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Rediff.com  » Business » Bharti-Wal-Mart alliance & India

Bharti-Wal-Mart alliance & India

By Arvind Singhal
December 07, 2006 13:53 IST
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Notwithstanding the countless column centimetres and sound bytes that have been devoted by the national and international media to the alliance of Wal-Mart and Bharti Enterprises since the story broke out about 10 days ago, I still wish to write on the subject.

My reason for doing so is my belief that this development is likely to have a far-reaching impact on India in the years to come - that is beyond the obvious.

Yes, we will see acceleration of growth of modern retailing in India and, yes, we should be confident of seeing the Indian consumer benefiting substantially on account of an overall better shopping experience covering all aspects including improved availability, better quality, superior service, and, of course, lower prices per se and thereby better price-performance ratios for almost all categories of consumer goods and many services.

Bharti-Wal-Mart deal reaches PMO

Yes, I also believe that the Indian retail market is big enough to have many large players and hence apprehensions about any immediate negative impact on any of the current retail players are misplaced.

And yes, the entry of Wal-Mart should actually encourage many other major international retailers to look at India with greater interest and some of the fence sitters should find it easier to take a decision to enter India. Hence, the retail landscape in India is poised to change beyond recognition in the next few years.

Cash 'n' carry: Bharti style

My reason for feeling more excited stems from a belief - partly based on reason and partly on an imagination that may be running wild - that the combination of Bharti and Wal-Mart will make a bigger impact than any other combination of Bharti and an international retailer, or Wal-Mart and another Indian partner (or Wal-Mart on its own) would have made.

In my view, this particular combination is incredibly potent and has the capability of providing a very strong challenge to the other extraordinary (new) incumbent: Reliance Retail.

Reliance, as only a few if any would choose to disagree, is one of the most successful and probably the most-determined-too-succeed business enterprise in India. The extraordinary vision and entrepreneurship of its promoters and the leadership team are superbly matched with an exceptional capability to implement the most audacious of plans in an unparalleled time and cost-effective manner.

However, Wal-Mart remains the most successful retail business in the world. At $300 billion plus in revenue, it dwarfs not only other retail businesses anywhere in the world but also almost all other industrial enterprises too.

It is no wonder that collectively, the Walton family is the richest family in the world, well ahead of Bill Gates and others. Envious competitors and armchair critics may take some comfort in its much-publicised retreats from select markets outside the US but it cannot take anything away from its very well-honed retail business operation/management skills that have allowed it to remain in pole position in the most competitive of all major retail markets in the world - the US - for over two decades.

Likewise, Sunil Mittal and his family have demonstrated that they are entrepreneurs par excellence and brilliant managers of new-age businesses.

Further, Sunil Mittal's success has to be seen in the background that he and his family have already built a multi-billion dollar business from scratch while facing almost all the challenges that India has to offer any start-up.

Hence, we have a situation in which the three main protagonists (Reliance, Wal-Mart, and Bharti Enterprises) are brilliant, determined, resourceful, and used to being no. 1.

Here, it would be difficult to imagine a situation in which either of the two parties would willingly give up the quest to be no. 1 in the Indian retail sector.

With Reliance having already thrown down the gauntlet and made its multi-billion dollar investment intention public, it can be expected that the new challenger would match or try to exceed this. Any slackening at the starting phase by either player could give the other an unbeatable lead.

What role can the government play? Sadly, it has been found guilty of omission by not having any cogent policy on retail and getting totally bogged down with the meaningless debate relating to FDI in the sector rather than creating a pragmatic framework of operating regulations (relating to issues such as zoning and location, employment conditions, customer rights, etc.) that are fair to all players - small and large - while also maximising the government's own social and fiscal objectives.

It should, now at last, remove any restrictions on FDI in the sector that have only made some Indian business families and select other local operators become the "suitable boys" to be wooed with impressive dowries by international retailers as a price for entering the Indian market.

Current retailers and those who are planning to enter this sector in the near future should get into a huddle with their respective think-tank members to reinvent and sharpen their own USP and their differentiating elements.

In the coming years, merely putting up large boxes (or small ones) and claiming to offer all-under-one-roof at low prices will not be enough to meet the challenge from the giants. Most current players (or their investors) should be willing to swallow some pride and take a haircut (in financial terms) to encourage mergers so as to give the merged entities some chance to succeed.

Middle-class Indian consumers should, of course, sit back and watch the action on the shop floor.
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Arvind Singhal
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