Mega Steps by Huge Chains: Rewriting the Rules of Indian Retailing

The formal announcement of a joint venture between the world’s biggest retailer, Wal-Mart Stores, and Bharti Enterprises to set up several hundred retail outlets across India in the next five years, promises to have far reaching consequences for a sector of the economy that has already seen sweeping transformation in the last decade or so. The move follows the recent entry of India’s industrial giant Reliance Industries into the rapidly changing world of Indian retail.

Under the terms of the 50:50 partnership, the stores will be operated by Bharti under a license. Currently, Indian law does not permit foreign shareholders to own a majority stake in retail, except in the case of single brand retailers. Officially, no financial details of the Bharti/Wal-Mart deal have been disclosed, but business analysts have been quoted estimating that the investment could be about $5.6 billion, which is about the same as Reliance plans to invest in its retail venture.

Reliance has announced plans for setting up a nationwide retail chain of hypermarkets, supermarkets, discount stores, department stores, convenience. and specialty stores. Their plan includes mega stores in Mumbai, Delhi, and Ahmedabad, besides luxury stores across the country. By 2010-2011, Reliance Retail outlets are expected to operate in 784 cities in India and in 6,000-plus rural locations. The company is expected to post a turnover of one trillion rupees ($22 billion) and employ over 500,000 Indians directly.

Both these chains are likely to have a direct impact on jewelry retailing. While details of the Bharti/Wal-Mart plans are still unknown, it is likely that as the world’s largest jewelry retailer, which already purchases goods from a number of Indian jewelry manufacturers for its U.S. stores, Wal-Mart will have strong plans for the jewelry sector.

Meanwhile, Reliance has set up a jewelry division within its retail operations, and though details of its plans have yet to be revealed, it is known that the company is in discussions with luxury brands, fashion houses, and jewelers.

The Aditya Birla group, another large industrial house, also has big plans. The group is reported to be launching their own retail chain with 6,000 stores across the country in the next three years at an investment of Rs 150 million ($3.35 million). In addition, with major international chains like Carrefour and Tesco also eyeing the lucrative Indian market, the rules of retailing are clearly being rewritten.