Allowing foreign direct investment (FDI) in multi-brand retail will not impact the fortunes of small shop-owners, claims Wal-Mart.

“I can give you the example of Mexico where we entered in 1991. Even today, after 20 years, 50 per cent of retailing there is done informally (that is, in the unorganised sector),” the President and CEO of Walmart International, Mr Doug McMillon, told a panel discussion at the World Economic Forum's Annual Meeting here on Thursday.

According to Mr McMillon, fears of large multinational retail chains forcing closure of kirana stores are ‘overstated.' India currently permits 51 per cent FDI in single-brand retail (stores hawking individual brands such as GAP and Armani) and 100 per cent in the case of cash-and-carry outlets that can only sell to other retailers and businesses.

The CEO of the US-based discount department stores giant said permitting large retain chains will help address inflation concerns for consumers as well as benefit farmers in India.

“We have a plan, even through our existing tie-up with Bharti Enterprises, to link up with 35,000 small farmers by 2015 to supply our cash-and-carry and Bharti's retail outlets. Once we have our own retail operations, we would be committed to invest billions of dollars in building logistics and cold chain infrastructure, which is good for India,” he added.

Walmart, with Bharti, now runs six cash-and-carry and back-end supply outlets in India, while Bharti Enterprises has around 100 of its independent ‘Easy Day' retail food and grocery stores.

Challenges

Mr Doug McMillon, however, admitted that operating in India would pose challenges even in the event of the Government giving the green signal for FDI. “Real estate prices in India are very high. Although it is not an issue for us now, it would be a problem we will have to deal with,” he noted.

There is also a dearth of buildings with the right configuration, where the logistics of retail can be handled in a seamless, cost-effective manner. “Ideally, we should have rectangular buildings enabling freight to move around more easily, which will translate to lower unit cost of operations and cheaper products for consumers.

The construction structures that are available in India have triangular, circular and all sorts of shapes, except rectangular. I suppose we will have to address that as well,” Mr McMillon remarked in a lighter vein.    

Political problems

Participating in the discussion, the Deputy Chairman of the Planning Commission, Mr Montek Singh Ahluwalia, noted that there are political problems in allowing FDI in multi-brand retail. “From our (Planning Commission) side, we totally favour opening up the sector for FDI. I would only encourage you to be there and hope that in due course it will all be sorted out,” he said. 

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