According to an article in the Indian newspaper the The India Times, Bentonville, Arkansas based big box giant Walmart is planning a series of partnerships with small and mid-level suppliers in India to create a significant list of Private Brand products that will be priced 10-15% than national brands – this mimics the pricing strategy of Walmart US while adding a intriguing local sourcing component. The move is part of the company’s strategy to go deeper into the Indian market and create cost-effective and efficient models of local procurement to keep front-end retail prices low, Raj Jain, MD & CEO of Bharti Walmart, has said.
“We will find suppliers, and make it together. There are so many categories where brands are not important, but functionality is,” Jain told TOI, while speaking about the front-end retail strategy of the company, days after the government’s nod to allow foreign retailers in multi-brand retail.
Walmart currently partners Sunil Mittal-led Bharti Enterprises for a wholesale (cash-and-carry) business and has said the Indian company can be a “natural partner” for its front-end retail venture as well.
Manufacturing and sourcing locally is one of the key models that Walmart adopts globally to control costs and this is followed even in its wholesale business. “If I give you a great-value product, you will trust me on that. And what if I give you that at one-third of the price offered by other brands?” Jain said, highlighting the benefits to the end-consumer.
The Private Brands are already being sold in the cash-and-carry outlets ‘Best Price Modern Wholesale Store’ and also at Bharti’s independently-owned stores ‘Easyday’. The global Walmart portfolio of Private Brands is represented by: Great Value, Equate, George, Astitva (ethnic Indian wear), Home Trends, Mainstays, Kid Connection and Athletic Works.
“95% of what we sell is locally produced and sourced. We totally believe in sourcing more from within the country, which is a purely economic model,” Jain said, adding that cost-effective models can be worked out for various types of products. “For example, what if our stores sell you clean drinking water for as low as Rs 2 a liter, provided you carry your own container or water bottle?”
The model will also be very suitable for a large country like India with diverse tastes and needs. In a country where tastes change every 100-200 kms, Walmart’s endeavour will be to source products locally and within a 100-km radius of a store. Also, such a model will save on unnecessary expenses like transportation and plastic costs that a conventional beverage company would incur. “These are the models that we can evolve in India.”
Walmart is in the process of finalizing business plans as it plans to make an application before the Foreign Investment Promotion Board within the next one-and-a-half month. The company is hopeful that its first multi-brand consumer retail store will come up in 16-18 months. “Once we get the approval, we will get cracking.”
Source: The India Times