Big Retailers, Wal-Mart and Tesco Go Above and Beyond For India

What are your corporate strategies during the recession and afterwards? According to ABC News, large retailers, such as Wal-Mart, Tesco and Carrefour, it is to merge into the Indian market…but for what price?

The poor infrastructure, vast regional differences and laws limiting foreign firms to cash-and-carry wholesale outlets and franchise tie-ups with local partners in the $450 billion retail market, it’s been a challenge all three large retailers have agreed to take. Since the recession has begun and Westerners are slow to pick-up their spending, these retailers believe it’s crucial to expand into the Indian marketplace.

“The supply chain is one of the big challenges,” Raj Jain, chief of Wal-Mart India. “We are willing to invest whatever it takes in the supply chain, the back-end. But that in itself won’t deliver all the efficiencies,” he said, arguing for fully opening up the sector.

Carrefour also struggles to maintain it’s supply chain.

“There are many, many layers, with commission agents, wholesale markets, distribution agents which increase time to market and costs,” said Yannick Douville, a Carrefour director.

Even the wealtiest of the world’s top retailer, India is a challenging market to step into because of things such as tiny farms and differential policies and taxes in every state.

ABC News gave a example of what the retailers are doing to ensure quality and accuracy in their supply chain and business plan. In the village of Haider Nagar in Punjab state, where Wal-Mart sources vegetables such as cauliflower and gourd, the retailer built toilets to prevent soil contamination, and teaches farmers about transplanting and nutrient management and the use of low-cost innovations to get a higher, better yield.

Recently, the government unveiled concessional duties and tax exemptions for refrigeration units and allowed external commercial borrowings for cold storage facilities.

But, is it enough to invest?

“Unless there is a big front-end no one’s going to invest billions of dollars in a cold chain or supply chain just to sell to some mom-and-pop stores,” said Technopak’s Singhal.