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Wal-Mart plans a slow ‘hockey stick’ curve in India

Wal-Mart is going slow in India. Its executives of course won’t admit this, but it is showing no hurry to begin selling in a country where its every move meets opposition.

This was not the scenario envisaged by its Indian partner, Sunil Mittal of Bharti Enterprisers, when he decided to link up with Wal-Mart (WMT) at the end of last year in preference to Britain’s Tesco. Mittal switched from Tesco because he hoped to move ahead faster with Wal-Mart, chasing Reliance Retail - part of one of India’s biggest groups that is headed by Mukesh Ambani. Reliance has now opened about 230 smallish neighborhood supermarkets and plans 17 hypermarkets in the coming year, so the Wal-Mart/Bharti combine has no chance of catching up this decade, if at all.

Wal-Mart does not seem unduly worried. Raj Jain, its president for emerging markets who has just been appointed to head the India operations, told me earlier this week that it would grow in India with a “hockey stick curve” - slow at first and then accelerating. On August 6, it announced that it had formally signed its joint venture agreement with Bharti to develop wholesale cash-and-carry stores but - and here came the signal of going slow - these stores would not open until the end of next year and there would only be 10 to 15 in the following six years.

I chided Jain over the speed, saying 10 or 15 stores was minuscule over so many years for the world’s largest retailer, and was much slower than had seemed likely when the initial MOU was signed with Bharti last November. Replying, he produced his hockey stick curve and said there “could be three times as many” outlets in that period, once they’ve gotten the first ones right. He could have added, I suppose, that at least he will be ahead of Tesco and France’s Carrefour, which have backed off until the potential for opening up is clearer.

So why the go-slow? Jain listed three reasons (though he didn’t like the word slow). First, of course, there is India’s current regulatory regime that bans Wal-Mart from retailing, but allows it to do wholesale activities and advise Bharti on retail stores planned for opening early next year. The chances of that ban being relaxed have reduced significantly since last year, and there is no discernible chance of it being removed before India’s next general election that is due by 2009.

Next is the current state of India’s escalating real estate market, with record prices being achieved in all areas, including the sort of shopping sites that Reliance and others are taking and that Wal-Mart and Bharti will want. Jain believes (probably over-optimistically) that current “prohibitive” prices will “have to correct and stabilize in the next two to three years”. He said they will “wait and see, rather than rush in”, adding that real estate developers are only now learning what retailers need. Until now, he said, many had unrealistically assumed that they only had to build a mall and wait for it to fill up.

Third, India currently has few established supply chains, and few cold stores or refrigerated vehicles to preserve produce on its way to market. Farmers and small manufacturers are not geared up to supply stores, and there are few food processing companies. All that has to be developed.

In addition of course, there have been the street protests against Wal-Mart and Reliance. (Other expanding retail chains with less emotive names such as Pantaloon’s Food Bazaar, Spencers, Birla’s Trinethra, and Subhiksha seem to generate less heat). Jain says the opposition, led by traders and other middle-men, is cashing in on a “lack of understanding” among owners of small mom-and-pop shops (called kirana stores in India) because Wal-Mart will be offering better quality and lower prices than are available now. “Any change will always require a certain reaction,” he says.

Yesterday, the reaction was evident when several hundred protesters staged demonstrations in Delhi and elsewhere, burning effigies of demons whose heads carried the names of international retail groups. The demonstrations were far smaller than the organizers had hoped - but that is not surprising, given that Wal-Mart is being so inactive. Wal-Mart is focusing far more on China, where Jain was working. Here in India, it looks to me as if it has no intention of speeding up the hockey stick curve until the regulatory regime allows it to open retail stores. I wonder if Sunil Mittal is wishing he’d stayed with Tesco.

SOURCE:RIDINGTHEELEPHANT.BLOGS

Originally posted by kulman Reliance Mart signs deals for 50mn sq.ft Reliance Mart, the hypermarket arm of Reliance Retail, a division of Reliance Industries, is sewing up real estate deals at a furious pace. Market sources said the company has, over the last six months, inked deals covering over 50 million square feet via franchisee as well as direct routes. Reliance Mart has set a target of 100 million square feet of space by 2011.  While Reliance Mart's first outlet is opening in Ahmedabad on Wednesday to coincide with the 60th Independence Day celebrations, the second and third hypermarkets are set to open in September this year at Jamnagar in Gujarat and Gurgaon in Haryana.    The Jamnagar facility is currently on schedule to open in the first week of September, sources said, adding both hypermarkets would cover areas ranging between 1,65,000-2,00,000 square feet. “At least 40% of the hypermarket floor space will be earmarked for garment brands with the remainder stocking home goods, electronics, white goods, footwear and food products," sources said. Reliance Mart is part of the Reliance group’s $5.5-billion retail initiative. Reliance Retail, has since October last year, rolled out over 200 convenience stores under the Reliance Fresh chain of grocery stores. Source: BS news here

Is this news real ?
Already signed up for 50 million sq ft ? & going for 100 million sq ft by 2011 ?
PRIL only has 7 million sq ft now and plans for 30 mil sq ft by 2010/2011.

Really that much ???



Edited by vivekkumar_in - 13/Aug/2007 at 3:25am

Reliance Retail unveils largest hypermarket

AHMEDABAD: Reliance Retail on Tuesday opened its first hypermarket here, with plans to open 30 more such superstores across the country at an investment of over Rs 375 crore by this year-end.

The hypermarket here, which at over 1,65,000 sq ft is by far the largest retail facility under a single roof, has over 95,000 products ranging from full line of groceries to garments, consumer durables to garden equipment.

... an informed source said that the company would be spendin g Rs 2,500-3,000 in developing each sq ft.

Mr Radhakrishnan said six malls under the Reliance Mart brand would come up in the national capital, five each in Punjab and Andhra Pradesh, three in Gujarat and two in Bangalore.

Over 500 such superstores are planned by 2010. The hypermarket format is the latest to be unveiled by Reliance Retail, which last year unveiled its fresh food format store Reliance Fresh, followed by consumer electronics store Reliance Digital.

Source: HBL news