After a troublesome offline retail stint with Bharti Enterprises which ended last year, US retail giant Walmart is looking to set up an e-commerce marketplace in India, reports The Economic Times citing sources familiar with the company’s plans.
It says Walmart has setup a team of more than 15 people headed by Walmart India COO Arvind Mediratta and the marketplace is expected to go live in the next three to four months.
What’s interesting here is that in an emailed statement to ET, the Walmart India spokesperson requests the Indian government to allow foreign investments in e-commerce, indicating that the company might have plans for direct retail and will probably adopt a hybrid marketplace model later. Walmart has however declined to confirm this development to the publication. Update: Walmart has shared the following boilerplate response with Medianama:
We do not comment on rumors or speculation. Walmart is committed to India and the market. We are pleased with our established and successful cash and carry business and plan to grow that business. We continue to study the feasibility of the FDI policy and remain steadfast in our belief in the important value Walmart brings to India, including social and environmental benefits. We would like to serve our customers in ways that can help them save money and live better. Our experiences worldwide support the fact that eCommerce is an important and growing area that meets our customers shopping needs. Toward this, we encourage the Government of India to consider opening ecommerce for FDI
Remember that Walmart’s competitor Amazon India which opened its India marketplace in June last year, has also been continuously engaging with the Indian government to relax the regulations against foreign e-commerce companies and allow foreign direct investment in online retail. Amazon director and general manager (seller services) Amit Deshpande told PTI in November 2013 that they have been engaging with the government to relax FDI norms in e-commerce space, which will allow them to adopt a US-like hybrid model wherein Amazon will start retailing products along with the existing marketplace. Amazon marketplace accounts for only 40% of their business in the US.
Amazon’s global vice president Paul Misener had also met with Anand Sharma in February 2013 and again in July 2013 to discuss this issue and it has been lobbying with the US government to seek their support for pushing foreign direct investment in India among other issues.
Following ambiguity in the Indian Government’s stance on FDI in e-commerce, the Department of Industrial Policy and Promotion (DIPP) had floated a discussion paper on e-commerce in India in January 2013, in which it had mentioned that several MNCs, industry bodies and an international council have made a case for allowing FDI in B2C e-commerce while a national body of traders had strongly opposed this move. (Read: Medianama’s submission on FDI in E-commerce sent to the central government)
Walmart-Bharti JV: Last October, Walmart and Bharti Enterprises had called off its seven year old joint venture of wholesale stores business, after allegations of FDI violations and bribery charges which led to the suspension of several Bharti Walmart executives. Following this, Walmart had acquired Bharti’s 50% stake in its joint venture of wholesale stores.
Earlier in January, Walmart had setup a new company called Wal-Mart India Private Ltd and was apparently looking for an Indian partner.
Remember that the Government had approved a 51% FDI in multi-brand retail in September 2012, although it came with a rider that at least 30% of the goods sold have to be sourced from local partners. Earlier in January, Walmart had asked the government to reduce the local sourcing norm to 15% saying it cannot meet the mandatory 30% norm but the Department of Industrial Policy and Promotion had apparently dismissed this appeal.
With FDI banned in direct-to-consumer online retail model, the company has probably therefore chosen to open up an e-commerce marketplace where foreign investments are currently allowed in the country. However, Walmart will be entering a heavily competitive market in India which includes players like Amazon India, Naspers-backed Flipkart and eBay-backed Snapdeal.