BOSTON — Wal-Mart will open its first store in India by the end of 2008, under terms of joint venture unveiled Monday with Indian telecom giant Bharti Enterprises.
The move gives the $345 billion Bentonville, Ark. retailer its long-sought entry into India, which has protectionist laws prohibiting multi-brand foreign retailers from opening stores directly. Each company will hold a 50 percent stake in the new venture, Bharti Wal-Mart Private Ltd. Wal-Mart announced in 2006 such a deal was in works.
The cash-and-carry formats will be similar to U.S. warehouse clubs in that they will supply goods at wholesale prices to retailers, grocers, restaurants and other small business. By 2014, the partnership hopes to have 10 to 15 stores, ranging from 50,000 square feet to 100,000 square feet and carrying apparel, food and other goods, across India. The company has not settled on a name for the wholesale concept, a Wal-Mart spokesman said.
Under a separate agreement, Bharti is also setting up its Bharti Retail, its own, wholly-owned retail chain, for which Wal-Mart will provide logistical and back-end expertise.
Should India’s laws regarding foreign direct investment change, the Bharti chain could potentially become a prime candidate for acquisition by Wal-Mart since it will have been built using the Bentonville, Ark. retailer’s supply chain and distribution platforms.
Asked about the possibility of acquisition, a Wal-Mart spokesman was non-committal: “Should the guidelines be revised to permit investment in the retail sector … we would evaluate the opportunities at that time and make an appropriate decision.”
Wal-Mart executives have said they consider India one of the most promising global opportunities for future growth. As it lobbies for the right to open stores in India directly, the world’s largest retailer sees opportunity at hand to cut costs out of the Indian distribution system, improve speed to market and cultivate a network of vendors. Wal-Mart imports about $600 million worth of goods per year from India.
“Through our wholesale cash-and-carry joint venture, we will help drive efficiencies across the supply chain and work towards the betterment of India’s farmers, small manufacturers and retailers, in line without our global vision of saving people money so they can live better,” said Wal-Mart vice chairman Mike Duke, who runs Wal-Mart International. “We would also like to leverage our global scale to transform some of these suppliers into exporters with access to our global markets over time.”
Raj Jain, a former Whirlpool executive who serves as president of Wal-Mart India, will oversee the joint venture. At a recent company-sponsored media conference, Wal-Mart executives cited Jain as one of the company’s rising stars.