Why the Wal-Mart model eludes Indian firms

BANGALORE: Repeating the feat of Wal-Mart reaching the top slot in the Fortune 500 list of companies, a first for a retailer, is a long, long way off for Indian retailers who are still swaddled in their diapered infancy. But how exactly does Wal-Mart work and what are the stumbling blocks in the path of Indian retail?
Wal-Mart follows a strategy called everyday low prices wherein the supplier gets value by operating as a large, nearly omnipresent channel for sales of goods and they get rapid feedback on unit sales and localised demand.
Customers get value because of the aggregation of a wide variety of quality goods in a single location at the lowest possible price. "Wal-Mart is the giant of discount retailing," says H.S. Kohli, CEO, Ebony Retail Holdings. It works on a low-price-high-volumes model where technology is used to give customers maximum value for money.
Retail industry experts believe this is not possible in India because ther are only a small number of suppliers who cater to the organised retail sector. It is well-known that in the US, giants like Wal-Mart have more say in deciding how goods of manufacturing companies are to be displayed and are not at the manufacturer''s mercy.
In India, it is clearly the reverse. Also, Indian retailers do not have large enough volumes to leverage with suppliers and with this low retailer bargaining power, margins are less and products cannot be sold at discounted prices.
The biggest problems facing the retail industry in India are that it has not been given real industry status and archaic real estate laws which have made access to prime real estate difficult. FDI not being allowed in the sector is, of course, one of the biggest grouses, standing out like a sore thumb amidst the high cost of initial finance from banks and FIs, and a plethora of central and state levies.
Another complaint is that stores are forced by regulations to shut early and are not allowed to extend shopping hours till midnight. Here too, states have different laws. "While Lifestyle in Chennai is open till 10 pm, in Bangalore, 8.30 pm is shop shutting time," rues V. Muralidharan, V-P (Operations), India, Lifestyle International.
There is a dearth of trained personnel too. Kohli says general business management institutes should have advanced retail courses. "The retail industry can also be linked with tourism, since this tie-up has huge potential," he adds.