Tag Archives: multi-brand retail

Handing Walmart a Big Whooping Defeat in India

Best_Price_Walmart_India_BhartiYangon   Walmart with tail tucked firmly between their legs announced that they are unraveling their partnership with India’s giant Bharti conglomerate, acknowledging finally that this marriage of convenience while trying to enter the burgeoning India retail market and sneak around foreign direct investment requirements was finally coming to an end.  The India FDI Watch Campaign, a coalition of organizations from traders to hawkers to labor unions is an ACORN International partner that we helped found in 2005 and have supported throughout this accountability campaign to deal with Walmart’s attempt to enter India, welcomed the news with both relief and celebration.

            This is a victory with a hundred parents though, and no small part of the story is Walmart’s own undoing of course, and more recently its inability to either have its way with the Indian Parliament or to abide by the rules that were finally crafted in a bitter compromise to allow foreign direct investment in retail.  The fact that their mischief and chicanery in Mexico of bribing local officials and greasing every skid in that country is likely to have also been at work in India where an investigation continues into whether they were involved in corrupt practices tying the hands of their lobbyists even more.

            Only months ago we felt we were not exactly losing, but we were not really winning either.  After years of beating back the Prime Minister’s efforts to modify FDI in multi-brand retail, including a dramatic time in the monsoon session of 2011 when Parliament essentially was shut down for weeks in resistance to the Congress Party attempt to impose FDI, the compromise that had broken the stalemate with a study and recommendation committee where Dharmendra Kumar from India FDI Watch testified several times. At the end of last year and early in 2013 the compromise was clear and the fight was going to be moving to the individual Indian states to block the entry of superstores.  There had been important concessions won.  Walmart and their like could only open in cities with more than a million population and outside of city center areas.   They had to spend significantly on infrastructure as part of their investment and, importantly, they had to source at least 30% from India.

            From Walmart’s statements, as they gamely tried to frame the split with Bharti as part of its long term “patient” strategy for India, it seemed clear that the threshold objection that they might have had was actually the minimum 30% sourcing requirement from India’s factories and suppliers.   If that wasn’t the real issue, then some communications person or executive speaking to the Wall Street Journal has now been fired, and of course that’s the issue that means the most to the political and economic classes of India.  We had campaigned continually against Walmart’s entry, arguing that they would be dumping Chinese goods on the Indian market.  From their statements, while raising the white flag in India, it sounds like we were more right than we might have ever imagined.

            Walmart has 20 Sam’s Club type stores which have been allowed in recent years if they sell exclusively to other businesses and not walk-in customers at large.   Metro, the German retailer, with a big footprint in Indian cities now had been fast-and-loose with a similar wholesale operation and was fined in Bengaluru.  With this splitting the sheets with Bharti, that will basically be Walmart’s brand in India.

            At least until they learn to respect the issues of the 20,000,000 small retail purveyors in this country rather than think that fast bucks and loud bullying is this same as transparency and accountability.

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Indian States are Putting More Roadblocks in front of Walmart Expansion

New Orleans   Two reports yesterday from Dharmendra Kumar, director of the India FDI Watch Campaign affiliated with ACORN International, point out how far the superstore giants like Walmart, Carrefour, Tesco, and Metro really are from being able to freely enter markets throughout India.  This is largely a story that the global business press is missing as they tout the rise and fall of the stock market without trying to understand that there continues to be a huge struggle over these issues of foreign direct investment in multi-brand retail.

            First and foremost, when Prime Minister Singh announced that he was pushing forward the modification, he could only do so generally at the parliamentary level.  Specifically each of the twenty-eight India states, not to mention the seven territories, has the right to independently decide whether to allow this FDI expansion in their jurisdictions.  As of this date, only 11 of the 28 states have indicated a willingness to tolerate such expansion with 17 thus far militantly opposed.

            As Dharmendra reported yesterday, there continue to be more roadblocks. 

            Walmart had teamed up with India-based Bharti in recent years to operate a “cash-and-carry” business that sold only to other businesses and not the general public, something like Sam’s Clubs the United States.  The Government had indicated that a “group” business like Walmart-Bharti had certain restrictions, but in recent years the ambiguity of the “group” business definition had allowed them free rein.  No more. 

            To quote from Dharmendra’s report:

On 3rd June 2013, Govt. of India defined Group firms as two or more enterprises that directly or indirectly are in a position to exercise 26% or more voting rights in the other enterprise or appoint more than 50% members on board of directors in the other enterprise. Amidst widespread opposition to the Walmart’s backdoor entry of FDI in Multibrand retail (through Bharti-Walmart, the 50:50 joint venture between Walmart and Bharti for operating Cash-and-carry outlets in India), in April 2010 Govt. of India framed a policy that asked cash-and-carry businesses (Bharti-Walmart) to limit their sale to group firms at 25 per cent of their turnover. In absence of clear definition of what group firms meant Bharti-Walmart’s cash & carry business (20 Best Price Stores) continued to sale almost 85% of their products to Bharti Retail’s 200 Easy Day stores.

Now, Bharti-Walmart will either have to limit its sale to Easy Day to 25 per cent of its turnover or restructure its corporate structure.

 

There can’t be happiness in Bentonville over this new clarification.

 

Yesterday the Indian Department of Industrial Policy and Promotion (DIPP) was also meeting and was expected to also propose additional heartburn for the superstore outfits.   India FDI Watch expected the following actions:

It is likely that the DIPP

 

– Would ask global superstores to invest 50% of only the first tranche of investments (minimum $100 million) in back-end infrastructure.

– Would declare that the 51% foreign direct investment limit in multi brand retail is composite one, including FDI and foreign institutional investment (FII).

– Would allow superstores to create back-end infrastructure in states that do not allow any FDI in multi-brand retail

             Forcing the big boys to put their investments up front rather than only in the logistics and supply at the backend of a retail operation almost puts a bull’s-eye specifically on the usually smiley-face of Walmart.

            There’s a lot more fight to come in India over FDI’s expansion into retail.

Indian States and Walmart Expansion Audio Blog

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