Wal-Mart to go for smaller stores in India

My colleague Nupur Anand is the lead writer of this story appearing in DNA Money edition on Wednesday, October 10, 2012.

Wal-Mart, world’s largest retailer, is likely to tweak its global strategy of setting up huge retail spaces and may go for smaller stores in India, experts said.

Considering the unwillingness of Indian consumers to travel to far-flung areas for shopping, the retailer will have to set up stores within a city, for which huge spaces may not be available or come at huge costs, they said.

“The concept of hypermarkets spread across a huge space may not work in India as the retailer would want to stay closer to the customers. In this scenario, tapping an existing catchment area means there will be no space to set up such huge stores. As a result, retailers are likely to go for small format stores in India, “said Harminder Sahni of Wazir Advisors, a consultancy.

Wal-Mart is known for its hypermarkets, which are generally located on the outskirts of cities and are spread over an area of 100,000 to 260,000 sq ft.

Wal-Mart has a toehold in India through its joint venture with Bharti that runs 17 cash-and-carry stores. Though an announcement for the retail business between the two companies is yet to come, Wal-Mart calls Bharti its “natural partner”.

Experts said under the deal, the stores run by Bharti may come under Wal-Mart’s fold. Currently, Bharti runs over 200 Easyday stores that are spread over a retail space of 3000-25,000 sq ft.

Analysts said Wal-Mart, too, will stick to a similar area and go for a maximum of 50,000 sq ft.
Given the space limitation, the company is likely to tap shopping centres and malls for setting up stores.

Experts said Wal-Mart will take a cue from Easyday and open stores in different formats. Easyday is present in easyday, easyday Market and easyday Hyper categories.

This will not be the first time Wal-Mart would ditch the big box store format. In Mexico, the average size of the Wal-Mart stores is about 5,000 sq ft.

Pushpa Bector, senior vice-president, leasing and mall management, DLF Mall of India said most retailers are now looking for more compact space.

“Hypermarkets that were earlier looking at 100,000 to 150,000 square feet of retail real estate have rationalised their requirements. The number is now down to 55,000 to 60,000 sq ft, which appears to be a more viable approach to business,” said Bector.

Devangshu Dutta of Third Eyesight retail said going forward the company may test the water with a big-box stores.

This means that Indian shoppers would not see much of hypermarket format stores soon.

While a supermarket stocks mainly food and daily use items, hypermarkets sell apparel, electronic, furniture, etc, and have amenities such as fuel stations, eating outlets and pharmacies.

Given the space constraint, the Indian consumers at best will get advanced supermarkets.

The company may also extend this strategy to product mix, focusing on goods that meet the demand of Indian consumers.

Dutta of Third Eyesight said for every company to succeed, it is important that the products are adapted to the local taste.

“It may not be a surprise, considering that Wal-Mart has burnt its fingers in other markets. For instance, both in Mexico and Brazil it took time for the retailer to get the right product mix.”

Experts said Wal-Mart was able to secure number one position in both the countries only after sufficiently localising the product offerings.