Wal-Mart Stores Inc, the world’s biggest retailer, will accelerate its rollout of wholesale stores in India, a crucial growth market that has long frustrated overseas operators with restrictive rules. Raj Jain, chief of Indian operations for Arkansas-based Wal-Mart, said the firm now expects to open 10-12 wholesale centres in India over two-to-three years, from an earlier target of five years, as real estate prices have become more attractive and it gains confidence in operating in the country.
Food price inflation and the need for food security should spur the government to open the sector to foreign direct investment (FDI), he added. “We will quicken the pace of expansion,” Jain said in a late Tuesday interview at his offices in Gurgaon, a fast-rising suburb of New Delhi that houses a host of multi-nationals. “We have more confidence in running the stores, we feel more confident about real estate compared to two years ago,” he said.
Retail rents fell by 30-40 percent from late 2007 peaks. Wal-Mart currently runs wholesale operations in India in an equal partnership with India’s Bharti Enterprises. India’s $450 billion retail sector is dominated by small local operators, a powerful constituency that has stood in the way of foreign multi-brand players such as Wal-Mart and No.2 Carrefour being allowed to operate their own retail stores.
Instead, foreign players must operate through franchise tie-ups with local partners or operate cash-and-carry, or wholesale, outlets of the kind Wal-Mart is rolling out. While the government is yet to liberalise rules for foreign retailers in India, Jain said India has moved beyond the question of whether or not organised retail is positive for the country.
“Everyone realises this country needs organised retail and that it won’t overnight replace mom-and-pop stores,” he said, sitting at a conference table adorned by a small shopping trolley filled with candy. Food inflation is a nagging problem in India, eating into disposable incomes and prompting political protests. Some 40 percent of fresh produce in India, which has a population in excess of 1.2 billion, is wasted due to inadequate supply chains and lack of cold storage.
Jain said opening retail to foreign investment would enhance food distribution and security, which the government realises. “Now it’s a question of having the political will and the timing of the decision,” he said.
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