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No More Wal-Mart's Food-only Stores For India As Yet. Read Why

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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

The American Multinational Retail Corporation – Wal-mart has given up plans to set up food only outlets in India. There have been several reasons pertaining to this decision of the corporation.

As per industry sources, there are plenty of global players which are keen to enter India because of the retail market accounting to $600 billion out of which 60 per cent is food. According to Union Cabinet Minister of Food Processing, Harsimrat Kaur Badal "Wal-Mart India has had a complicated pathway ever since its inception in 2009". 

We tell you 5 reasons why Wal-Mart is not ready for an entry into the food stores business in India as of now. 

1.) Wafer-Thin Margins 

According to government data, with the addition of 32 lakh capacity of cold storage created with an investment of Rs 9,000 crore India has managed to reduce wastage by 10 per cent per annum.The government has denied retailers to sell non-food items such as shampoos and soaps and this is leading to make food only ventures miserable. Retailers said that operating only food stores does not make business sense at all as it does not promise heavy margins.

2.) Not Quick To Jump – 

Wal-mart is evaluating all the policy ground rules before taking a forward step. The Government of India has permitted 100 per cent Foreign Direct Investment (FDI) in retailing food produced or manufactured in India.Wal-mart officials have remarked this move of the government as progressive but will study the policies in detail before initiating a further move. As per the media sources, "The Wal-Mart headquarters do not want to suffer by taking an impulsive decision" said Rajneesh Kumar, senior vice-president and head of corporate affairs, Wal-mart India.

3.) A Bumpy Ride Since Inception –

As per the experts, Wal-mart India’s CEO Krish Iyer said, “We need to conceptualize, evaluate and come up with the model that takes time. For Wal-mart India, food retail in the cash and carry business accounts for more than 65 per cent of businesses.” Wal-mart India had a corrugated ride since its very arrival in India in 2009. The anti-bribery compliance program led to a major part of its stagnant expansion growth in India. The consequences led to its split with its wholesale retailer partner “Bharti Enterprises” in October 2013. 

4.) FDI Has A Major Role To Play - 

India has allowed international retailers to sell multi-brand food products on both domestic and online platforms as long as they are manufactured in-house (in India). However, the policy refuses to allow to stock general commodities such as soaps, shampoos, and non-food products. On government’s move to open the doors of food retail to investment, Krish Iyer later went on a record to say, “All the stakeholders including retailers, consumers, and farmers will benefit from it, and it will also increase access to capital, which will promote retail enterprise”.

5.) Opposition From The State - 

Commerce and Industry Minister, Nirmala Sitharaman has publicly opposed allowing international super-markets to sell non-food items across India. To make India a manufacturing hub, the government is strict with it policies and regulations.   

Edition: December 2016

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