Continuing International Expansion, Wal-Mart Opens First Store in India
Wal-Mart (NYSE: WMT) opened its first store in India’s northwest Punjab region today. Wal-Mart plans to build 10 to 15 more stores during the next three years. The discount retailer operates 3,685 international stores in 15 countries.
Local vendors called Wallahs control 97% of India’s retail trade. To protect their business, a major element of Indian culture, Wal-Mart has agreed not to compete directly. Instead, it will supply the Wallahs and other business owners, plus their families. By respecting the local customs and finding a way to work with rather than work against, Wal-Mart may be able to avoid the mistakes other companies have made after expanding into the world’s largest democracy. Ikea, for example, was forced to pull out of its $1 billion investment in India after the government subjected the Swedish furniture maker to restrictions.
Wal-Mart seems eager to embrace the local culture. Local brands comprise 90% of the items stocked. Indian pop music is blared through the store’s speakers.
The giant retailer – whose shares were one of only two Dow companies to show a gain last year – has seen its international sales grow at twice the rate of U.S. sales. International sales account for nearly a fourth of Wal-Mart’s total revenues.
Indian consumers are eager to peruse the wide, air-conditioned aisles of the retailing giant. The membership cards given to business owners have been in high demand by family members and relatives seeking to benefit from Wal-Mart’s low prices. In keeping with the spirit of its agreement to sell only to business owners, Wal-Mart has restricted store access to three family members per card.
Not everyone in India is happy to see Wal-Mart’s arrival. Watchdog agencies say Wal-Mart has an unfair competitive advantage because of its size. Trade groups want to protect their markets from foreign competition.