Thursday, February 22, 2007

Wal-Mart checks out India, faces heat

Executives from US retail giant Wal-Mart toured Indian stores on Thursday as they work on a deal that could change the face of the country's $300 billion retail sector and has sparked fears of mass job losses.
In New Delhi, over 100 demonstrators waving banners and shouting slogans marched on government buildings to protest against the entry of the world's largest retailer into India.
Some broke through police barricades and burnt an effigy of a dummy with "Wal-Mart Down" scrawled on it.
"Go back Wal-Mart," protesters shouted, waving placards saying: "Save Small Retailers".
But there were no protests as Wal-Mart Stores Inc. Vice Chairman Michael Duke, accompanied by venture partner Rajan Mittal of Bharti Enterprises, visited a mall and a hypermarket in a Mumbai suburb and checked out products on display.
Wal-Mart and Bharti plan a joint venture for cash-and-carry in a retail sector that is dominated by small family-run stores. The sector is forecast to more than double by 2015, and has attracted the interest of other top global retailers such as Tesco Plc. and Carrefour.
Small shopkeepers fear Wal-Mart could put many of an estimated 40 million Indians who depend on retail out of work.
"The earnings for our small store keep me, my younger brother and sister and my parents alive," said Amrit Prakash, 26, one of the protesters, who owns a small grocery store in Delhi.
"If Wal-Mart comes, they will sell goods at wholesale prices which will be cheaper and I will have no customers. I simply can't compete with these big supermarkets ... what will happen to me and my family? I'm worried we'll end up on the streets."
His fears have strong political resonance.
Sonia Gandhi, head of the Congress Party that leads the coalition government, raised her concerns about the "Wal-Mart effect" on retailers in a letter to the prime minister that was leaked by the media.
Duke was expected to hold talks with government and Bharti officials in New Delhi, but no specific business announcement would be made, Wal-Mart said in a statement.
Duke was in India "to learn more about the market first-hand and to further explore the wholesale cash-and-carry business," Wal-Mart said, adding it was a routine trip.
"We look forward to partnering (Bharti) to build backward linkages with farmers and suppliers through a robust and efficient supply chain," the U.S. group added.
Wal-Mart, which is also discussing how to provide Bharti with technology support, said it hoped to increase the amount of goods it sources for its international operations from India from $600 million last year.
Analysts say investments in the supply chain, which is hamstrung by poor infrastructure, from refrigerated trucks to warehouses, would cut the number of middlemen and help reduce spoilage, estimated at nearly 40 percent of total output.
Bharti Retail Ltd., wholly owned by Bharti Enterprises, said earlier this week it would spend up to $2.5 billion by 2015 to build hypermarkets, supermarkets and other stores.
"Maybe a few years down the line, when they have a bigger presence, we can see the impact, but right now no single firm has the clout to make or break this market," said one analyst.
Reliance Retail, part of Reliance Industries Ltd., is investing $5.6 billion in some 700 stores, while ITC Ltd., the Birla group and Pantaloon Retail Ltd. - India's top retailer -- are all ramping up.
But small shop owners are concerned at what they call Wal-Mart's "backdoor entry" into the sector.
Foreign multi-brand retailers' access to India is restricted to cash-and-carry and franchise operations, the route chosen by Metro AG, Shoprite Holdings and Marks & Spencer Plc.
"We believe Wal-Mart is going to ruin this country and millions of people will lose their jobs," said Dharmendra Kumar, campaign organiser in New Delhi for India FDI Watch, a coalition of trade unions, traders, students and communist parties.

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