Wholesale joint venture in India to rely on Wal-Mart logistics
Wal-Mart Stores said today it has entered a 50 percent joint venture with Bharti Enterprises to establish wholesale cash-and-carry outlets serving small retailers in India and the supply chain management system to support the operation.
The joint venture will be called Bharti Wal-Mart Private Ltd. and Wal-Mart is being relied on to provide the logistics backbone for the operation. Wal-Mart is widely recognized as one of the most innovative companies in developing lean methods for delivering products to its warehouses and stores. It plans to use its expertise in driving down costs to provide products at lower prices to Indian consumers.
Among the modern techniques it plans to introduce are just-in-time inventory management, retail information systems, refrigerated transport and storage, satellite tracking of trucks and trailers, and fuel management systems.
The operation will provide small business owners such as fruit and vegetable sellers, and restaurants, products at wholesale prices. It will also serve Bharti Retail, a new line of stores owned and operated by Bharti.
Wal-Mart will help set up a supply chain network of farmers and small manufacturers and provide them the distribution infrastructure many of them lack to quickly get their products to market, the world’s largest retailer said.
“Wal-Mart’s global expertise in supply chain and logistics will bring enhanced efficiencies across the retail ecosystem,” said Sunil Bharti Mittal, chairman and chief executive officer of Bharti Enterprises, in a statement. “This venture promises to bring great value to millions of farmers, artisans, small manufacturers and retailers across India. We are pleased to be a partner in developing this sector which is set to become a significant engine of India’s economic growth.”
“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,” Wal-Mart Vice Chairman Mike Duke said.
Bharti is a large conglomerate with interests in telecommunications, agribusiness, insurance and retail sectors. The tie up has been in the works for the past year, and follows Bharti’s flirtation with Tesco, a hypermarket retailer based in the United Kingdom. The joint venture became possible as India has gradually loosened some restrictions in the retail sector, which is still not widely open to foreign operators in order to protect mom-and-pop stores. Wal-Mart is getting around restrictions and local opposition by investing in the backend, wholesale operation instead of a store-front retail operation.
The partners plan to open the first wholesale facility by the end of 2008, and 10 to 15 centers during the next seven years. Each facility will be from 50,000 to 100,000 square feet and will sell a wide variety of produce, groceries, staples, stationery, footwear, clothing, consumer durables and other general merchandise.
“Creating a strong backend infrastructure will be one of the critical components in the development of modern retailing in India,” said Rajan Bharti Mittal, managing director of Bharti Enterprises. “This partnership is committed to bringing in world-class processes and technologies in the area of supply chain, logistics and cold chain that will bring immense value to retailers, both big and small, across the country.”
Raj Jain, head of Wal-Mart operations in India, said the venture’s success will be due to its reliance on local suppliers. “We source local products from local suppliers that appeal to local tastes, needs and fashions.”
That is a lesson that Wal-Mart has learned in places like China where, it has had to adapt its model to local demands.