American retail giant Walmart is learnt to be actively exploring the online space in India. It was in talks with some leading e-commerce companies in India for partnership possibilities, sources close to the development said.
Walmart, however, said the information was “completely speculative”. The world’s largest retail company, with global revenue of $400 billion, is currently trying to strengthen its e-commerce operations in the US and other international markets, sensing competition from online competitors, including Amazon. In recent months, Walmart has been acquiring web-related companies internationally, including in China.
The e-commerce space has turned active in India, with several serious entities in the game. Amazon has also entered but through the aggregator route, by launching jungle.com. Amazon opted for the indirect entry due to the restrictions on foreign direct investment (FDI) in the retail sector.
Explaining why a foreign retailer would be keen to join the online segment here, Saloni Nangia, president of Technopak, a retail consultancy, said e-commerce had very strong business potential here. The factors influencing the growth of e-commerce are dearth of real estate, the average Indian consumer becoming time-deficient, exponential growth in internet connectivity, smart phones and tablets. “As modern retail is still a very small share of the market and India is a growing economy, a multi-channel presence will help build a stronger presence in the market,” she said. The annual retail business in India is pegged at an estimated $500-billion (Rs 25 lakh crore); 0.1 per cent of this is online retail.
The existing foreign investment restrictions in domestic trading would be applicable to e-commerce, too. Such companies would engage only in business to business (B2B) e-commerce and not in retail trading, the policy states. In the brick and mortar segment, the rules permit 100 per cent FDI in cash and carry or wholesale trade. In single-brand retail, too, FDI up to 100 per cent has been allowed, from the 51 per cent earlier, though with several riders. In multi-brand retail, however, FDI is not allowed at all. The Union cabinet had cleared FDI in multi-brand retail last November but then held it back, due to an adverse political reaction.
In India, Walmart has a 50:50 joint venture with Bharti Enterprises for operating cash and carry (wholesale) stores. In 2009, it launched the first cash and carry outlet in India, and now has 17 of these across the country. Walmart and Bharti want to extend the partnership to the front-end multi-brand category once FDI is permitted there. Walmart gets around $1 billion (about Rs 5,000 crore) in annual revenue from its India operations.