WALMART adjusts business to local conditions in India

Planet Retail 16 Aug 2010

Walmart has been forced to create a unique business model in India due to its immature supply chain, India's Business Standard reports. The supermarket chain, whose supply chain is known for its efficiency, awards marks out of 100 to all suppliers. Whereas in other countries most suppliers score around 95, in India the average is a mere 60 points.

Raj Jain, CEO of Bharti Walmart admitted: "It's a big problem." He says that the poor performance of suppliers has forced Walmart to keep "significantly more" inventory in India than anywhere else in the world and that eats into operational efficiency.

Other challenges facing Walmart in India include the issue of free credit. Walmart has recently introduced two weeks' free credit through a system of credit cards issued by Kotak Mahindra Bank to compete with local wholesalers, who typically offer credit for free to regular customers with whom they have been doing business for years. In India many wholesalers deliver goods direct to the buyer's doorstep and some customers are finding that it is a long way to travel to the Best Price Wholesale store every morning to pick up goods.

At present Walmart's India operations are restricted to the state of Punjab, making it easier to build a more reliable supply chain within the state. Jain said: "Restricting to a geographical area is good. You can get critical mass in some states, not the entire country." The company has realised that it will take a long time to gain critical mass across India once it is ready to expand into other states and this is a huge issue that it has to face, and one that will confront other western retailers, particularly if FDI is eventually permitted in multi-format retail.

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