Krish Iyer, President and CEO of Walmart India, expressed his optimism about the future of his business. In India, Walmart does not sell directly to consumers. Instead, the company is an organized wholesaler or cash and carry operator that sells merchandise to local kirana stores, hotels, and catering firms. This model responds to the way India handles foreign companies to compete.
Nearly 90% of all consumer goods are sold through small kirana stores. The distribution channel is highly fragmented as there are about 10 million kirana stores in India. Consumer companies typically sell products directly to these kiranas or sell through distributors in urban markets. However, they service customers through wholesalers in smaller towns. This helps organized B2B companies such as Walmart and Metro to gain share of market, especially after the implementation of the goods and service tax (GST).
India allows 51% Foreign Direct Investments (FDI) in multi-brand retail stores, while 100% FDI is allowed in cash-and-carry wholesale ventures. However, Mr. Iyer told the Economic Times of New Delhi that the cash-and-carry business is complex due to the low margin nature of the business and steep real estate costs in India.
According to the Economic Times report, India has 3% of the world’s land but it has 17% of the world’s population. In this huge, densely populated market, Walmart now operates 24 Best Price wholesale stores across nine states which were opened in the last ten years. Mr. Iyer indicated that the next ten years will be a period of exponential growth, yet the company does not plan to go national but stay focused on the states in which it is now operating.
Walmart plans to double its store count in the next three to four years. Six stores will be opened this year in the states of Andhra Pradesh and Telangana. Walmart also has an online platform for members of Best Price Stores that it launched five years ago. At the time, this platform was restricted to cities with stores. However, two years ago, the company opened an online platform without a physical store. Iyer said that “we will see the acceleration of ecommerce and omnichannel in our stores as we progress further with the implementation of this new platform.”
Last year, Walmart invested $16.6 Billion in FlipKart – India’s largest on–line retailer as another way to increase its market presence. Growth will be slow, but Walmart is committed to achieve a dominant position in India. Amazon and Metro are strong competitors in India as well.