Walmart in India

One of the things that I hate the most about traveling around in the US is that the cities and small towns across the country are all so standardized. Sure, some of the larger cities have their own particular characteristics and charms and the scenery varies from state to state, but on the whole America is pretty generic from sea to shining sea.
The main reason for this is the presence of national level retailers and brands that have dominated and practically shut out small scale local competition.From Starbucks, Dunkin' Donuts and Taco Bell to The Gap, Express and Macy's, practically every American city and town (except those in Vermont where large retailers are still shooed away) has the same set of merchants, dealing the same set of wares in its streets and malls.
The marketing processes employed by these retailers are so sharply attuned to the psychology of their consumers that they have persuaded Americans to spend more than practically anyone else on earth, sending their savings rate to an average of less than 1%. For instance, by using Simmons market segmentation data (just to prove that I didn’t sleep through my marketing classes), we can quickly find that suburban New England housewives are big buyers of sports utility vehicles and also that they read a lot of travel magazines and that they aspire towards higher social standing. To exploit this knowledge, retailers advertise their SUVs heavily in travel magazines in New England with ads that feature well coiffed women. Successful sales are practically guaranteed.
The high degree of consumerism that results is what keeps the American economy running, resilient to the vagaries of the market and to international pressures. Consumer spending is what pulled the country out of its last financial downturn and it has never flagged since.
While Macy's and Sears cater to the cities, no American small town would be complete without a Wal-Mart in driving distance, peddling the same array of cheap shiny Chinese products across it's six thousand stores. By purchasing $15 billion-worth of goods from China every year Wal-Mart has helped erode America's manufacturing base for consumer goods, while at the same time given poorer US consumers access to a host of products they could otherwise never afford. The company also employees 1.3 million Americans in low-paying, but readily available jobs.
Wal-Mart is now poised to expand its retail operations to India, a country with a rising middle class and increasing spending power. The move comes on the heels of Walmart's expansion into China. Wal-Mart operates 43 Supercenters in China and has two distribution centers supplying them. From just over 200 employees a decade ago, Wal-Mart has grown to 26,000 in 2005 and expects to have 40,000 employees in China (20% of whom have college degrees, unlike their US counterparts) by the end of 2006.
India's slow deregulation process currently does not allow for international retailers to set up base in the country, but this seems about to change. The country's complex foreign direct investment (FDI) regulations, which currently bar international retailers from directly entering the Indian market are slowly being relaxed, now allowing "single-brand" retailers such as Nike or Toyota to own 51 percent of their business operations in India and will probably soon also allow Wal-Mart like retailers that sell a variety of brands in their stores to operate within the country.
Local opposition is already forming to inhibit the entry of large scale foreign retailers into India, with many of the country's opponents to free markets prematurely bemoaning the end of India's small scale retailers. The fear is that Wal-Mart with its state-of-the-art supply chain, globally sourced products and heavily reduced prices will push the little village corner-shop retailers out of business.
I believe that we should welcome Wal-Mart, Sears and any other interested retailer into our country with open arms. For too long rural and small town Indians have limited their purchases to the weekly groceries and the occasional new garment for the festivals. Indians save 15% of their incomes and we do not keep our capital working.
Another problem in India is that our current agrarian economy is not operating to the best of its potential and needs to be tuned up as well as supplemented by a competent consumer economy.
When rural Indians have access to a wide variety of low cost goods - bright plastic mugs, hairclips, towels, cheap electronics, toys and other trinkets I predict that we will see a retail revolution the likes of which the world has never seen. Shrewd Western style marketing, targeting rural Indians, will help kick start consumerism outside the cities. In addition Indians already possess a naturally high degree of social competition and if Americans are constantly trying to keep up with the Joneses, then we're trying to keep up with the Joshis. In short, consumerism will breed more consumerism in rural India and this will be the last nail to be pulled out of socialist India's coffin as the country jolts back to life.
High rural demand will create a strain on supply and small Indian manufacturers will ramp up production to keep pace. Employment rates will rise as retail and manufacturing jobs are created and Western style production efficiencies will be put in place to keep prices competitive. This technology will soon spill over from manufacturing to help improve the country's vast agriculture economy that currently has wastage levels of 25 - 40% because of low quality supply chains and bad inventory management. This will reduce the cost of food and further increase the quality of life in rural and small town India.
The only drawback that I can foresee is that Indians will stop saving as much as they do and borrow more to maintain their new lifestyles. Is this a bad thing? I don't think so; not as long as we continue to produce at high levels and maintain a decent trade deficit. Wal-Mart and other large international retailers have already said that India is one of their fastest growing sourcing destinations for low cost manufacturing, so I don't see rampant rural consumerism in India resulting in huge deficits to China.
Some may point out that rural India could become a boring landscape full of generic low-price retailers. I don't think that's as bad as it sounds. It's selfish to want rural India to remain unchanged at the expense of rural Indians. A Wal-Mart near every Indian village and small town may sound unattractive, but try telling that to the local farmer's wife as she shops for a shiny new handbag.
I think its about time that Indians started enjoying their money instead of saving it up for lavish weddings and unwearable jewelery for their children.