Wal-Mart May Enter India with Local Partner

Hopes for change in policy on foreign direct investment in retailing

Business Line
March 10, 2006

Pune: Wal-Mart, the world's largest retailer, which has been waiting in the wings for the government's go-ahead to enter the Indian market, may consider entering it with a local partner. Ms Beth Keck, Director, International Corporate Affairs, Wal-Mart International, said, "We often work with partners and have done so in countries like Japan, Central America, Mexico and China. They have been able to give us a better understanding of local customers, which has helped us to operate more effectively in these countries. We may consider this approach for India too."

She was responding to a specific query from Business Line on the subject.

According to information available, Wal-Mart entered Japan, the world's second largest retail market in 2002, by picking up a minority stake in the Tokyo-based Seiyu super market chain. It spent an estimated $600 million last year to increase its stake to over 53 per cent, making Seiyu a Wal-Mart subsidiary.

Policy hitch

Of course for Wal-Mart, there is still a policy hitch to be over come in India as the present official stance allows only `single brand' retailing to be carried on with foreign direct investment. But here too, Wal-Mart is hoping that things would change.

"We welcome the Indian Government's movement in allowing 51 per cent FDI in retail to single brand companies and hope they eventually will open this sector more broadly to foreign investment," Ms Keck added.

Asked if Wal-Mart would discuss the issue of a broader scope for FDI in retail, Ms Keck said, "The Indian government's policy on foreign direct investment in retail is just one of several topics which we discuss with Indian government officials. As a purchaser of goods, we also are interested in learning about a wide range of areas that affect our sourcing from the country."

The Arkansas-based retailer's interest has to be seen in the context heightened activity in retailing with,corporate heavyweights such as Reliance Industries jumping in on the retail bandwagon to cash in on a market estimated to be worth $350 billion by 2010.

Meanwhile, the retailer with $285 billion in revenues is significantly increasing its global sourcing out of India and will source $640 million worth of home wares, textiles, apparel and fine jewellery this year.

"Direct sourcing from the region will continue to grow, as suppliers in India, Sri Lanka and Nepal are innovative and respond quickly to new trends for apparel and goods found in Wal-Mart retail outlets," Ms Keck said.

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