Walmart sticks with India
New restrictions hurt retailer’s $16B bid to sell to nation online.
Inc. and its Indian e-commerce platform Flipkart Group remain committed to doing business in India despite governmental restrictions on foreign companies that took effect this month.
A new mandate to enforce India’s protectionist regulations threw a wrench into plans by Walmart, Amazon and other companies that have invested heavily to expand in India. But Walmart’s leadership vowed to remain in the region.
“Walmart’s and Flipkart’s commitment to India is deep and long-term,” Dirk Vandenberghe, executive vice president at Walmart and regional chief executive officer of its Asian and Canadian operations, said in a recent statement. “Despite the recent changes in regulations, we remain optimistic about the country.”
Vandenberghe said Walmart would keep its focus on “serving customers, creating sustained economic growth and bringing sustainable benefits to the country” — promises the retailer made when negotiating the Flipkart deal. Those promises were an attempt to quell widespread resistance in India to yet another large American company expanding its presence there.
The Bentonville retailer’s $16 billion acquisition last year of a 77 percent stake in Flipkart Group was intended to allow Walmart to sell online directly to India’s burgeoning middle class. However, the restrictions implemented Feb. 1 prohibit foreign retailers from selling products through companies in which they have an equity interest, as Walmart does with Flipkart, or from requiring merchants to sell exclusively on their platform.
So far, Walmart has been mum on how it intends to move forward with its plans in India under the new rules.
Indian business groups say
foreign giants like Walmart, Amazon and Google create unfair competition, wipe out locally owned business and stymie the growth of tech startups.
International retail expert Dave Marcotte said India, like other developing countries, has created a closed economy in an effort to build up its own markets. Every foreign company trying to do business in India has to navigate a complex regulatory system designed to give its homegrown, largely momand-pop, businesses every advantage, he said.
“You have to find some way of working with the government,” said Marcotte, senior vice
president of retail insights for Kantar Consulting.
Marcotte said Indian consumers enjoy shopping online when they have the opportunity. But, he said, “India will almost always default to protecting companies rather than protecting consumers.”
Retailers aren’t the only type of businesses caught up in India’s regulatory snares, he said. “It’s a huge issue, and it will impact other companies” such as Netflix, Facebook and Google, he said.
Marcotte readily admitted he doesn’t know how Walmart and Flipkart are going to proceed, but said both companies are too heavily invested — to the tune of about $20 billion — to walk away.
“Both are going to try to find a means of working in the market so they can align with the changes going on” in India’s Commerce Ministry, he said.
Perhaps hoping to make the most of its investment, Walmart began late last month to offer items from Flipkart’s clothing and housewares brand Myntra on Walmart’s Canadian website. Through this collaboration, “Walmart is able to connect Indian sellers with Indian and South Asian customers living in Canada,” Walmart spokesman Felicia McCranie said in an emailed statement. As for whether the products will be made available in the U.S. or elsewhere, McCranie said only that Walmart “works across its brands and business areas” to find and evaluate new opportunities for collaboration.