Wal-Mart has overcome India's protectionist trade barriers and now has a strong retail foothold in India through a joint venture with Bharti Enterprises.
Mom-and-pop & other small specialty shops dominate India's retail landscape, which resembles a farmers' market with many smaller proprietors but few big-box stores. India's retail environment started to change when earlier this month Indian conglomerate Reliance launched 11 neighbourhood supermarkets in Hyperabad, the fastest-growing city in India - the world's second-most highly populated country.
Over 95% of Indian stores are 500 square feet or less. Analysts expect India's retail market to more than double from about $300 billion in sales in 2005 to over $600 billion by 2015.
For years, Wal-Mart has been frustrated by Indian restrictions that bar foreign companies from operating multi-product retail chains in India. To comply with existing Indian rules, Wal-Mart has signed an equal partnership deal with Bharti Enterprises whose company Bharti Airtel Ltd. is the country's largest cellular phone service provider with more than 30 million users. Like Wal-Mart, Bharti is cash-rich and has the capacity to scale up quickly.
Indian big-box stores will be franchisee-owned. However, it isn't immediately clear whether Wal-Mart has given up plans to set up its own stores in India, where resistance from political groups and domestic businesses has prevented the government from allowing foreign companies to operate multi-product retail chains.
Lured by the 30% annual growth of India's retail sector, global retail giants such as Wal-Mart and Germany's Metro AG have been lobbying the Indian government for years. Rising middle class incomes and an increase in demand for branded products make India a compelling marketplace for global retail companies.
India would appear to be a key part of Wal-Mart's global retail growth strategy, as we discussed in the article Wal-Mart Finally Gets It.
As for Indian exports, in 2006 Wal-Mart has sourced products worth some US$2 billion (euro1.6 billion) from India for its worldwide stores. However, the figure is small compared to US$18 billion (euro13.73 billion) worth of goods that the world's biggest retailer exports from China.
Read our analyses on India's great potential both as an international trade partner and as part of an exciting Brazil-Russia-India-China Exchange Trade Fund (ETF) investment.
