Worried that Walmart’s $16 billion deal to takeover India’s biggest e-commerce company will force millions of mom and pop stores out of business, hundreds of shop owners in several cities have led protests against the U.S. retail giant.
India’s fast-growing retail trade is dominated by millions of small traders that have long opposed efforts by Walmart to establish its stores in the country. Now they are concerned its entry in the online market will drive down prices, making them uncompetitive, and are demanding the government block the deal.
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Raising slogans such as “Walmart Go Back” at a sit-in protest Monday in New Delhi, Praveen Khandelwal, the secretary general of the Confederation of All India Traders expressed fears that “Walmart will dump globally sourced material in India and ultimately the level playing field will be vitiated.” He says they fear practices like “deep discounting and predatory pricing” by large chains with deep pockets will “kill the competition.”
Although Walmart has eyed India’s retail market for more than a decade, its efforts to make inroads have been hampered by tough regulations for overseas retailers in opening brick and mortar stores. The regulations are meant to protect the livelihood of 15 million small store owners.
Flipkart Deal
But Walmart’s deal with Indian e-commerce retailer Flipkart, which sells goods ranging from soaps to appliances, clothes and accessories, will allow it to access Indian consumers through the online route and establish a foothold in a fast growing market. In the past five years, millions in India have begun logging onto websites to shop and the e-commerce market is expected to grow exponentially during the next decade. Flipkart has approximately 100 million users.
In a statement, Walmart said it has been supporting local manufacturing in India by sourcing from small and medium suppliers, farmers and businesses run by women. “Our partnership with Flipkart will provide thousands of local suppliers and manufacturers access to consumers through the marketplace model,” Rajneesh Kumar, senior vice president, Walmart India, stated.
But that has failed to reassure Indian shopkeepers and traders. Ajay Bajaj, of Bajaj Vacco in New Delhi, has been selling household appliances for more than five decades and sells his goods through online companies like Flipkart. He is not opposed to e-commerce, but he says he worries Walmart will make his business unviable as it procures cheaper goods from countries like China.
“Our apprehension is only that instead of me or my colleagues who are producing in India, if foreigners were to come here and make produce [goods] elsewhere and then sell here, first of all we will be out, because it will certainly be survival of the fittest and also the money game,” says Bajaj.
$700 billion market
But retail analysts dismiss worries that cheaper goods sourced from outside India would be a threat to small shop owners.
Ankur Bisen of retail consultancy, Technopak, points out that such products already flood the Indian market and are sold in thousands small stores across the country. “You are getting containers of Diwali lighting, containers of idols, of cheap stationery in India, why are you not stopping that?” he questions. “Same mom and pop stores are selling Chinese goods, they are selling imported goods.”
The protests against Walmart this week were however much smaller than those witnessed about a decade ago when traders feared the U.S. retailer would be allowed to open stores.
India’s retail market is worth about $700 billion. “It’s a growing space, it’s a profitable space,” says Bisen pointing out there is ample space for big and small retailers.
But traders continue to be suspicious, pointing out that Walmart has traditionally been a brick and mortar retailer. “Walmart is an off-liner, why Walmart is coming through e-commerce? Naturally there is a hidden agenda to control the vibrant retail trade of the country,” says Khandelwal.
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