Wal-Mart Knocks on Front Door of India

Bangalore booms with jobs fed by US and European businesses’ ravenous appetite to trim labor costs. It is a tricky balancing act for us to be part of this readjustment of the global economy. Is this movement of jobs part of the natural maturing of older economies and the rise of new economies? We arrived in Atlanta 20 years ago to see the last throes of the farm economy of the South give way to a booming consumer and technology services economy. What is the natural order?

We may yet witness the natural order in India as the inevitable rise in economic prosperity brings retail giants to feast on some of that prosperity.

With $316B USD in revenue, Wal-mart is iconic in the retail industry. Equally iconic is the impact a Wal-Mart Superstore has on local retailing. Communities have watched newly opened Wal-Marts decimate mom and pop stores and well-established national and regional chain stores. We all have faced the tricky balancing act between everyday low prices and the lost service from the owner of a well-worn locally owned hardware store.

In India, mega retailing does not exist. Everywhere in India, in every village and city, there is a proliferation of small retail shops…most under 500 sq. ft. In this land of 1.1 billon people, it is estimated that there are 11 shops per 1,000 people. In the US, that ratio is 4 shops per 1,000 people. Even in the UK, once derided by Napoleon as a nation of shopkeepers, the ratio is 5 shops per 1,000 people.

The small retail shops of India, classified as being in the “unorganized retail” sector, provide employment for nearly 40 million people. The giants are rattling at the gates, however. The French retailer Carrefour, which is the second largest global retailer behind Wal-Mart, is coming, but announced it was slowing plans to enter the Indian market. Wal-Mart has penetrated the massive market in China (http://www.wal-martchina.com/english/index.htm) and understands that India is a different market. A Wal-Mart representative indicated that, despite the enormous red tape in entering the Indian market, Wal-Mart “will just keep coming back because of its unbelievable potential.” India’s biggest retailer, Mumbai-based “Pantaloon” is expanding rapidly, trying to stay ahead of the entry by global giants.

The entry of global retailers may have another impact on the economy, not directly related to the small retail shops that they will overshadow. In countries such as Brazil and South Africa, the large retail chains control 50 – 75% of the food retail. For small, dispersed farmers and product packaging companies in India, the stringent quality control and packaging demands of these multinational outlets will be very hard to meet.

So how will India respond to the other side of the sword of globalization? Jobs do roll in, but so do the retailers in search of those displaced dollars. A tricky balancing act will have to be faced when blue light specials come to India.