Walmart is attempting to reposition itself and its logistics in the rapidly changing Indian economy. The huge US retailer has focussed on the Indian market as a major opportunity to continue its not always successful geographical diversification. However, it has not done this by focussing on its characteristic ‘big box’ retailing. Rather it has opted, or possibly been forced, to develop wholesale capabilities serving small grocery retailers.
Now this strategy seems to be under pressure. The Indian subsidiary has become heavily loss-making but in addition e-retailers are entering the Indian grocery market. Amazon has embarked on a joint venture in India whilst the Indian businessman Mukesh Ambani has launched a high-profile project called JioMart.
Walmart does have significant assets in this area. It bought the Indian internet retailing business ‘Flipkart’ in 2018 which gives a strong platform and it appears that this this is what it will focus on to build its business, starting a concept called ‘FarmerMart’ designed to sell locally sourced produce. The result is that Walmart needs to shift assets into building a logistics infrastructure to support expansion at Flipkart. In particular it appears that Walmart is on the hunt for major warehouse locations in India appropriate for e-retail, even as it shuts down sites dedicated to its conventional operations.
Retailing in India is complex. Small shop-keepers in India have significant political influence and they have been successful in restraining the entrance of foreign retailers in the country. This influence is now even being felt by e-retailers as politicians criticise low prices that small shop-keepers cannot match. So it is dangerous to make predictions about the future of retailing in India, however it would seem likely that the demand for modern warehousing suitable to support internet retail operations will increase significantly. Companies the size of Walmart and Amazon have the resources to create the infrastructure to do this, although whether they can do this profitably is uncertain. None-the-less the likelihood is that emergence of internet retailing will be another factor in opening up growth opportunities in the logistics sector in India.
Source: Transport Intelligence, January 14, 2020
Author: Thomas Cullen