The big-box store has come to India, and retail will never be the same

JASON KIRBY (Maclean's)

Anupam Mukerji, a technology consultant in the teeming Indian city of Mumbai, can see the country's shifting retail landscape right from his balcony. For years, two roadside mom-and-pop shops catered to a steady flow of local shoppers. Whenever Mukerji, 30, found himself short of staples like soap, bread or smokes, he'd just phone them up and the shops would hand-deliver the goods. Then a sleek new mall opened up nearby and began to lure customers away. A few months ago, one of the small store owners sold to the other, who combined the properties and modernized the business. "Indians are traditionally relationship-oriented, so when someone has been buying from a mom-and-pop shop for 25 years, he becomes more of a friend," says Mukerji. "But in Mumbai, I have seen the malls are slowly eating up the smaller stores."

 

Now the biggest fish of all is set to hit India. This week, Wal-Mart struck a deal with an Indian company to roll out hundreds of big-box stores across the country. Local firms have already unveiled plans to copy the behemoth from Bentonville's business model of efficient supply chains and low prices. Earlier this month, Reliance Industries, a major petrochemical company, threw open the doors on 11 Reliance Fresh supermarkets in the bustling southern city of Hyderabad, the first of more than 4,000 stores it aims to open across the country in the next four years. Reliance chairman Mukesh Ambani has vowed to make the chain a "Wal-Mart in India."

For Wal-Mart, the Indian retail market represents a potential bonanza, a market expected to more than double in size to US$636 billion by 2015, according to Arvind Singhal, chairman of Technopak, a New Delhi-based retail consultancy. But Wal-Mart has faced problems beyond America's borders. After a string of poor results in Germany and South Korea, Wal-Mart pulled out of those countries earlier this year. In India, the company has had to compromise just to gain a foothold in the heavily regulated retail sector, which employs some 54 million people through roughly 12 million small shops. The company formed a joint venture with Bharti Enterprises Ltd., controlled by billionaire Sunil Bharti Mittal. Bharti will own 51 per cent of the new business. "We plan to roll out as many stores as we can in the next few years," Mittal told reporters in New Delhi. "The investment will be large."

With thousands of big name stores on the horizon, tiny retailers fear they'll be squeezed out of business. Thousands of merchants in New Delhi already face closure. India's Supreme Court has ordered the city to dismantle 40,000 illegal shops on residential roads. Shopkeepers staged a strike in October, during which four people were killed in clashes with police. This month, 5,000 merchants held another three-day strike and smashed police barricades.

But the fact is, India's retail sector is changing in spite of the anger. Many of the mom-and-pop shops will be forced to adapt as customers seek the quality and convenience of larger stores. And there are no guarantees of success, not even for Wal-Mart. "I'm already a Reliance fan," says one early customer, Amrit Dugar, a wedding planner who lives closer to another market but says he will come to Reliance Fresh, because he "can buy everything under one roof."