When Sam Walton opened his first store all those years ago, he had the luxury of being a pioneer and could afford to experiment, make mistakes and perfect the model — without being under the public glare. However, the first store of Bharti Wal- Mart cannot afford this luxury. Apart from being in retail, it is a joint venture with a leading Indian and US corporate. Its every move will be watched and commented upon, second-guessed and debated.
A couple of thoughts came to my mind while reading about the opening of the first store.
First is the name, Best Price Modern Wholesale (BPMW). Phew! That’s quite a mouthful I wonder at the logic behind such a long name that defies most branding principles. Unless the expectation of FDI being allowed in the venture has prompted an interim name which can be changed without much impact on the consumer’s psyche. Even though this is a cash-and-carry with a dedicated B2B customer base, the name does play a role and as of now, it is purely functional and more like a statement. Maybe considerations of a future dispute over the brand name prompted this call? I can only speculate.
Next is the core of any retail enterprise – the sourcing and supply chain. India’s enormous geographical spread makes this a daunting task at best. The existing system of wholesale markets offers an easy and cost-effective alternative to direct sourcing, especially in the grocery and fresh categories. Wal-Mart already has sourcing machinery in India, but that is more for non-food merchandise. The game changer would be to establish a true farm-to-fork chain. Sounds nice on paper — easier said than done.
Grassroots-level sourcing initiatives would be a competitive advantage as long as they are done for grocery, fruits, vegetables, meat and fish. If this is limited to the branded products and the non-food that is already being sourced by their global sourcing team, the stores would be just another addition to the retail landscape.
This is typically a chicken-and-egg story. Does a chain first build enough stores to amortise the cost of an elaborate sourcing and supply chain mechanism, or vice versa? The temptation to build stores first is obvious. Revenue flows in from day one. I recently read a news article about how retailers shun direct procurement. I can understand this temptation from the perspective of managing the OPEX. However, this is not what retail is all about and I have written an extensive piece about this on my blog.
I assume that the revised roll-out of stores within a shorter time frame is to leverage their efforts at a comprehensive and grassroots-level sourcing mechanism. However, the proposed $100-million investment seems to be more towards setting up stores, assuming an average set-up cost of $5 million per store. So, where is the money for backward integration?
Next is the issue of India and its peculiarities. It is a unique country and cannot be treated with a cookie-cutter approach. I remember the first hypermarket of a foreign operator that opened in Mumbai. They had an entire run of paints with various shades and pack sizes, no doubt based on their international experience with DIY customers. Did the chain have Indian managers? Of course! Were their inputs taken about Indian consuming habits? Very doubtful. Integrating international best practices with Indian peculiarities is a must-do, without which the best practices would lose their relevance. Be it the number of car parking slots required or the IT systems, India is different and needs an indigenous solution.
BPMW has got the timing right and has a golden opportunity with regard to scripting a new chapter in the Indian retail story. What would actually set it apart would be out-of-the-box solutions for the customers. Value is not only price. In that context, even though the name suggests best price, the stores would become winners by offering holistic value to the customers.
The BPMW team should explore simple but far-reaching ideas to make a positive impact on the businesses of their customers and more importantly explore ideas that create a strong emotional connect. For example, the customers could be offered life insurance for free based on annual purchase slabs. Given that this customer segment usually does not have such a financial safety net, the emotional and actual benefits of such a simple step would have far-reaching implications.
That the existing cash-and-carry stores are now expanding is proof that this format has found acceptance with the B2B customers. Anyway, almost 30 per cent of the small traders purchase from the wholesale market and for them this format is a good alternative.
Hotels and restaurants find tremendous value in the offerings because of the range of food products made available. One of the existing cash-and-carry operators works towards offering specialised food products, including special cuts of meats for its customers. In a way, this is good for BPMW as there is an existing benchmark. They need to match the value offering and better it in the coming years.
The MTV spoof of yesteryear which ends with the line “We are like that only”, about sums up India.
Accepting and managing the environment and consumers should be a key guiding principle. I sincerely hope that the team sheds its legacy of greatness, experiments and finds a brilliant working model for the Indian marketplace.
And in true Indian style, let us welcome this new addition to the Indian retail landscape and wish them well.
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