart
failed to take this into account.
from the Unorganized Sector
retailers in the organised and unorganised sector had been preparing themselves
for global competition since the approval of FDI. Organised retailers had been
focusing on mall space acquisition, retail expansion and diversification while
the unorganised sector had been focusing on value added services. A study by
Price Waterhouse Coopers and CII stated that smaller unorganised retailers had
some inherent advantages as compared to the larger organised retailers,
primarily due to its locational advantage along with a strong customer