The saturation of small town America has led the Wal-Mart corporation to chase profits in frontier markets like China, Central and South America, and now, India. Next week Wal-Mart will officially open its first wholesale store in partnership with Bharti Enterprises. Bharti has made its mark as the owner of India’s largest phone company. But two years ago, Bharti and Wal-Mart inked a deal to create a joint venture for wholesale stores that would supply small retail shops in India, which has a retail market estimated at almost $400 billion. The new wholesale store will be located in Amritsar, in the province of Punjab. Amritsar is located in the northwest part of India, and is internationally known as the home of the Golden Temple, the spiritual and cultural center of the Sikh religion. “We will open a store next week” a spokesperson for Bharti Wal-Mart Private Ltd. told the AFP newswire. Wal-Mart had to agree to this joint venture because Indian law does not allow foreign investment in the retail sector — except for ‘single brand’ stores like Reebok, or Apple. Wal-Mart had to create a franchise arrangement with Bharti, and the new stores will not be open on a retail level for shoppers. Instead, Wal-Mart will sell its merchandise to India’s legion of small shops, hotel, fruit and vegetable vendors, and restaurants. Even this level of involvement in Indian affairs sparked strong opposition from local retailers and elected officials, who worried that retail Wal-Marts would destroy the country’s small merchant class, the backbone of Indian commercial trade. Wal-Mart will be operating under an assumed name: “BestPrice Modern Wholesale.” Wal-Mart has been slowly piecing together a network of suppliers for its BestPrice stores. “India is not a homogenous market, so ours is not a cookie-cutter approach from the U.S.,” the president of Wal-Mart India told Time magazine. But Wal-Mart’s foothold in India is not just in the wholesale market. The company is also partnering with Bharti in a chain of 25 “Easy Day” grocery markets. India has also been courted by the British Tesco supermarkets, which also are dancing with an Indian partner, and the French Carrefour retail chain, which is still negotiating an entrance into India.
Wal-Mart has had a mixed track record in foreign countries. Its stores crashed in Indonesia in 1998, failed in Germany and South Korea in 2006, and still have not made money on its Seiyu stores in Japan after seven years. But international sales at Wal-Mart are now 24.6% of all sales at the retailer — and growing faster than other divisions. In 2009, Wal-Mart had 3,615 stores outside of the United States. Sales grew 9.1% to almost $99 billion. By comparison, in 2007, net sales from international operations were $77 billion. The company’s latest Annual Report hardly mentions its joint venture in India, noting the opening of a Hong Kong regional office to “support existing operations in Japan, China and India.” But Wal-Mart’s joint venture in India is a placeholder until the day when Indian politicians open up its retail market to direct foreign investment. That is what Wal-Mart is waiting for, and its wholesale operations now are simply creating a staging area for the company’s future growth plans. Readers are urged to send an email to India’s Prime Minister, Dr. Manmohan Singh, at http://pmindia.nic.in/write.htm with the following message: “Dear Prime Minister Singh, As an economist, you understand the impact that Wal-Mart retail stores would have on India’s small merchant class. You need only look to America to see the changes that Wal-Mart has caused in our country. Wal-Mart is not the beginning of competition in India, it is the end of competition. Today, you restrict Wal-Mart’s investment in India to a wholesale capacity — but if you ever change that policy to allow direct retail investment by foreign chain stores, you will usher in a period of American and Western Colonialism that you have not experienced since the British rule of your nation. Its one thing for Wal-Mart to export Indian goods — but it is quite another thing to let them capture sales from smaller merchants. In America, Wal-Mart has opened so many stores that it is cannibalizing its own comparable store sales, and has had to slow down its growth rate. But India is a new frontier for Wal-Mart, Tesco and Carrefour. They will export dollars from your local economy, and leave your merchant class in shambles. Don’t allow the current restrictions on retail investments to lapse, or you will regret that you ushered in Wal-Mart’s Passage to India.”