Detailed Analysis of Present and Future of Retail Sector In India

Detailed Analysis of Present and Future of Retail Sector In India And In-Depth Research On Business Model And Strategy of Walmart

Things To Know Before Strategizing:
Retailing in India is one of the strongest pillars for Indian economy as it accounts for 15-16% of its GDP (Gross Domestic Product). It is estimated to be a huge market across the globe with a value of $500 bn. Indian retail market is considered to be among the top five retail markets from the perspective of economic value. The basic reason behind this elephantine opportunity is 1.3 billion population and the need to cater their demand.

Before entering and implementing different types of strategies in emerging or rapid growth markets, retailers have to confront a unique set of challenges. It is necessary to have a deep understanding of “what is not available” easily. What we witness is that Indian retail market is still unorganized. Small independent players still accounts for 90% of sales in the Indian retail market as reported in 2013.

FDI in Retail Sector has come a long way. FDI in retail (except for single brand product retailing, that too with condition) was not allowed in India till recent times. That means, if the company requires foreign funding they need to serve general public with a single branded product. Now, the rule has changed to 100% in single brand retail (which was earlier 51%) ,while creating a path for FDI in multi brand retail with a stake of 51 %(which was earlier prohibited). Earlier, there used to be certain caveats associated with the expansion of multi brand retail sector like cities with 1 million population are eligible for this. Moreover, this was also dependent on the final approval from respective states to allow implementation within those states.

One thing which currently hampers the Indian economy is the economy slowdown. However, this is short-term and does not mean a permanent shift to a lower growth trajectory. India has strong basic fundamentals, which includes high rate of savings, an increasingly skilled labour force and increasing global competitiveness in many areas. There are also some deficiencies, most notably in the area of infrastructure. However, the Government recognizes these weaknesses and correcting them is a high priority. One should be optimistic that Indian economy will come to a better shape and get back to a higher growth path, which it can maintain for several years and FDI is an accelerator in Indian economy. It is required for the growth of retail as well as for Indian economy and it will prove beneficial for all major stake holders. This new policy will look after the concern of both foreign retailers and their Indian counterparts. The benefits to foreign market players will be easy access to local market learning and a large consumer base while the local Indian companies will be benefited by the exposure to best management practices and technology know how.

India is more of a mixed economy. To adopt any new policy we need to have the consent of common masses. Here, in this case if we use this increased flow of capital in a better way it will also benefit both the farmer and the end consumer a lot. Farmer will benefit from the better price indexing and direct selling to the retailer which will help him to retain a large chunk of profit, which currently gets passed to the intermediaries. The consumer will have a better shopping experience and benefit from the competition and reduced prices. Not only these mentioned stakeholders be benefited, but also the benefits will pass to the various other sectors like infrastructure industry as well as employment sector. As mentioned earlier about the problem of the retail real estate, the industry will surely get the required boost due to increase in demand and investor confidence. As retail requires front end office space and back end warehouse infrastructure to support retail industry, this will eventually increase the transparency in real estate. Additionally, the country will flourish on all the parameters like in terms of quality standards and cost competency.

But, there are various hurdles while implementing this policy like political will, protests from various SME owners and unorganized retailers and lack of proper infrastructure (like transportation, logistic support, storage and warehouses). So, it is an obligation of the government to give a proper consideration to all the stake holders. Apart from all caveats which the government is facing, the steps taken by government have indeed reflected a strong and long term approach. The new international entrants are here with long term commitments and ready to take long term debts. They are ready to invest in retail infrastructure for a longer period. Their entries will definitely make their Indian counterparts more active, as it is already visible in the announcement made by Reliance Retail to add one store per day.

Types of Strategies in Retail Sector as Per The Indian Scenario:
Quick Fact: Organized retail, which constitutes 8 per cent of the total retail market, will grow much faster than traditional retail. It is expected to gain a higher share in the growing retail market of India. Various estimates put the share of organized retail as 20 per cent by 2020.

Important Trends And Developments In Retail Sector:

• Increase in per Capita income

Indian economy is the fastest growing economy globally and it has witnessed a growth in annual disposable income of 13 % and has even reached to 15 % in various major cities like Delhi and Chennai. Per capita expenditure during the financial period of 2011-12 has seen a growth of 12%. Their income/expenditure patterns will help to create the marketing strategy for the retail company.

• Greater Debit and Credit Card Penetration Encourages Consumers To Spend

The attitude of consumers towards use of cards witnessed a massive change with majority of consumers shopping in modern grocery retailing in cities and metropolitan areas and making payments by cards. Card payment transactions excluding commercial transactions witnessed a growth of 35% in 2011-12. Retail industry can leverage on this. The companies can create business plan along with banks to lure more and more customers by creating incentive programs.

The outlook of India is not good but neither too bleak. GDP is witnessing a slow but gradually increase, and we expect soon it will be back on track to 7-8% of annual growth rate post Lok-Sabha election. The increasing GDP growth rate will surely help to boost consumer sentiments, annual disposable income and expenditure. Apart from these benefits, increasing GDP will further contribute to the decline of the unemployment rate for the next five years. Furthermore, as retailing is one of the leading contributors to GDP growth in India, employment in retailing is also expected to increase from 2.3% in 2012 to 2.8% in 2017. These strong sentiments is further supported by the changing lifestyle of Indian consumer particularly, the urban consumer as witnessed in 2012 in terms of changes in eating habits such as eating out, increased consumption of packaged food in grocery retailing and increased awareness of international brands in non-grocery retailing.(see chart below.)

Stronger consumer confidence will drive growth particularly amongst modern grocery retailers, particularly supermarkets and hypermarkets.

Apparel – 33%, Food & Grocery – 11%, Mobile & Telecom – 11%, Electronics – 8%, Food Services – 7%, Jewellery – 6%, Footwear – 4%, Others – 20%

How To Tailor Marketing Strategies And Create Marketing Plan To Cater To This Demand Which Is Growing By Leaps And Bounds?

The retailers in the forecast period will continue to build larger format stores as it helps to increase the footfall in outlets, improve the look and feel of the outlets and offer higher discounts in order to compete with the direct selling retail channels vis-a-vis with increasing paradigm of e-retailing. This will be most visible among the following categories: apparel, electronics and appliance, and beauty and personal care. We also just cannot neglect the importance of kirana stores or the unorganized sector to cater to the consumer needs. But, it is also necessary to look for the middle ground where interest of both the players will exist together. What India is witnessing is that, with more and more supermarket opening up, the consumer’s preferences reveal an interesting feature. Though the local kirana shops still exist and run successfully, there are some differentiating attributes that attract the customers towards the big format stores. So, what exactly consumer prefers to buy from these stores are: Day-to-day cooking needs, quick meals and utility products. These are the prominent product categories for which a consumer goes to a super market.

Multinational Retailers should not underestimate the domestic players. These domestic supermarkets have better understanding of consumer taste, they understand the market behavior, they set up supply and distribution relationships, have learned to manage the business around institutional voids. Some major challenges for foreign retailers are:

• The cost of capital in emerging markets is high. Their Business Plans require an aggressive growth target to make the expected return on investment.

• Expectation from Head Quarter to achieve volume and profitability.

To meet with these challenges MNCs should engage with their Indian counterparts and use their resources.

What Type Of Strategies Can Help To Build The Relationship With The Indian Customer?

As the developed market is getting stabilised, every multinational retailer is moving towards emerging market. Earlier, the attitude towards emerging market was to first establish the top line and profit would follow sometime in the future. But as the growth is getting saturated in the developed market, it is necessary that these emerging markets contribute in their bottom line also. For this they are required to hold the customers’ attention for their products in shelves. If they can’t hold the consumers’ attention and not able to make them perceive the value of those products in their life, there is scant hope to maintain both top line and bottom line. So, the communication strategies must be synchronized with their personal tastes and behaviours.

Types Of Strategies That Need To Be Adopted With New India In Retail Sector

If we go by the recent reports published in a leading newspaper, Indian consumers are very bullish. On the index of consumer confidence, India holds the second rank (after Indonesia). So, to effectively cater to the demand of Indian consumers, one should be careful in the implementation of the type of strategies. But, the marketing tactics should be long term. The giant retailers should be careful during their establishment period. Once their distribution channel and infrastructure get well established, they can look towards other small metros and towns which are equally important market. Since, consumption behaviour and usage pattern are different in metros and towns, companies need to look after their product marketing strategies.

How These Factors Mentioned Above Will Enrich The Experience Of Both Consumer And Retailer?

Higher per capita income during the tenure 2007-13 proved to be a good period for retailing. Retailing witnessed overall growth of 15%. This growth was higher than the total review of CAGR of 13% during 2007-12. This equipped the customer with high bargaining power. Consumers spent more in hypermarkets, apparels, electronics appliances and health and beauty retailers. Even in packaged food section retailer increased the shelf space for different edible items. This has made the job of retailers relatively easy, they can work on their strategies and marketing mix as they can assess the buying behaviour of the customers and tailor their advertising strategies accordingly.

Future of Retail In INDIA:

Why Foreign Retail Players Are Trying To Engage With INDIA?

• After China and the US, India is expected to generate the third largest growth in retail value sales in actual terms over the 2011-2016 period.

• Various giant retailers like Carrefour, Seven & I earlier has generated most of their sales from their domestic markets but now they are witnessing low growth prospects.

• Indian retail market is heavily fragmented and allowing FDI in multi brand retail sector will present a major opportunity to foreign retailers.

• India’s high income consumers lie in the age bracket of 25 and 40.

• Major shift is expected in grocery market. Earlier this sector has been controlled by “mom and pop” stores that have served their local communities and they do stockpiling of unpackaged groceries. But, the landscape is changing dramatically since 2006, and are being replaced by modern groceries. They bring new service offerings which are appreciated by young urban elite. But, still it accounts for only 4% of its total potential which indicates the low level of penetration.

Brief Overview Of Indian Consumer Market:
Source: Euro monitor

Retail Market of India – 440Billion USD

Household That Owns a Car – 5%

Total Population – 12.2bn
• Urban Population – 365mn
• Employed Population – 415mn
• Employment in Retailing – 41mn

Total Household – 229mn
• Occupants per household – 5.2
• Refrigerator Penetration – 20%
• Microwave Penetration – 18%
• Internet Penetration – 137mn

Implication Of FDI Policy On Different Sub-Sectors Of Retail:

This policy will have different impacts on the various sub segments. Some segment may get a low impact but it might be a stumbling one for another.

Regulations:

• Minimum FDI of USD 100 million and a constraint of maximum 51 per cent stake of the foreign entity imply that the minimum investment required by both, the foreign and the Indian partner together, is more than INR 1000cr.

• 50 per cent of FDI in back end infrastructure in three years. Minimum investment of INR 250-220cr is to be invested in back end infrastructure in the first three years. However, different retail segments have dynamic requirements of back end infrastructure.

• 30% of local sourcing is required. Multi brand or single brand retailers with foreign equity shares, if exceeds 51%, will be required to source at least 30% of their goods from local and small SMEs.

Average international expenditure of each is 1.8%.

All these companies are able to conform to the policy of $100mn proposed by Indian government. But, the real question is how many of the other players can close a deal. However, many retailers are not as global as Tesco or Carrefour. Using Walmart’s figure of 0.9%, only 92 companies would theoretically have a large enough cash flow to support such an investment.

Recently, Tesco PLC got the clearance from the FIPB (Foreign Investment Promotion Board) by buying 50% stake in TATA’s Trent hypermarket. This deal was sealed at $110mn

Walmart Footsteps In INDIA:

The world’s biggest retailer Walmart was in joint venture with their Indian counterpart Bharti retail and operated the retail store Bharti Walmart under the name of “Best Price”. But, they recently have dissolved their joint venture citing unfriendly regulations issue. Now Walmart has put their India expansion plan on hold.

Other big firms like Telenor, Estisalat also cited the issue of restriction in Foreign Investment. After parting ways with its Indian partner Bharti Enterprises, Walmart has said that it would continue to run 20 wholesale stores that the two companies have operated jointly. Although, they have not “packed their bags” but have just put their plan of scaling up their expansion in India on hold. Walmart was enthusiastic about the massive potential in India and treated it as a learning hub, where the retail business was dominated by “mom and pop”stores. If we take a look at their overall sourcing mix, a very large chunk of manufacturing comes from China and other Asian markets. India is growing, but it is quite at a low level for their sourcing operation, which means they need to invest their time and effort to develop the Indian supply base to match their standard.

Two Different Theories On Walmart’s Entry In India:

There are many reasons to support investments in Indian Retail Sector because of various reasons. Even there is a set of theory which supports to allow full “100%” relaxation for investment in retail. Because, our current infrastructure on supply chain, logistics etc. are very poor, they will make the situation troublesome for these JVs. Indian retail is still very backward, supply chain is rickety and wasteful. Probably, vegetable will rot before reaching someone’s plate. Foreign firms may make life harder for small shopkeepers and middle men. But, if we give them full access to our retail market then their cash and technology know-how could help modernize Indian farming and can move crops faster from fields to shopping baskets. That would curb rising food inflation and will ease the stubborn inflation which is hovering around 6-8 % ( WPI index). This new reform is well timed. Growth has dipped below 6%. The rupee is weak, investors are nervous. Government took this step to boost the sentiments in the market. The political reaction has been furious and xenophobic. The Parliament was brought to standstill.

But there is a section of society who always opposes the entry of big players like Walmart. The reason cited by them also brings some other dimensions which are pertinent to this issue like:

• The entry of Walmart will make it difficult for the small retailers operating the “mom and pop” store to earn their bread, as these companies are large enough and price competitive to pull a large chunk of customers.

• It is actually good news for the country and the reasons are:

- First, Indian businesses have a bit less competition at home. No need to make heavy investments in creating advertising ideas.

- Second, the upper middle class in the country remains buoyant despite the topsy-turvy economic shifts.

- Three, the rupee is cheap and therefore the report suggests that there has never been a better time for Indian companies to venture out and emerge global players.

To conform to both the theories Indian Government frame certain policies to protect the interest of all stakeholders:

1. Only 51% investment is allowed in Indian retail market that too via approval from FIPB.

2. Up to 30% of sourcing is required from local dealer which is also regulated in different segments. Such segments are Apparel, Mass Grocery, Beauty and Wellness and Consumer Electronics.

3. Only 53 cities are found eligible for this venture. This policy constraint restricts the access to retail market. But now the government has eased up this rule and put down the restriction of 1 million population.

4. Approval from State Government required.

However, Walmart is not ready to invest any more directly in India and is pitching for certain modification in policies like: changing the norm of 30% of local sourcing to 15% only. They have dissolved the joint venture with Bharti Retail in which both have 50:50 stakes to ramp up their own individual expansion across India. Walmart was also engaged in a lobbying with American law maker over Indian FDI retail rules. During the first quarter of 2013, Walmart lobbied for close to 50 issues before various Government departments and agencies and spent a total amount of $1.84 million on these activities. As per the records of a disclosure report they spent a total amount of $6.13 million (about Rs. 33 cr) on lobbying for various issues, including “discussions related to FDI in India”. This shows that how strongly they are trying to start their operations in India.

Types of Strategies Implemented by Walmart:

Marketing Strategies:

• Wherever Walmart starts operation they might not be very impeccable. But, what they lack in product elements gets compensated by their unparalleled convenience and price competitiveness.

• They are the master of online retailing tactics in most of their markets. Their marketing campaign covers all facets of strategy, but what makes them different from their competitors is their aggression that has highlighted their need to be successful to remain at the top of the industry in retail.

• But an aggressive campaign also led to create controversy, and through these years, Walmart has been involved with a fair amount of negative publicity directly involving their specific marketing strategies. Their attacking and bullying nature has caused many to start legal proceeding against them but, still they remain number one.

• Walmart believes in marketing by their presence of a large number of stores (8500 stores in 15 different countries with 55 different names), intensely competitive pricing, and such a large market share has put them on the driving seat (operation wise).

• Walmart is also involved in influencing the pattern of their buyer’s consumption with their product. They believe in producing and generating demand as par to their supply level. They make the customers hit their stores for three sales in two days.

• They have segmented the market and most of the other developed or emerging economies according to their consumption level.

• Walmart can offer a company a prime opportunity of product marketing to get their products to the masses-but doing so they have the discretion to set the price as low as possible. Their online marketing gave them a upper hand while keeping transparency in their operation. You can purchase their entire collection of products through the web. You can read customer reviews, sign-up for a newsletter, and get options for special deals available only through the website.

• They initiate various program like “One-hour guarantee” program to entice the customer or they can just hang out at the store all night long. This is a new strategy to lure customers under which they will get the product guaranteed if they are in the store during a particular time period (like in America it is 6:00 to 7:00 p.m.). Actually, the tactics assimilated by Walmart is to listen the voice of frustrated customer who has arrived early in the store for the promoted item but, it is sold out. This is basically their grievance handling procedure, you just need to register yourself and make payment and they will let you know.

• They also have very high regard for kids as their customers, they try to attract this particular segment by selling toys “chosen by kids” in that particular country. This is an example of different strategies for different segments.

• Apart from having a vast network of “brick and mortar models”, they also rely on social media campaigns for their wider reach which is equally important. Customers are able to contact with them for 24 hours a day, which helps in customer satisfaction aspect for the whole business. This shows their in depth knowledge of communication strategies.

• They don’t prefer any loyalty program as particular, but to take on their rivals they joined hand with one of the leading handset maker iPhone to launch a mobile app called “scan and go”. This will allow shoppers to use their iPhones to scan bar codes, enter the quantity they want to purchase and then use self-checkout lanes to pay. It will be more beneficial once they launch this app across the market. They also search for coupons and compare price with the help of this app.

What India Is Expecting And How Walmart Is Keeping Up With Their Commitment With Their Type Of Strategies?

• Today Indians are looking for more brand option in the nearby markets by putting in minimum efforts. Supermarket is the only place to fulfil their demands as they have more shelf space as compare to their counterparts i.e. “mom and pop stores”. This fact is well endorsed by a survey done by “Indian retailer magazine” where 30% of respondent prefer to visit supermarket for their shopping. This approach exposed them to enormous product ranges and product brands.

• Entry of any new modern retail outlet has empowered the Indian consumer with new options available in their baskets. It also reflects the attitude of Indian consumer towards small kirana shop which keeps only the popular product in their shelves. It will not work for the consumers who are the major influencers in present scenario.

• To make their presence more notable they have started contributing in CSR (corporate social responsibility) by initiating program of women empowerment to teach critical life skills related to communication, hygiene, reproductive health, occupational health and safety, identifying personal strengths and gender sensitivity with the help of NGO SWASTI. Up to 8,000 women will also receive leadership training to develop the work and life skills necessary for personal and career development. This will prove beneficial for apparel and retail industry as it makes women more aware about these segments.

• Walmart still has not lost their hope of entering in Indian multi brand retail market. According to their new strategy, Walmart has registered a new company in India called “Walmart India Pvt. Ltd.” on 15th January, 2014 and looking for a new partner. Walmart had said it was studying the feasibility of India’s foreign direct investment (FDI) policy in multi-brand retail before finalizing plans to enter the segment.

Pricing Strategy: An Edge Over Competitors:
Walmart’s pricing strategy is a very unique. They are able to quote lower than their nearest competitors. Their pricing model varies from country to country. Walmart is more than just a world’s largest retailer, it is an economical force. They always believe in offering shoppers lower price than they could get anywhere else. If we look at the inception of Walmart, the vision was always to keep prices as low as possible. Even if the margins weren’t as fat as competitors, they realized they can cover their operating cost by creating volume business. Their strategy was very modern and unique since their inception. They were the first to use “Universal bar code”. Due to their global presence, they forced the manufacturer to adopt the common labelling. This bar allowed retailers to generate all kinds of information creating a clear shift of power from manufacturers to retailers which gave price deciding power to Walmart. They became especially good at exploiting the information behind the bar code and was considered a pioneer in developing sophisticated technology to track its inventory and cut the fat out of its supply chain. Now they demand manufacturer to use new technology “RFID” Radio frequency identification technology. This will contain more data than universal code and help them to penetrate further in their existing market. Walmart never gave any discretion to small manufacturers in deciding the price for their products. They will decide it on the basis of their rivals’ resources and pricing strategy.

Thus in India, Walmart is considered as a threat to India’s businesses including kiranas as they will not be able to survive Walmart’s cut throat and unfair competition without proper enforceable protection.

Every Day Low Price Strategy And Every Day Low Cost Strategy:
This type of strategy formulated by Walmart is the cornerstone which make their focus on pricing even stronger. Their EDLP strategy makes the customer’s one stop shopping even more convenient. The price investments across a broad assortment allows them to deliver a lower-priced market basket. Through various localized and national market media campaigns, they made the customer believe that are the low price leaders on basket of merchandise.They offer various festive promotions on hundreds of items in the season’s most popular categories and make your festive mood less worrisome. To deliver EDLP consistently, Walmart practices Every Day Low Cost (EDLC) across its operations worldwide. Walmart is running several product related initiatives in Asia that save costs and benefit local customers, including Guaranteed Pricing.

What India Wants?

Discounts – A Deciding Factor: 
Indians are price sensitive consumers. You can’t charge the Indian customer more than what they actually perceive about a product in term of value. A kirana store can never compete with the kind of discount and deal that a supermarket can offer. Kirana store can offer discount to their frequent buyers only. Bulk purchase will always come up with some deal or discount. Super market can also deliver theme based offer or period based offers which depend on season, festivals etc. The loyalty card concept is also a way to share the margin with loyal customers. The intention is to retain the customers and then start giving them a share of the profit made from loyal customers. They need to formulate the type of strategies which does not alienate customers from the store because, they are not able to perceive the quality.

Distribution And Retail Format in India:
Basically Walmart is always about large sizes but in India this tactics won’t work properly, because the reason is infrastructure is still lacklustre and the auto mobile ownership is very low. So Walmart approaches the Indian customers through multi format stores and not a single format. Although, in India e-commerce is still not allowed for retailing, this particular model is under consideration of DIPP(Department of investment promotion and policy). Till now, before dissolving the stake in Bharti-Walmart ,company was operating 20 cash and carry stores(Best Price). They made their entry through tier-2 cities because the cost structure of these cities is low as compared to larger metros but it doesn’t make any difference in the consumption pattern of these cities to a large extent. They have established three different distribution centres. These distribution centres in Bangalore, Chandigarh and Delhi will serve the stores in their vicinity.

Future Expansion :
Walmart need to do more than just a large retail stores, if they really need to widen their reach among Indian customers. Off course, Indians are price sensitive but, the way Indian economy is getting mature and evolved the next phase of economy would be driven by “EXPERIENCE ECONOMY” where the marketers need to present their offering as a stage. To do so they need to serve their customers at a very personalized level, try to deal with them one on one and develop a friendly relationship with the customers. The customer looks for discounts, fairly priced products, captivating options accompanied with better look and feel. All these are need to be fulfilled by modern supermarkets.

Type of Strategy Implemented By Walmart In The Expansion Of Their Technological Wing:

In today’s competition, technology play a formidable role in companies’ expansion. Walmart also realized this fact very well. Walmart is banking on India by expanding its Bangalore based technology center to take on their biggest e-commerce rival Amazon. Walmart LABS is working in the feasibility of mobile app and to gather social media intelligence to make its e-commerce business more effective. They are trying to integrate their e-commerce platform with their traditional business. They are targeting the talent pool from different platforms like Google, e-bay, Amazon. Business threats from the rivals like Amazon force Walmart to invest in technology.

Acquisition of Talent @ Walmart:
In their overseas operation, Walmart offers better job opportunity. Every year Walmart opens doors to thousands of people and helps them to lead better life. The wages are very much competitive, good benefits and opportunities to build good career. They offer jobs at all levels, including some entry level jobs. Although due to lack of Business Plan in India they have slashed their workforce by 1500.

A recent report by a consulting firm revealed that as more foreign players enter into the Indian market it will create the job opportunity for 1.6 million people. Retailers in India are supposed to provide meaningful career to their employees. Innovative rewards and recognition system should be put in place to motivate and inspire retail workforce. There should be proper “movement of talent”. Talent management should be made an institutionalized initiative. There should be proper grooming program for talent at entry level.

Challenges:
There is an absence of proper courses for educational courses which lead to absorption from other stream. This lacuna even extended to specialized retail areas like merchandising and supply chains. Reasons sighted is retail portfolio is still not treated at par with sectors. We all know the future potential of Indian retail. But, still we are struggling with creating talent house to cater this demand. Given the gap in demand and supply of well-trained retail professional will come under focus. One of the challenge that Walmart will face in India is talent acquisition.

Strategy:
To overcome this problem company can roll out programs where student or fresher with no past experience can be groom to take the position of responsibility or they can acquired people with relevant experience .But, both can affect their cost of capital in different way. Without proper talent no company can execute their marketing mix in proper manner.

CONCLUSION:
India is a big fish in the retail market as we all know, annual Indian retail market is of $440bn. But, still we are not able to tap this market at its full potential. Reasons are types of strategies which retailers are still not be able to discover or are in their nascent stage such as pricing strategy, cost efficiency, market penetration, policy lacklustre, poor infrastructure etc. Due to all these constraints companies are force to face poor customer retention. Every brand tries to ensure that the type of strategies they implement will give them large chunk of customers to meet their appetite and ability to retain the customers who made purchases from them should re-visit the brand for their next purchase. This is where retailer giants like Tesco plc.,Walmart stores plc. with their technology know how, customer engagement strategy, will make the market more competent.

Although, after launching its brand to much fanfare with its Indian partner Bharti Enterprises Ltd., Walmart has hit a wall as restrictive regulations as well as number of court cases have soured its view on the Indian opportunity. Reasons quoted are arduous government policies and other political roadblocks. But, now government has worked very hard to make the rules less arduous to facilitate their entry in India.

• New policy said that only 50% of the initial investment of at least $100 million made by the foreign retailer needed to go towards so-called “back-end” infrastructure (the worry for foreign retailers was that this was 50% of all investment).

• It also eased that retail stores can be set up in any city allowed by respective state governments (and not only those with a population in excess of 1 million as mentioned in the original policy).

Government and Walmart are trying to make nod on various controversial issues like level of manufacturing.Because as per the current policy practised in India, retailers have to follow the normal route and cannot be categorized as private label suppliers (of Walmart), the issue of local sourcing. Private labels are always a unique type of strategy implemented by Walmart.

By Tarun Gupta