Like two lumbering elephants at the start of the mating season, Wal-Mart and the Government of India are eyeing each other, a little hungrily, a little warily. The dance has begun, and though the ultimate outcome seems clear, the process to get there could be plenty circuitous. HereÂ’s a Standard & PoorÂ’s update, published this month on the Business Week website:
Wal-Mart stated on Feb. 2 that it has applied to create a separate entity in Bangalore devoted to “market research and business development in relationship to the retail industry in India.”
“I think that has been no secret that we think the market opportunity in India is really outstanding,” Wal-Mart spokeswoman Beth Keck told the Associated Press on Feb. 2.
You don’t say. However, the government is playing hard-to-get:
The Indian government opened the doors of its retail market to 51% foreign direct investment (FDI) two weeks ago. But this most recent economic liberalization applies strictly to companies that sell goods through single-branded stores. The partial allowance permits a direct majority ownership interest by foreign entities, which, we think, is good news for many of the world’s marketers of top labels.
In S&P’s view, the widely anticipated FDI policy for limited retail investment, however, effectively slams the “Closed” sign on big-box chains and particularly Wal-Mart, feared by India’s Communist party as potentially putting mom-and-pop stores out of business by sheer virtue of its size. The retail behemoth rang up slightly more in retail sales for the year ending January, 2005, than the entire Asian subcontinent sold to its population of more than 1 billion Â…
But Wal-Mart wonÂ’t be easily dissuaded. Just ask the Mexicans:
Wal-Mart’s experience in emerging markets is the crux of its battle plan. Bentonville has been down this path of limited investment in retail before. Not too long ago, it battled anti-FDI sentiment in Mexico. In S&P’s view, Wal-Mart won that battle. It is now the biggest private employer in Mexico and operates more than 780 stores in that country.
On the positive side, all the eccentric uncles with the ear hair and the roving eye can soon get jobs as People Greeters. I can see it already. “Velcome to Val-Mart,” with a waggle and a smile…
“On the positive side, all the eccentric uncles with the ear hair and the roving eye can soon get jobs as People Greeters. I can see it already. “Velcome to Val-Mart,” with a waggle and a smileÂ…”
In the Chicago area, they already do.
kxb:
Which Chicago area Wal-Mart?
NO!!! This is a major disappointment. Wal-Mart needs to go to hell
“Which Chicago area Wal-Mart?”
Either Mount Prospect, Palatine, or Niles. And the ones that aren’t Indian are probably Mexican.
Big Box mart
On the positive side, all the eccentric uncles with the ear hair and the roving eye can soon get jobs as People Greeters. I can see it already. “Velcome to Val-Mart,” with a waggle and a smile…
how soon is this? 😉
damn..from seeing tgif, kfc, 31 flavors, micky d’s, and now the big walton family is invading bangalore? whohooo… that should be ehem.. quite interesting.. i will miss the street vendors and all that..since they will likley be taken over by this conglomerate.. ahh… sigh… next thing you know, there will be no goats, elephants and cows roaming the streets of india..and then what will we look forward to?
When I went to Cancun a few years ago, Walmart was the biggest thing in town. It seemed like where all the locals went on Saturday night. They even had a tortilla factory in there! I think, if that is any indication, the Mexican government more than lost the battle…
I dont think Wal-Mart’s biggest problem is Govt. of India and the communist parties … but Its Reliance, Pantaloon etc
A columnist on Rediff thinks that Reliance in Retail is one of 4 things that could change India
I’m curious as to what extend Wal-Marts in India would be percieved by the people there as an indication of an increase in standard of living. They might percieve this as a big step up, even if the macro-level economics don’t pan out. Wasn’t that part of the allure of the Big Box on small town America? People percieved that they had access to reasonably at high quality goods at low prices, and so they didn’t pay as much attention to what happened at a macro-level. As a result, manufacturing turned to low-cost sources, and the people buying the goods at Wal Mart were no longer employed by factories which could not meet the price levels Wal Mart needed.
In india, if the manufacturing base is not leaving due to lower prices, maybe Wall Mart creates a different dynamic than in the US. Maybe, not as disruptive of the local economy?
Also, there is at times a notion that developed world economies are those that are able to provide consumer goods, but I wonder if standard of living and access to consumer goods is a false link. Maybe standard of living is more accurately measured by other standards. I was listening to NPR recently and a commentator was making a point that infection control is really a stand-out of the developed world that flys almost under the radar in terms of what people consider as a benefit of a first-world standard of living. But if you think about it, one of the biggest deterrants to living in India for some people who go from the developed world to developing world countries is that infection control is not as good. This gets translated into concerns about proper immunization, drinking water, sewage facilities
Then a queation is, to improve standard of living, which is a better indicator of developed world status?
I can see the one elephant, walmart…which is the other?
Heh, practically EVERY serious economic study of Wal-Mart has concluded the exact opposite. The Macro-Economics have absolutely panned out to the benefit of nearly everyone involved. The perceptions, however have not because of a classic assymetric cost/benefit problem (or what Bastiat classically called the visible / invisible cost problem).
Name-brand (for ex., nobel prize winning) economists on both sides of the aisle will agree / instantly recognize these sorts of problems while wannabe economists / muckrakers readily fall into them.
Benefits like lower costs, lower inflation, more efficiency, etc. are incredibly important but not ultra visible on a day to day business – they’re phenomena experienced at the margin. In aggregate, the numbers are impressive –
BUT, they percolate through the economy in a vast number of small increments. By contrast, the corner drug store put out of business is very very small scale phenomena (economically speaking) but, it’s highly visible and hence gets noticed far above and beyond it’s actual cost to society writ large. It’s a sure prescription for economic demagoguery.
In places like India, high quality products delivered at low prices (and if there’s one place that makes Wal-Mart’s quality feel uniformly high compared to the alternative, it’s India) is insanely important.
What Vinod said. The benefits of low cost retailing are especially important in a developing country like India. I’m actually wondering how Wal-Mart will compete with indigenous solutions like the roadside vendors who sell shampoo, soap and tobacco packets individually.
Kishor Biyani of Pantaloon already has Big Bazaar Stores a big retailer. The earlier story mentions this :
Retail isnt just cheap prices of the goods, a huge part of retail is aquisition of property at the RIGHT locations. Walmart can come into India but I think that land aquisition and other logistics would make their operations less profitable than local competitors such as Pantaloon and Reliance. But Walmart’s entry can only help the consumers of India, in my view.
Vinod,
Maybe my use of Macro-Econ is not the right term. What I mean is that, the economics for people in the US who shopped at Wal Mart and had factory jobs or depended on the manufacturing industry. Was Wal Mart a good deal for them, or in your view or other’s view, was the US loss of manufacturing due to some other reason. I personally don’t know.
Also from the point of view of worker’s benefits, Wal Mart doesn’t give the same benefits, and I bet that’s another negative for the Wal Mart rise. Thats probably not a concern in India where a Wal Mart job is probably going to be seen as cushy. But the step-down from a factory job with health insurance to Wal Mart seems like it hurt.
hello – good thread – cant but help chip in.
Some personal context, I sell business services and businss to the retail sector in NA. I cant quote journals or stuff – but I manage to hit the right chords with senior execs so seem to be in the know on this sector. I also keep one toe in India and have a close friend whose job right now is to build up a brand in India through a retail store chain. I get the straight “dope” from him and he keeps me abreast on Ikeas, walmarts, big bazzars and such. That being said, I admit to a leftist streak, which is why I am content riding the streetcars of T.O. (yoooo hooooo linngus) rather than drive a wankmobile down south. So here’s my dope from the gut.
I would drink a pint of liquid poop (टटी)rather than allow walmart to come to my neighborhood. i can understand when people protest. To hell with macroeconomics. i dont like it and i dont need it. It could be just a NIMBY thing. I also voted against Walmart when they wanted to set up in Guelph by rolling over a graveyard and putting up a giant waste tunnel.
That being said, Walmart coming to India is a good thing – the best reason being that a publicly traded corporation as a trading entity would force a lot of banias to pick up their act. I have an uncle, eponymous to one of the bloggers, who lost his shirt – no silly, dont be literal – to some scumbags who shut shop and left town. It’s a vicious game out there and the distributors have to play dirty (musclemen) to recover monies from the retailers. Walmart will play hard but fair – at the very least it’ll bring process innovation and standardization to the distribution industry – a funciton of its size. big bazaar has created a different, but profitable model of operation and i will eagerly see how walmart takes on desh.
My dear chholey – yes it would be a sad world indeed were we to lose the individuals to faceless smileys (sic) – i dont know what will happen in india – but if I map it to the rise of the lifestyle stores in my little town … i think all will not be crushed. even in the world of the supergrocery stores (upscale-bankers-advertising-nutballs-singletonscruisingforpartners-type – Loblaws, downscale-immigrant-pennypicnhing-couponsaving-bulkpurchasing-type-noname-goods No Frills, granola-eating-hairy-armpit-bourgeoishippies-SUV-driving-BoBo-couples Whole Foods) there is room for farmers’ markets and coops where one can only get seasonal stuff. So you are likely to keep hearing … टमाटर ले लो !!!!! from the street now and then at least through the span of my life.
pardon me – the little text in hindi in my posting above said – “Get your Tomatoes !!!! ” – a not uncommon refrain in the streets of north indian towns, cities.
hey,
i’m posting about something completely unrelated, but we did a fundraiser for south asian earthquake relief and now we need to pick a charity [yeah i know not necessarily the most intuitive way to go about fundraising]. does anyone have any ideas on non-religious charities that will direct the money towards the affected areas?
thanks!
just shoot me an email at cusailgurl(at)yahoo.com
On both fronts, you’re talking about macro-econ issues. On balance, if you add up the [benefits of Wal-Mart] vs. [costs / sins of Wal-Mart] the benefits vastly outweigh. You’ll find point instances of cost (for ex., the cornershop who can’t compete) but these need to be weighed against the benefits (for ex., lower inflation) all the while recognizing that Schumperterian economic displacement is inevitable (the Italian corner grocery shuts down and becomes a Vietnamese nail salon)
Top-down studies – like the ones I cited before – make attempts to quantify this. Bottoms-up analysis — that all transactions between consumers and Wal-Mart are uncoerced and thus mutually net beneficial — argues the same thing.
Wal-Mart isn’t uniquely to blame for “the loss of US Manufacturing” jobs nor is there any reason why US workers have a stronger “right” to such a job vs. a worker in China or India.
This would sell a lot of T-Shirts.
Hmm, I wonder if its such a knockout case. Perhaps people on the “side” that thinks Wal Mart is net not a good development are not totally without a point. Its hard to figure that there is not some drawback from the situation. Maybe you’re correct that taken as an aggregate; “if you ad them up” Wal Mart has been net positive. It makes sense on the face of it; inflation remained lower and consumers had access to high quality goods. I also see the point that American jobs are not any better than Indian or Chinese jobs. However “point instances” are also people, and its not so easy to shrug off the displacement thats happened. I think people are searching for answers and remedies of some of that displacement. You’re right demogoguing Wal Mart isn’t likely to give anyone an actionable answer, but answers probably do need to be found for people who are facing changed life circumstances. Wal Mart itself has likely not come into business to look after the well-being of consumers, and if the effect of Wal Mart is net positive that’s in some ways a bit of an accident and not a goal. I would not argue with you on either of the Macro-Econ parameters you’re setting up though. There is also the idea that access to consumer goods over a short term could be outweighed by the possibility that without good jobs or a decent educational “feeder system”, some of those Wal Mart beneficiaries themselves are not going to be able to afford to continue to buy even the lower cost consumer goods. Or else, without adequate health care or other more basic needs met, such as more spritual needs, being able to buy consumer goods might become a phyric victory. Either that, or a plasma TV screen becomes cold comfort to someone simply whiling away the days in poor health, with little job prospects and not much for their kids to do. Is that Wal Mart’s fault? Maybe some more screwball people would say yes but not everyone putting an eye to the large effect Wal Mart has had is doing that. Its also quite clear that attacking Wal Mart as some kind of purposefully evil corporation is screw-ball
This is true of Capitalism, broadly 😉
😉 yeah i’ve read John Steinbeck