Sunday, April 01, 2007

Walmart Comes to India

Five hundred years or so after the British East India Company came by to India and dropped anchor for a good four hundred years, another global Goliath, Walmart is deciding to set sail for India - to sell extremely inexpensive goods to India's more-than-a-billion Davids, sourced presumably from China and India. This article is an attempt at prognostication: it will try to put a human face to lives ruined by this capitalist foray.

Turn front the clock six years (in the spirit of turning back the clock). The year is 2013. Walmart has completed its foray into India - having set up in excess of four hundred stores - almost at least one per each and every economically significant community in India.

The Singhs

Mr. Balbir Singh Jr. was a eleven year old child in Luknow. His father (Balbir Singh Sr.) was what was called a "procurer - seller", and individual who would buy foodgrains from farmers for Rs 0.50 per kilo and sell them to retailers in the same town for Rs. 4 per kilo. The grain would be brought to a government constructed godown by the farmers on their trusty bullock carts, and would be picked up by truckers operating on behalf of city-based
kirana stores from the same godown. Balbir Singh Sr. would pocket this Rs. 3.50 per kilo as profit and educate Balbir Singh Jr. in an expensive English Medium School. Mr. Singh Sr. was what academicians considered "a middle man". He was so much a middle man that if middle men ever formed a political party, it would be quite probable that Mr. Sing Sr. would be their poster man. The party would probably be called CPI (M), with the "M" standing for Middlemen.

Mr. Singh's business model was quite robust. He was exploiting the illiteracy of his suppliers by paying them only Rs. 0.50 per kilo. And by paying them only Rs 0.50 per kilo, he would ensure that none of their children could ever afford to go to school. So, they would never learn how they were being ripped off.

Yet Walmart put a big question mark on Mr. Singh Jr's future and Mr. Singh Sr.'s livelihood. Here's how.

  • Walmart was cheap: Much cheaper than local Kirana stores. Despite the fact that the shops were 30km away, the villagers sent their wives to Walmart to buy food every week. They would go walking and come back walking with a cardboard carton on their heads - just like they carried water from the well 40km away on other days. They started doing this as soon as Walmart opened. On looking at their Walmart bill, they realized that they saved Rs. 50 ($1.10) on average every month. They used this to educate their children in the local school. And somewhere in 2011, their children realized that Mr. Singh was ripping them off.
  • Walmart Started Buying Direct: An enterprising walmart manager, in 2009, realized that they could buy the groceries directly from farmers. This was a breakthrough as they paid the farmers Rs. 3 per kilo of rice (and sold it at Rs. 3.50 per kilo). Soon, word started to spread that the farmers were getting a good deal from Walmart. More started to sell to walmart.
  • The great middle man strike: Some idiot in the local faction of the CPI came up with the brainwave of crippling the society by making the middle men go on strike to protest the "unfair business practices" adopted by Walmart. Needless to say, society flourished like never before. This was the end of the middle men.
The Venkataappans

When
little Liela Venkataappan was asked what her father did for a life, she would stand embarassed for a little while, and then say what she was taught to say: her father was a "political operator." And that, of course was a euphemism for "goonda". Her father was one of Tal Bhakeray's minions in Mumbai. He had taken pride in digging up the pitch in the match against Pakistan in Mumbai long ago - as a matter of fact, he held that as the pinnacle of his career. He was also instrumental in burning theaters that screened Mira Nair's movie about lesbianism, "fire". (We will let the fact that he was in actuality a closet homosexual be for now.)

When Tal Bhakeray learned that Walmart was giving the middle men (one of his most important constituencies) a tough time, he decided to end Walmart. So, he sent Mr. Venkatappan to a walmart with an army of people to create entropy. After Venkatappan went to Walmart to strart wrecking the asiles, be came to the television asile. There, he saw a 29" flat screen color T.V for Rs. 2500. ($60)

He bought it. This great deal ensured that he did not have the heart to destroy walmart. He called off the attack. This enraged Tal, and Venkatappan was fired. And Ms. Leila's future was in the same trouble that Mr. Singh Jr's was.

Mr. Robson Walton

Mr. Walton was Mr. Walton's son, the latter being the founder of Wat-Mart. He had had high hopes for India. A billion customers made his mouth drool and his eyes open wide in 2007. So, he set up more than 400 stores in India, just like he would have set up in the U.S.

He set them up with massive parking lots in sub-urban areas.

Any Indian would tell you that this was a recipe for disaster. Not many people have cars in India. They have scooters and cycles and they use public transport. His business model was benefiting only 5% of the population. This kept the registers ringing, profits were modest - but not astronomical. The poorest of the poor would seldom use Wal-mart, save the odd woman from a nearby village who would carry the food back at home in a cardboard carton.

These were not happy days for Mr. Walton. He saw his business margins decrease over time, when other Indian retailers started delivering goods for "free" at home. Mr Walton had reformed retail in India - but had not got a big slice of the initial pie. Much like Kelloggs revolutionized corn-flakes in India - pushing up drastically the sales of their competitors by their advertising. Mr. Waton got together a team to do some further brainstorming. He had some serious food for thought.




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