Recently Wal-mart announced its entry into India in partnership with Bharti Enterprises. It was well on the cards for sometime. But still the announcement generated protests in different parts of India by small shop (Mom And Pop - MAP shop) owners. They think that Wal-mart is a big-size, fire-spitting dragon which if let in, will burn all the MAPs. Long term picture may not be very different if these shop owners just hide behind their counters without rekindling their own fire to fight the big guy.
Wal-mart plans to setup 10-15 stores in India by 2015. Each Wal-mart store currently attracts average 4000 visitors per day. If the 15 stores attract 4000 customers from day one, then roughly 60,000 Indians will visit Wal-mart daily or assuming grocery shopping frequency of 2 weeks, around a million customers will visit Wal-mart. Today India has a population of 300 million upper and middle class people or 60-70 million families. By 2015, this number will grow to 100 million if we assume a conservative CAGR of 5%. So even if Wal-mart is building 100% customer base from day one, then it will attract only 1% of India's upper and middle class families.
Entry of super-markets will be good news for those currently working in the retail industry. The current situation for Ramus and Shamus is not very encouraging - 10-12 hours of work every day, no rights, no job securities, no medical insurances or any other perks and all this for meagre salaries of Rs. 2000-3000 per month. In the new super markets, their working conditions will be better, their salaries will be better and their self-esteem will be higher since they will see themselves as part of a big organization. They will have to acquire new skills though to be saleable to these big super markets. There are concerns about those who cannot be retrained because they are illiterate or they are old or they don't have enough money for retraining. The concerns are that they might be left out of the current boom. But the 'complete' transition to super market culture wouldn't happen overnight and may take more than 20-30 years. That is enough time for the current generation of non-saleables to see through their life in the MAPs and not feel any real threats from super markets.
Entry of super-markets will be good news for consumers too who will have more choices, and cheaper goods. There are many products such as processed food which are not available on a large scale in India. Not that they are expensive but the Indian retail industry never provided them, and consumers never demanded them. It might be a chicken and egg problem which we can discuss offline. But the point is that with growing affluence, consumers demand for better brands, for packaged products is increasing and they will see these demands being fulfilled by super markets. It will be super markets that will flourish the retail supply industry in India. So the consumers will not complain the entry of super markets.
It is not necessary that after 20-30 years, there will be no place for MAPs in India. Take Singapore as an example. MAPs coexist in large numbers with super markets such as Carrefours, Giants and Cold Storages. MAPs cater to needs of two types of customers. One type caters to convenience. These MAPs are in the neighbourhood and stock goods that one needs on a more regular basis and saves a trip to the super market in emergency situations. The second type caters to economically lower class of the society, those who are highly price-sensitive and who don't care about shopping experience. MAPs in India can also reposition themselves to better target the evolving customer needs. People like me think that Indian retailers, with their strong business acumen, customer service focus and survival skills, will be rediscovering themselves and will find their own niche.
Even if the recent protests were not against super markets per se but against foreign super markets, giving Wal-mart some tough competition will be Indian super markets such as Reliance, Big Bazaar and numerous local imitations. There is not much to worry. The Wal-marts and Carrefours of the world are not colonising Indian retail industry.
One loser from the super market boom in India will be resource-crunched earth. Natural resources are increasingly becoming rare species and increased demand for consumer goods will quicken the pace. One can just hope and pray that marketers don't entice people into buying aluminium foil, plastic wraps, kitchen towels, etc. and Indians, who are still 'surviving' without such products, find their current practices healthier and don't give in.
I have fond memories of eating ice cream from our local ice cream wala during summer holidays. As the hot summer sun goes down and the evening approaches, ice cream uncle comes on his bicycle. We run to the front door at the sound of his bell, ask him to stop while we convince mom how much we deserve the ice cream. In the meantime, my brother is already waiting for a signal from me to tell the ice cream uncle to put one delicious scoop in each cup. That one scoop of ice cream used to give us so much satisfaction and the experience left so many fond memories. The super markets, with their sophisticated supply chains, get us huge ice cream packs at much lower prices. As a result, one doesn't need to wait for ice cream wala, all you need to do is reach the refrigerator.
But who knows, maybe my ice cream uncle will supply to Wal-mart and I will atleast be able to enjoy the same taste, if not relive the same experience.
Wal-mart plans to setup 10-15 stores in India by 2015. Each Wal-mart store currently attracts average 4000 visitors per day. If the 15 stores attract 4000 customers from day one, then roughly 60,000 Indians will visit Wal-mart daily or assuming grocery shopping frequency of 2 weeks, around a million customers will visit Wal-mart. Today India has a population of 300 million upper and middle class people or 60-70 million families. By 2015, this number will grow to 100 million if we assume a conservative CAGR of 5%. So even if Wal-mart is building 100% customer base from day one, then it will attract only 1% of India's upper and middle class families.
Entry of super-markets will be good news for those currently working in the retail industry. The current situation for Ramus and Shamus is not very encouraging - 10-12 hours of work every day, no rights, no job securities, no medical insurances or any other perks and all this for meagre salaries of Rs. 2000-3000 per month. In the new super markets, their working conditions will be better, their salaries will be better and their self-esteem will be higher since they will see themselves as part of a big organization. They will have to acquire new skills though to be saleable to these big super markets. There are concerns about those who cannot be retrained because they are illiterate or they are old or they don't have enough money for retraining. The concerns are that they might be left out of the current boom. But the 'complete' transition to super market culture wouldn't happen overnight and may take more than 20-30 years. That is enough time for the current generation of non-saleables to see through their life in the MAPs and not feel any real threats from super markets.
Entry of super-markets will be good news for consumers too who will have more choices, and cheaper goods. There are many products such as processed food which are not available on a large scale in India. Not that they are expensive but the Indian retail industry never provided them, and consumers never demanded them. It might be a chicken and egg problem which we can discuss offline. But the point is that with growing affluence, consumers demand for better brands, for packaged products is increasing and they will see these demands being fulfilled by super markets. It will be super markets that will flourish the retail supply industry in India. So the consumers will not complain the entry of super markets.
It is not necessary that after 20-30 years, there will be no place for MAPs in India. Take Singapore as an example. MAPs coexist in large numbers with super markets such as Carrefours, Giants and Cold Storages. MAPs cater to needs of two types of customers. One type caters to convenience. These MAPs are in the neighbourhood and stock goods that one needs on a more regular basis and saves a trip to the super market in emergency situations. The second type caters to economically lower class of the society, those who are highly price-sensitive and who don't care about shopping experience. MAPs in India can also reposition themselves to better target the evolving customer needs. People like me think that Indian retailers, with their strong business acumen, customer service focus and survival skills, will be rediscovering themselves and will find their own niche.
Even if the recent protests were not against super markets per se but against foreign super markets, giving Wal-mart some tough competition will be Indian super markets such as Reliance, Big Bazaar and numerous local imitations. There is not much to worry. The Wal-marts and Carrefours of the world are not colonising Indian retail industry.
One loser from the super market boom in India will be resource-crunched earth. Natural resources are increasingly becoming rare species and increased demand for consumer goods will quicken the pace. One can just hope and pray that marketers don't entice people into buying aluminium foil, plastic wraps, kitchen towels, etc. and Indians, who are still 'surviving' without such products, find their current practices healthier and don't give in.
I have fond memories of eating ice cream from our local ice cream wala during summer holidays. As the hot summer sun goes down and the evening approaches, ice cream uncle comes on his bicycle. We run to the front door at the sound of his bell, ask him to stop while we convince mom how much we deserve the ice cream. In the meantime, my brother is already waiting for a signal from me to tell the ice cream uncle to put one delicious scoop in each cup. That one scoop of ice cream used to give us so much satisfaction and the experience left so many fond memories. The super markets, with their sophisticated supply chains, get us huge ice cream packs at much lower prices. As a result, one doesn't need to wait for ice cream wala, all you need to do is reach the refrigerator.
But who knows, maybe my ice cream uncle will supply to Wal-mart and I will atleast be able to enjoy the same taste, if not relive the same experience.
2 comments:
Interesting. . .Walmart in the US has earned a reputation of being one of the worst companies to work for because they have broken so many labor laws. They set up benefits esp. medical coverage so that most employees never enjoy health care benefits or earn a livable wage. Lots of lower income people are stuck working there hardly earning a livable wage.
As they say "be careful what you wish for" Lots and lots of lawsuits have been filed against WalMart here and, sadly, it seems to employ people who, for whatever reason, have a hard time finding any other options.
Hi Sarah,
That is a very important point you are highlighting. It is not a reason though to stop Wal-marts from entering India. It can teach us lessons to take precautionary measures so that the same mishaps don't occur in India. Recently McDonald's in China was forced by the Chinese government to increase employee salaries by 15% since the salaries were considered to be lower than the industry benchmarks. Such actions can help control worker exploitation. Hopefully the policy makers in India are listening.
I am not asking Indian government to give a red carpet welcome to Wal-marts. I am saying that their entry is not that bad after all. It will help elevate the standard of living of workers in retail industry, it will give customers a lot of choice and it will give new business opportunities for budding entrepreneurs.
Currently Indian retail supply chain and logistics industry, port and highway infrastructure to store and transport goods etc. are highly inefficient and are almost non-existent at national scale. India's retail industry is only $300bn. Only 1.5% of food produced in India is processed currently. Compare that with Malaysia and Philippines which process more than 50% of food produced in their countries. The entry of super markets will fuel the growth in retail infrastructure which in turn will fuel a retail boom in India, which will have obvious benefits in terms of business and employment opportunities.
Super markets seem the biggest growth driver for Indian retail industry.
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