Bharti Enterprises and Wal-Mart Stores Inc on Monday announced the much-awaited, equal joint venture for cash-and-carry wholesale retail in India.
NEW DELHI: Bharti Enterprises and Wal-Mart Stores Inc on Monday announced the much-awaited, equal joint venture for cash-and-carry wholesale retail in India.
The JV company, Bharti Wal-Mart Pvt Ltd, would set up 10-15 stores in tier-II and tier-III towns over the next seven years, and cater to B2B customers such as other retailers, hoteliers, push-cart vendors etc.
While this JV marks the entry of the Giant of Bentonville through the wholesale route — which is a first anywhere in the world for Wal-Mart — a lot of things still remain unclear about the future of Wal-Mart in India.
To begin with, the two have divergent views on whether their partnership would continue in case the government allows foreign direct investment (FDI) into front-end retail.
In this event, Wal-Mart should, ideally, have the option of coming to the front-end on its own, and it has said so clearly.
To a question whether the two companies would extend this partnership to the front-end in such a scenario, Bharti Enterprises managing director Rajan Mittal said: “Each of us should be the natural choice for the other”.
His brother and Bharti Enterprises chairman Sunil Mittal had earlier told DNA Money that “Wal-Mart will be brought to the front-end in partnership with us… Why have they partnered us for the back-end business otherwise?”
But Raj Jain, country president for Wal-Mart’s India operations, does not appear to share this view.
“Right now, we are concentrating on the JV. What happens in the future, how much FDI is opened and who partners whom is all in the realm of speculation,” he said.
Not only the 50:50 wholesale JV, the two companies have also signed a technical collaboration agreement, which enables Bharti to access Wal-Mart’s global experience in the retail space.
When asked whether this pact is exclusive to Bharti, Jain said Wal-Mart was “open” to providing technical know-how to other retailers as well.
However, Mittal said “this is not how it works generally.”
There is a dichotomy even in the timing for the wholesale and front-end operations. While the first wholesale store would open only by the end of next year, the first front-end store would open much earlier - by the first quarter of 2008.
So, is the back-end support for Bharti Retail’s front-end business critical or incidental?
Differences on key issues apart, the two partners also appeared hesitant to share key details of the wholesale JV. Queries on the proposed investment, projected turnover and manpower requirements elicited no response.
Jain merely said that the JV proposes to set up between 10-15 stores over the next seven years across tier-II and tier-III towns.
The cash-and-carry stores would service all B2B customers - other retailers, kirana stores, push-cart vendors, hotels etc.
On whether Bharti, as a 50% partner in JV, would get preferential pricing for buying merchandise from wholesale stores once its front-end business commences operations, he said pricing would be uniform for all customers.
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