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Online's share in our revenues is rising: Walmart India CEO Krish Iyer

Krish Iyer, president and CEO of Walmart India, says that businesses in countries like Taiwan, Thailand and Philippines, which have adopted e-commerce in a big way, have clear focus on the bottomline, unlike in India.

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Krish Iyer, president and CEO of Walmart India, says that businesses in countries like Taiwan, Thailand and Philippines, which have adopted e-commerce in a big way, have clear focus on the bottomline, unlike in India.

"Money is being made on every transaction and majority of the companies there are gross margin positive." He talks to Ashish K Tiwari about valuation-game craze in India's e-commerce space and changing retail scenario in India.

How does India fare as compared to other developing nations in the present stressed market conditions?
In my view, the economic adjustments going around the world give businesses in India a brilliant opportunity to lead global growth. That's how people outside India see it and that's precisely how we should be seeing it as well. Being a domestic consumption-driven economy has come very handy for India. Not too much dependence on exports is one of the primary reasons why the economic turmoil and global events haven't had as much impact on India as we have seen in other BRIC countries such as Brazil, Russia and China.

What is your take on the present government's initiatives on making India a manufacturing hub?
While the focus on manufacturing is laudable and important, the future growth for India is going to come from the services sector. This apart, the current focus on 'Make in India' coupled with initiatives like Startup India, Digital India and skill development in small cities are very important. The latest Goldman Sachs report clearly outlines that India can deliver 8% growth over the next five years driven by technology, 300 million new internet users, and the focus on ease of doing business, among others.

Major concerns are being expressed by the corporate world regarding the ease of doing business…
My personal experience over the last one year has been very positive and I have seen very significant focus from governments, both State and Central, in the area of ease of doing business. The efforts being taken perhaps are not visible to all mainly due to the deep-rooted problems of the economy and the system. Give it some more time and the results will get visible to all. Having said that, on the ground level, I can see the willingness and the desire to listen and simplify things from every chief minister across the country. Look at Maharashtra, which has announced a retail trade policy. Similarly, when we approached Telangana government and talked about a 365-day licence, they came out with a notification for the entire industry. So, I think the willingness on the part of Central and State governments in the area of improving the ease of business is very high. I think it is the duty of the industry then to go out and make the best use of the opportunity. And like I said earlier, my personal experience has been very good while dealing with them.

Could it also be because you are representing Walmart in India and have the access and influence that other players do not?
It's not about access but about going and explaining the point of view about how it will benefit the industry by doing certain things. What is happening in Telangana is a great example. By keeping shops open seven days a week, there will be increase in the overall level of employment to the extent of 12% to 15%. This will eventually add to the gross domestic product (GDP) growth. The regulators certainly are listening and taking policy decisions accordingly, thereby benefiting the overall industry.

Given the way things are happening in the Indian retail space, what changes do you anticipate in the brick-n-mortar space for them to be able to compete with the e-commerce players?
I think there are some changes we need to make ourselves. We are only in the cash and carry operations, with 21 stores in the Indian market at present. Looking at the numbers differently in terms of non-store retail and in-store that's happening, and therefore, thinking about the ratios in terms of staff cost and utilities ratio, etc., - that's a step we need to take. I believe we have an opportunity there as a brick-n-mortar / cash and carry operator to become sharper in terms of looking at how we should be operating those stores. This is because a large part of the sales is becoming non-store sales. That's one part of future change in the thinking that needs to come in. The second point is, what is relevant for other countries, is sometimes not relevant for India. For instance, customers in developed countries get a very pleasant shopping experience given the infrastructure there. But that's not true for customers in any of the Indian metros. So, to that extent, whether online or brick-n-mortar will have a greater share in the Indian market is anybody's guess. I am of the view though that online will definitely catch up although physical retail will not get eliminated. While modern retail growth rate is high double digit, most of it is coming from Tier II and Tier III. While the penetration of internet is much faster in the metros, the same trend will catch on in the next five to 10 years in Tier II and Tier III towns. This is something brick-n-mortar retailers need to foresee, and build their organisations / operations accordingly.

How is your cash and carry business progressing in India? Are you on track with plans of having 50 stores by 2020?
We play a crucial role through the cash and carry operations, which in itself is a very big opportunity. Our understanding of the market reveals that 92% of the overall retail trade is traditional. We are in the business of helping promoters of the small and medium enterprises, kirana stores, hotels, restaurants and catering operations save money and earn better margins. As far as our 2020 plans are concerned, we are progressing very well and quite a few properties have been signed already. The overall process of building a large box of 50,000 to 60,000 square feet takes about 30 months. We have clear targets for (opening stores) in the third, fourth and fifth year and I am very confident we will meet our commitment of 50 stores in the next five years.

What's your take on the way e-commerce businesses are making headlines off-late?
E-commerce is a great way of doing business by way of offering variety and convenience to the customers. However, one thing that has hit me in the last year and a half is the whole craze about building valuations while not really looking at the bottomline. I haven't seen such behaviour in other South East Asian markets. While businesses in countries like Taiwan, Thailand and Philippines have adopted e-commerce in a big way, there is a clear focus on the bottomline. So, money is being made on every transaction and majority of the companies there are gross margin positive.

You have a very bullish view on the omni-channel approach.
Omni-channel is all about serving the customer anytime, anywhere through whatever means the customer wants you to serve. And from what I see on the ground, I can tell you that omni-channel will be the key focus hereafter. In fact, the brick-n-mortar players will play a crucial role while continuing to learn from the pure-play e-commerce players and then will be able to drive profitable growth while providing omni-channel experience to the customers. And that to my mind, is the only way to go. Retailers will have to focus on what the customer wants rather than competing with each other.

Offering digital wallet facility to customers is the new hot topic of discussion these days.
Generally, I think it is picking up and my view is that every innovative idea must be given a chance to at least be tried and some of these ideas coming from young entrepreneurs are great ideas. There is traction in some instances as the facility is all about creating a more cashless operation and it also enables access to a lot of data if you start popularising wallets.

Do you also see enough excitement about it in the cash and carry business as well?
We are still working on offering the digital wallet facility to our customers.
 

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