How Wal-Mart entry could change Indian businesses

Written by Amit Agarwal on Aug 11, 2007

Walmart Low PricesAs Wal-Mart and Bharti gives touches to their deal and bring in modern global business practices to India, one can hope to get “everyday lower prices” as has been the motto of the American giant.

The retailers would undoubtedly be benefited by Wal-Mart’s lower cost model but even the Indian consumers may see some indirect benefit owing to Wal-Mart’s legendary supply-chain management and lower margin strategy.

The biggest problem plaguing the Indian retail business is the unorganised supply chain. There are over 30 lakhs kiranas along with countless market vendors and small sellers who contributes 96% of the retail marketplace. The costs are higher as there is lack of economies of scale with involvement of middlemen in the consumption cycle.

In India, a consumer pays five times for his food than what the farmer actually gets, while in USA, this ratio is just 2:1. Also, 60% of agricultural output gets due to processing delays, storage problem and other bottlenecks.

This is where Wal-Mart’s expertise could come in handy as they could extract better prices from suppliers, run efficient supply chain and customize offerings according to Indian consumer preferences.

But the Government also needs to flex its laws for the overall betterment of producers and consumers. There are far too many restrictions, legal procedures and taxes to be dealt with. Also the infrastructure needs to be spruced up for quicker transport and storage of goods by retailers. Source

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