Local kirana stores: Walmart's unlikely friends in India

Representative Image

Walmart competed with mom and pop stores in the US for years and put them out of business as it grew. However, with a change of landscape, comes a change in strategy. For its business in India, the retail giant has found unlikely friends in these local stores as it attempts to succeed in the huge consumer market of the country.

The Indian government was reluctant to open its markets to foreign entities, fearing its impact on the business of over 12 million neighbourhood businesses that control 90 percent of the retail sales in India. Therefore, Walmart has devised a plan to double its retail chain in India by supplying the local stores instead of competing with them.

"Our single biggest agenda is: How can they become loyal to us?" Krish Iyer, CEO of Walmart's India unit, told Bloomberg. "The expansion phase will continue because the opportunity in India is huge," he said.

Relentless efforts

Walmart started its wholesale business in India in 2009 since it was not allowed to open retail stores in India due to government regulations. It recently acquired a majority stake in homegrown e-commerce company Flipkart for $16 billion. To its dismay, the government unveiled new regulations in the e-commerce sector to protect small businesses in the country.

The company faces tough competition from Reliance Retail and Amazon. The retail industry of India is one of the fastest growing in the world. It is expected to be valued at $1,200 billion by 2021 from $672 billion in 2017, according to a report by India Brand Equity Foundation.

Amazon is also working hard to get local kirana stores on board to expand its network beyond tier I and II cities. The Jeff Bezos-led giant aims to arm small shopkeepers with smartphones to place orders of goods for local residents. They would also be delivering the products.

It is unclear how much Walmart intends to invest in this. But, Iyer said the company is planning to set up 26 more Best Price wholesale stores by 2023. Each location would cost between $8-10 million.

According to him, there is no integration planned with Flipkart. The e-commerce entity has a separate board while Walmart India is a wholly owned subsidiary of the US company.