Date of publication: March 20, 2006
Source: Reuters
Reuters correspondent Emily Kaiser is in Asia, reporting on U.S. retailers operating in the region. Here are her impressions on the prospects for big retailers in India:
Sitting in a Mumbai taxi as the driver angrily honks at an endless stream of trucks, buses, cars, pushcarts, pedestrians and cows, it's hard to imagine how foreign retailers could operate here. Then you hear about customers causing traffic jams as they flock to clearance sales and it becomes obvious why Wal-Mart and others are fighting so hard to open stores in India.
The new shopping malls popping up on the outskirts of Delhi and other major cities sell Benetton clothing, Nike sneakers and Nokia phones. Western music plays over the loudspeakers. It's easy to forget that this is a developing country -- until the power goes out and the escalators stop with a jerk. Customers just walk up and continue their shopping. A few minutes later, the lights come back on.
Analysts in India say foreign retailers will bring much-need investment and expertise to a fast-growing retail segment that needs to solve critical infrastructure problems. In a country where millions go to bed hungry, some 40 percent of farm produce spoils before reaching consumers. That may be the most compelling argument for allowing Wal-Mart to come in. Supply chain is Wal-Mart's greatest strength.
The opposition raises a strong case for keeping Wal-Mart out. Will foreign retailers really be able to create enough jobs to make up for the stores that will inevitably close? An efficient supply chain means cutting out the six or seven intermediaries. What happens to them? And how will the arrival of superstores affect a community built around a central market?
The wild card is exports. In China, for example, Wal-Mart turned local suppliers into global export partners, bringing massive amounts of money and new jobs. They hope to do the same in India. Wal-Mart already exports about $1.8 billion to $2.0 billion a year from India and sees room for growth in key categories such as textiles and jewelry.
The side effect of ramping up exports is criticism back home. Many Americans blame Wal-Mart for widening the trade gap with its $18 billion a year in Chinese imports. Would a "Made in India" label draw any less criticism?