When will Walmart enter India? Will it enter India? Walmart and India – This is a topic that I’ve personally never been much concerned with particularly so I’ve neither read much beyond the standard case studies on Walmart in business school nor paid too much attention to retail news.
So why I am writing this post? The short answer: Recently I’ve noticed a spate of hits on this blog with exactly those questions on Walmart and India or just the keywords "Walmart" and "India". Since one must pander to the needs of the market that one serves 🙂 – blog readers, in my case – I thought I’d take a stab at writing up my subjective opinion as food for thought. Mind you, the opportunity to pontificate and throw in elements of design thinking in this most fundamental of corporate strategy questions – how to enter an emerging market – is an added bonus.
For context and background, I did quick search online for the words "Walmart" and "India" – mostly 6 month old news items talking about Walmart eyeing the Indian market, growing their procurement office in India, sourcing products and a couple questioning Walmart’s entry into India and it’s subsequent impact. One article covers the US Ambassador’s attempts to ease the way for Walmart to enter the market – India has historically preferred to protect selected segments of her markets from foreign competitors.
That’s the news roundup there. Now what about the strategy for entering this market? I noticed that the only reasons given by John Menzer, Walmart’s CEO
of international operations, for entering the Indian market,
consistently cited across the referenced articles were:
"India represents a $250 billion retail market, growing 7.2 percent a year, but modern retailing is just starting to emerge."
"The average urban household income in India is about $3,000 a year,
roughly in line with China, and the consuming class has grown from 35
million families in 1996 to an expected 80 million this year. That’s
roughly in line with the U.S.," Menzer said. "This is a very big
opportunity for us."
These two points are classical examples of decision making taught the MBA way. We would have looked at these figures, "wow, a rapidly growing market, look at that $250 Billion dollars" or "80 million consuming class families, in line with the US" – and strongly recommended, in class of course, where we had no dollars to lose, that Walmart enter India as soon as possible. In other words, these are the typical left brain, "expensive management consultant did a research study of the retail markets and recommended this growth segment to us because we’re stagnant in our home base" reasons. What usually happens when you put blinkers on and follow these blindly?
An excellent example is Whirlpool and their "World Washer"? The design was such that saris, lungis, dupattas and other indian clothing, which are but lengths of cloth, would entangle and tear in the milimeter wide gap left between the agitator and the drum – er, basic observation and prototype testing. Trouble was, they’d designed it in Brazil, uh, another "developing market". There were other design issues as well – go read the link, this is a post on Walmart.
My copy of Business India, dated Dec 5th to 18th 2005 has coincidently a big spread on the Indian retail segment, where local mega retailers discuss their issues and are compared to the unorganized sector – only 2% of the retail industry is organized – and bring up the cultural differences in shopping, the Indian housewife’s preferences and the role of the kirana, or local mom and pop stores. In addition, there’s mention of the variability of the infrastructure and environment – rough roads, traffic conditions, crowded cities, intermittent power and water supply – all the issues that preclude Walmart’s entry into India AS IS.
Meaning that without a fundamental redesign of their entry strategy customized to Indian market conditions, their standard "Superstore" approach – stores 10 miles out of town, bulk packaging and huge parking lots will not be successful. Even before a formal user observation study here are some localization issues selected from the news articles:
"We understand Indian consumers; there are
6,400 castes and sub-castes in India whose eating habits are incredibly
different. Our strategy is built around those differences, and that’s a
huge asset." As evidence, he cites the entry of South Africa’s
Shoprite, which opened a "standard model supermarket" in Mumbai last
year "smelling of meat" in an area of Hindu vegetarians.*
And my single datapoint is my sister’s household, which I observed, during my recent visit to New Delhi. She has a car and driver. She lives in the suburb of Gurgaon, just outside New Delhi, where malls and shopping centers are coming up like mushrooms, and there is still miles of farmland left on which to build. We went shopping to one of these malls. For clothes and shoes.
What about groceries? Her majordomo/cook does that. In the evening, at the wet market close by. He comes to her before it’s time to cook dinner for the family and they discuss the menu, the leftovers and the inventory in the fridge and kitchen. Then he gets on his bicycle and goes to do the shopping. While she eats bon bons in front of the TV. Ok, I exagerate. But you get the picture.
Will she go to a Walmart Superstore? Sure, it would be a novelty as much as the McDonalds was in this little Italian town – hat tip to Niblettes for sharing the link with me. And what are the odds that, just as the McDonalds eventually lost out to the ‘inertia’ of cultural change – in their case, the local eating habits and preferences, that the Walmart’s traffic will eventually settle into one of an occasional field trip? I could, of course, be totally wrong in my guess. But I have seen Kentucky Fried Chicken’s outlet in New Delhi face a similar trend cycle in their traffic. Where are they today?
*ok, here it makes sense to look at different religious beliefs as they apply to diet and cultural sensibilities. India has hindus, muslims, christians, jews, jains, buddhists, sikhs, zoroasterians as well as assorted other faiths (what’s left? confucians? Calcutta’s Chinatown)