Wal-Mart Looking To Ramp Up Sourcing From India
Apr 14 2010
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Wal-Mart Stores Inc. is looking to export products worth "hundreds of millions of dollars" from India as the world's largest retailer wants to make the country a major sourcing hub, the chief executive of its Asian operations said Tuesday. Scott Price, however, didn't provide any specific export targets, saying it is still "early days."

Price was in the northern Indian city of Chandigarh for the opening of the second wholesale store of Bharti Wal-Mart Pvt. Ltd., the U.S. company's joint venture with Bharti Enterprises Ltd. India is an important country for the retailer--for sourcing materials due to cost advantages and because of the growth potential it offers when the markets in the developed world, including at home, are saturated. Only a small portion of India's retail market is organized at present, leaving huge space for expansion.

But, the law governing India's retail sector is a hindrance. The country allows multi-brand retailers such as Wal-Mart to operate only wholesale outlets and provide back-end support to local operators. Single-brand retailers, however, can make up to 51% foreign direct investment in their ventures. Price said he hoped the Indian government would allow foreign direct investment, or FDI, in multi-brand retail soon.

"There is an increasing realization in the government that more investment in retail will help," he said. "We are very hopeful that the government is considering and understanding the need to open FDI in retail."

Raj Jain, managing director and chief executive of Bharti Wal-Mart, said the companies "will like to be equal partners" if India relaxes rules and allows Wal-Mart to invest in Bharti Retail, which caters to retail customers.

Bharti Wal-Mart has exported products--mostly textiles--worth about $125 million from Punjab since the company opened its first wholesale store in the northern Indian province's Amritsar city in May last year. Jain said it may look at exporting agricultural products going forward. The company has arrangements with local farmers to directly source products and Jain said about 20%-25% of the fresh farm products sold at its store is sourced directly.

"If our direct-farming program works well, and the farmers are able to bring up the quality to international standards, we should be looking at (exporting) agri products in addition to household products," Jain said.

He said the company may opt for contract farming once the level of trust with the farming community improved. The company's commitment to the farmers is that it will pay them a price which is based on quality and is 7%-10% higher than that day's open-market wholesale price, he added.

Source: Dow Jones Newswires,13 April 2010