Thursday, May 03, 2007

Wal-Mart India Story!!!

Wal-Mart is entering Indian retail market in partnership with Bharti Enterprise. I see a major change in the retail industry in India, not that it was not changing anyways!! Big-Bazaar, Tru-Mart etc have been fighting to change the scenario. They have been trying to allure the customer from mom 'n' pop stores, but have been finding it tough except in some categories.
Given wal-mart's expertise in supply chain, it might do wonders in the market.

How will it affect the Indian markets:

  • As always happens in competition, consumer will be the biggest winner in the show. Quality stuff at competitive prices at all times (if the store open 24x7).
  • Producers might have to give in some of their profits, but in long run might be happy to do business with wal-mart (situation in US is different as it does not have a small shop culture, so producers are forced to concede to the whims of wal-mart, but I don't see similar thing happening in India.)
  • Best part might be fighting the food article's adulteration. As I hope wal-mart will look for better quality.
  • Small shop owners will be forced to improve their quality of product and service but should not lose much in the competition.
  • In the end, wal-mart wont be going deep in small towns, so small shop owners in those cities need not worry.

10 comments:

Pegasus said...

let me put ur post in one line:
1) customers will benefit.. more choice, more competition, lower prices.

2) farmers will benefit... better supply chain management, and removal of middlemen.

3) govt will benefit... big chains pay taxes, issue receipt.

4) shopkeepers... i once published an analysis how a smart hawker can driver walmart out of business.. so its only the lazy guys who need to worry

thoughts of a blank mind said...

For once you agree!!

Abhishek Prakash said...

# As always happens in competition, consumer will be the biggest winner in the show. Quality stuff at competitive prices at all times (if the store open 24x7).

Agreed. Though it may not be valid if there are a few large players in the market (read 8 - 10) leading to oligopoly and fixing of prices.

# Producers might have to give in some of their profits, but in long run might be happy to do business with wal-mart (situation in US is different as it does not have a small shop culture, so producers are forced to concede to the whims of wal-mart, but I don't see similar thing happening in India.)

Absence of "small shop culture" has nothing to do with the monopoly of wal-mart. What if the muscle of wal-mart's monopoly drives the "small shop culture" out of India?

# Best part might be fighting the food article's adulteration. As I hope wal-mart will look for better quality.

Agreed.

# Small shop owners will be forced to improve their quality of product and service but should not lose much in the competition.


What is the basis of the assumption that "small shops should not lose much in the competition."?

# In the end, wal-mart wont be going deep in small towns, so small shop owners in those cities need not worry.

What is the basis of this assumption? What scares wal-mart away from the "Fortune at the Bottom of the Pyramid"? Again, your assumption that small shops are only a part of small towns in incorrect.

Pegasus said...

//For once you agree!!//
now what do u mean?

thoughts of a blank mind said...

# As always happens in competition, consumer will be the biggest winner in the show. Quality stuff at competitive prices at all times (if the store open 24x7).

#Agreed. Though it may not be valid if there are a few large players in the market (read 8 - 10) leading to oligopoly and fixing of prices.

~~ Oligopoly seems difficult given the different variety of producers at every level in India. Small time players are anyway enjoying freedom in smaller markets.

# Producers might have to give in some of their profits, but in long run might be happy to do business with wal-mart (situation in US is different as it does not have a small shop culture, so producers are forced to concede to the whims of wal-mart, but I don't see similar thing happening in India.)

#Absence of "small shop culture" has nothing to do with the monopoly of wal-mart. What if the muscle of wal-mart's monopoly drives the "small shop culture" out of India?

~~What I got to know in the wal-mart story in US is, if you want to sell your stuff, you have to go to wal-mart as there are no other players in the market which can market your goods against them. In return to that, wal-mart forces its own prices and try to keep most of the margin in its own pocket. In india you can capture market with covering small shops in an area. And I don't see wal-mart forcing them out of market, given their depth in common household.

# Best part might be fighting the food article's adulteration. As I hope wal-mart will look for better quality.

Agreed.

# Small shop owners will be forced to improve their quality of product and service but should not lose much in the competition.

#What is the basis of the assumption that "small shops should not lose much in the competition."?

~~ As per my knowledge small shops already enjoy very good margin on most of the articles. They should be able to withstand the cost competition with not much of difficulty.

# In the end, wal-mart wont be going deep in small towns, so small shop owners in those cities need not worry.

#What is the basis of this assumption? What scares wal-mart away from the "Fortune at the Bottom of the Pyramid"? Again, your assumption that small shops are only a part of small towns in incorrect.

~~The cost of setting up the stores in those places(think of multiplying one store with no. of cities). Plus there is not much demand of centralized shopping centers in small cities yet. If you leave the software boom affected cities aside, there are not many cities boasting of more than one or two grocery shopping centers.

~~Yes, I do see problems for the organized retail players but they will have to learn to compete with international players, if they want to be global players.

thoughts of a blank mind said...

@pegasus, you never seem to agree with my views. You might not agree with this view of mine too!!

abhishek praksh said...

~~ Oligopoly seems difficult given the different variety of producers at every level in India. Small time players are anyway enjoying freedom in smaller markets.

Man! You are mixing producers with procurers and large retailers! How many large procurers/retailers are there in the market?

~~What I got to know in the wal-mart story in US is, if you want to sell your stuff, you have to go to wal-mart as there are no other players in the market which can market your goods against them. In return to that, wal-mart forces its own prices and try to keep most of the margin in its own pocket. In india you can capture market with covering small shops in an area.

In India, it is the middle-men who capture the biggest margin (especially for agricultural produce). Wal - mart will in the 1st place get those middlemen out of the market. Why are you assuming the Wal-mart will start biting on the Producer's margin from the day one. They may adopt a different strategy in the beginning (procure at higher prices to get middlemen out of business -- remember, they have far deeper pockets, better supply chain skills and all). Once the middlemen are out of business, they (and other a few other large retailers) will have the monopoly (oligopoly) over the supply chain. And then the producers will have no option but to concede to their demands. Have you studied the growth history of Wal-Mart in United States?

~~ As per my knowledge small shops already enjoy very good margin on most of the articles. They should be able to withstand the cost competition with not much of difficulty.

What the shop keepers do not enjoy is the control over the supply chain.

~~The cost of setting up the stores in those places(think of multiplying one store with no. of cities). Plus there is not much demand of centralized shopping centers in small cities yet. If you leave the software boom affected cities aside, there are not many cities boasting of more than one or two grocery shopping centers.

Hard to imagine something like a "Wal-Mart Lite"? Already a lot of large retailers have started setting up mid-size stores in small towns and even villages!! The ground reality is changing faster than you imagine.

~~Yes, I do see problems for the organized retail players but they will have to learn to compete with international players, if they want to be global players.

Disclaimer: I am not against organized retailing per say. But one should not make assumptions in a hurry. Their impact (both good and bad) can be far more profound and require deeper study and analysis. New laws/regulators might be needed to facilitate level playing field for all the parties to make the game beneficial for all the concerned players.

Pegasus said...

//you never seem to agree with my views. You might not agree with this view of mine too!!//

how can we have a wonderful conversation if i agree to u.. and u agree to me

edward said...

Thats nice! Wal-Mart, the biggest Supply Chain Management Services is planning to invest in Indian market to improve the quality in retail sectors.Thanks for giving such an interesting site about supply chain management services.

Anonymous said...
This comment has been removed by a blog administrator.