Amidst loud cheers, Raj Jain, CEO of Walmart India, ran up to the world stage at Walmart's annual shareholders' conference in Fayetteville, Arkansas. Wearing a blue T-shirt that screamed ‘India, Winner of World Cup Cricket,' he is prepared for the big role that the country would have in the retail giant's expansion plans.
Emphasising that India is a key market for Walmart's international operations, he said the India business is expected to grow as large as that in China. (Walmart has 330 stores in China.)
I don't think we have reached any kind of scale in India right now. India is a huge country and it will take a long time to do that. Through our cash-and-carry operations and through our agreement with Bharti Retail, in the last three to four years, we have set up several supply chains in the North. I feel good about States such as Punjab and Haryana where I think our supply chains (other than for fresh products) are in pretty good shape. So we can provide good products to almost all parts of those States.
Supply chain efficiency is a slow-burn process. It has taken us three years to cover only two States. It's an 8-10-year game before the entire supply chain development takes place. But I think if FDI in retail was allowed, this could be accelerated. A lot of funds could flow in quickly. This is true not just for Walmart, but for any other retailer.
But how would you compete with the local mom-and-pop stores in the pricing game? They too have started offering margin-free prices and cuts on MRP, apart from their traditional services such as month-long credit and home delivery.
Our philosophy on competition is that EDLP comes with EDLC. We need to continue to reduce our costs of total movement of procurement and supply at prices lower than anybody else. We are working hard at this and we will deliver this.
On customer service, I would say that service levels in India will be much better than in other countries. India has more people and the resource is not expensive. Where retail falters in India is at the ‘check out' experience. It's a complete mess because of technology and the back-end not being good enough. Fortunately at Walmart, we have access to the best.
The second part, which is a bigger part, is that when you go to a shop with a list of 20 items and you don't find six items on the list, you have to go elsewhere to complete the shopping, which is a cost incurred. In-stock is important and in-stock in India is pathetic. The fill rates are pathetic because of an inefficient supply chain. We have a 90-plus per cent fill rate and I feel this is not good enough. In my opinion, it should be 99 per cent and we are working very hard to reach there.
Walmart is in a unique situation in India where you are present in the country but are not able to use the Walmart name, but have to deliver all the services expected of the large retail chain. How will you build the brand in India? And when FDI regulations relax, will your partnership take a new shape?
For our supermarket formats, we have chosen a neutral brand like EasyDay. If we keep the brand post-FDI, the customer will not see any change. But how we operate post-FDI-relaxation will largely depend on how FDI opens. If it opens 51 per cent, then we will need partners anyway. Post-FDI, we will take all these decisions.
On our brand name, even now, we can lease our name and they can put it on top. But we are not ready to do that unless we have control over what happens in those stores.
During this year's shareholders' meet, Walmart has been upbeat about its international operations, with almost a fourth of its annual revenues coming from outside the US this year? What are the company's expectations from India?
India is a very large consumer market in Asia, second only to China. At some point, we expect to cross the potential of China. As of today, the expectation is to be as big as, if not bigger, than China. But the current investment environment in India is restricting our growth.
What are your expansion plans for India?
We have six cash-and-carry stores (Best Price) and will have 14-15 at the end of the year, out of which about 4-5 will be in the South. We will do another 10-12 next year.
We have three distribution centres, one each in Chandigarh, Bangalore and Delhi. These distribution centres (DCs) supply to stores in that region. The country will need 10-15 DCs, but the growth of the DCs will depend on Bharti Retail's expansion plans.
Walmart in India has made an entry through Tier-2 towns. Are you looking at moving from Tier-2 to larger cities soon?
We are looking at doing that, but interestingly, we find that the unmet demand and the cost structure in the Tier-2 towns are much better than in the larger metros. When it comes to food retailing, consumption does not change much from a smaller town to a larger city, but the cost structure can change by 50 per cent.
Walmart is all about large sizes. Obviously this will not work in India. What would your approach be?
We cannot survive on large formats in India, like in Mexico. The answer will lie in multiformats and not a single format. In the US, infrastructure is very evolved and automobile ownership is very high, I don't think India will be there soon.
Globally, Walmart has been talking about using technology for its next phase of growth. What are your plans for India in this area?
We are trying to understand this space. I think m-commerce will have a bigger potential in India, as mobile availability is much easier than Net connectivity. We are looking at both the opportunities. We are already piloting a payment by mobile project in one of our stores and are getting a decent response.