News: Wal-Mart may debut with Sam's Club

(DNA 23/03/2006) New Delhi - The world’s biggest retailer, Wal-Mart, is shuffling in. And its first foot in the door, perhaps, would come as a relief to the Pantaloons, Spencer’s and other chains - including the would-be Reliance Retail.

Sources said the giant is bracing for a launch of its cash & carry wholesale format called ‘Sam’s Club’ in India, along with a local partner.

A development that perhaps unnerves another chain - the German Metro AG - more than anybody else. Metro has already set up a successful beachhead in Bangalore two years back.

While foreign direct investment (FDI) guidelines do not permit investment by multi-brand global retailers in India, 100% FDI is permitted in cash & carry wholesale trading under the automatic route.

Sam’s Club, which was launched in China in 2003, is a members-only warehouse.

It operates by selling high volumes of merchandise for very low profit margins to its members.

A Wal-Mart Inc spokesperson told DNA Money, “As part of the market research we are doing we are talking to a lot of people in India, including those who might be considered local partners.

We have not made such plans (about bringing Sam’s Club to India). At this point we are evaluating a wide variety of possibilities and have made no decisions about any particular formats.”

With large Indian corporate houses such as Mukesh Ambani’s Reliance Industries and the Bharti Group readying plans to make their retail foray, Wal-Mart may find it tough to cater to the complex Indian market alone.

In fact, industry sources point out that Wal-Mart is interested in partnering with Bharti for making its debut but the latter turned down the proposal.

When asked for comments, a Bharti spokesperson said “Bharti has an existing interest in the horticulture arena and is exploring the opportunity in food retail. For now, we are evaluating options. This is at an early stage and it would be premature to comment on any speculation.”

Wal-Mart, however, is going ahead with its sourcing plans for the country.

The Wal-Mart spokesperson said “We will purchase around $630 million worth of goods directly from India this year - mostly apparel, home furnishings, textiles, shoes and jewelry. This is about 40% more than 2005. In addition, we purchase another $1.2 billion worth of goods from suppliers who source from India. We anticipate similar growth in the next year or two.”