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Why the small retailer will survive January 11, 2007

Posted by Vijay in Business, India, Retail, Trends.
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As a follow up to my previous article, Murali Partha writes in with his viewpoint.

Here is why I think Walmart will not have the same impact as it had in the US. It may take a few years before we see anything in terms of wiping out of the mom & pop stores. I am not saying Walmart will not succeed in India, but just that it may not have the same impact for quite a few years as it has in other parts of the globe. (I wonder what the Chinese experience of Walmart was like!)

The six mile radius in the US where mom & pop shop around Walmart got knocked off might actually be reduced to a two mile radius in India. Reason: Indians are not as mobile as the Americans. We typically do not travel too long for our day to day grocery needs. And I am talking of the majority of Indians who might not have cars.

We are used to home-delivery in most cases because when we buy in bulk we do not have our own conveyance to transport it.

And when we do not buy in bulk we prefer to go the store at the end of the road.
I can’t imagine Walmart being able to provide a great cost advantage on items such as the 1 rupee Shampoo sachet. A vast majority of India can afford only these types of products – one piece at a time. I can’t envisage trips to the neighbourhood walmart for these customers.

Again many of these customers are used to buying on credit (or have a running account that is settled once every few days) – don’t see Walmart doing it.

It should not be surprising if, as with many other western products that were super successful in those markets (such as Pepsi-Coke, Ford-GM et al), Walmart too might have to tweak its business model to realize its full potential in India.

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Comments»

1. JV - January 11, 2007

I have same feeling for walmart’s entry in Indian scenario. Most of foreign companies had to change their strategies before they become successful in India.

There are many things unique about Indian consumers, among the other things you mentioned above. Further walmart has to spread its business through all classess, I mean this is not some sort of premium produc which can be aimed to higher class only.

2. M O H A N - January 11, 2007

The USP of wall mart is its potential to bully the manufacturer himself. This is how he roller coasts all other retailers.

He just makes a call to colgate and asks what is his best price for delivering 3 tonnes per quarter of his colgate packaged paste!!! Obviously the gauranteed business of volumes makes the producer to give the typical 38Rs MRP at 20RS to WALMART but retilers have allways been buying it at 32RS. So when wall mart prizes this at 25RS…guess who is going to win.

Agreed the rural landscape does not suite the foreign companies and thats where the stratergies are different. The 1 RE shampoo packet hits the rural landscape at 50PS ….

Wall Mart has its own policy of giving credit to loyal customers and they too can do the door delivery. One more USP for these guys is 30 day no question asked money back policy. Recently i purchased a DVD player in big bazaar and found out on the 10th day it could not play MPEG4, promptly i returned it and since this was comfortable i purchased a player which could play MPEG4 as well as DivX…

The monster definetly is there to impact. Maybe the 2 mile radius will be hit in 1 years time max.

cheers
mohan!

3. Veena Shivanna - January 11, 2007

Mohan’s foriegn visits & Image shift has got us a big comments. Muraliji I am with your team 🙂
even today.. I can get you so many people who don’t have credit cards, don’t use ATM’s , don’t have cell phones in India.. I am not even talking the poor people strata, my own father, my own husband & my own brother.. They have their own good reasons for all that, afterall they are very happy the way they live. This is what is needed ultimately !!
I am regular visitor of Sapna book stall, atleast 2-3 visits in an year. I don’t say I don’t go to landmark @ forum.. May be once in 2-3 years.Thats a huge difference! Big shots ella Wal-Mart ge hogi banni, oLLeg aagli 🙂

4. M O H A N - January 11, 2007

Hmmm..

Whats ATM cards and cell phones go to do with buying your groceries and day to day needs which you can not do away with or postphone????

Whats again mohans image got to do with reality??? This is a fact which will happen any ways…

In interesting feature you may have skipped correlated to this is the sale price of wheat!!! Know why?? There is a shortage in growth ( should we thank SEZ in future?) and there is a rule due to which local traders cant keep more in stock ( also called hording) but MNC’s can buy in quintals and repackage and sell at higher price – ITC ashirwad etc guys have wheat in wharehouse but you and i cant get it at low prices in the local kirana shop.

What do you want to do with that now… its the MNC bully out there in a shape. So sleep people , tell the world you dont have credit card ( even i dont have) so you are not affected!!!

Thinking positive is defentily not about image or BAD COMMENTS.

5. Ashok Dhamija - January 12, 2007

I agree with Mohan’s comments above. An average retailer in India gets about 10% to 20% commission on selling most branded products; in fact, may be even lesser commissions. Bharti-Walmart and Reliance would be able to get 30% to 40% commission from the same manufacturers and then would be selling the same to the consumers at say 20% discounts or more.

So, ultimately, it is going to affect the retailers in India as well. The time taken will of course depend upon how fast and how wide Bharti-Walmart or Reliance can penetrate with their malls.

6. Murali Partha - January 12, 2007

Mohan/Ashok – True! But you have not reckoned with Metro & other similar formats. Metro is a veteran in dealing with Walmart and in fact contributed to Walmart’s demise in Germany.

Metro will be quite savvy as well in leveraging the supplier chain for better prices and their Cash & Carry format and bulk sales model is a huge hit. Especially with the kirana store owners. That trend should continue and because of the bulk purchase option, Metro should be able to sell stuff at a price point slightly lower than Walmart to the small retailers. In turn if the small retailer use a nominal mark-up the cost-differential with Walmart could be minimised. Then throw in the customer service, next door convenience, credit ….

But yes end of the day, it would be inevitable for the wind-up of the small retailer, but I do think things will not go down without a stiff fight, for a few years.

7. praneshachar - January 12, 2007

yes murali it is not that easy to wallmart to weed out our retail network.
India has got its own requirements in my opinion first to get affected by wallmart/reliance will be Fabmall Food world etc., it is the customers who are with these superbazars who will immediately switch over to wall mart etc.,
Like story of mobile phone which has captured such a big margket
in India for wall mart it may happen otherway if it happens it is good for indian consumers and small retailers let us hope for that

8. shriyans - February 12, 2007

Well i was reading blogs…… My views simple—-

Indian customers need — best services / best quality products at LOWEST prices.

If these retails gaints can deliver this… they r in business

shriyans

9. Amit Khanna - April 23, 2007

Why Could Our Authorities not Provide Support enough and cultivate small retailers to grow bigger. Instead, it has encouraged and paved the way of small retailers to get sentenced shortly or lately by Bringing Big Players in Our markets in the name of Opening up of Markets.

10. amy - January 28, 2008

I feel it would be better because it will employ a lot of young boys and girls. Yes some momo pop stores will be wiped out but the people who would get jobs will outweigh the impact of closing some shops. I think it will some how will a difference in caste system. up until now banias run small shops but the new jobs will be for everybody especailly for poor people bec these cashier or stocking jobs don not require lot of education.
then you never know


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