You never win with Walmart, warns man who tracked American behemoth

Is Walmart good for India? Right after US retail giant picked up a 77% stake in India’s largest online retailer Flipkart for $16 billion, concerns have been raised over how the American retail behemoth would impact India. Very few Indians know how Walmart operates in its home market and how it’s perceived there. If you ask the man who has closely tracked Walmart in the US for more than a decade, Walmart is an unbeatable force.

You don’t ever ‘win’ in a competition with Walmart. You may survive, but as a competitor, and as a supplier, you’ll always have to keep changing and innovating, because Walmart will come after your customers, and Walmart will come after your profit margins—because Walmart never gives up,” said American journalist Charles Fishman in an interview to Quartz. In 2006, Fishman wrote a bestseller, ‘The Walmart Effect—How the World’s Most Powerful Company Really Works’ that described in staggering detail the operations of the retail giant.

No wonder, online sellers are jittery about Walmart’s entry into e-commerce. They fear that Walmart might bring in its own private labels via Flipkart to the Indian consumers, adding to competitive pressures. “These products would be brought in at hyper-competitive prices, which will cannibalise the market and make it difficult for other sellers to operate. We are studying the situation and will take appropriate action, including the legal rout if necessary,” a spokesperson of the All India Online Vendors’ Association (AIOVA), which has 3,500 sellers on large platforms like Flipkart and Amazon, told TOI.

Brick-and-mortar traders too are fearful of Walmart. The Confederation of All India Traders (CAIT) said the deal was nothing but a clear attempt to control and dominate the retail trade in India by Walmart through e-commerce in the long run. “Digitally powered e-Walmart will certainly vitiate the e-commerce and retail market. There will be an uneven playing field to the disadvantage of retail traders. Only the venture capitalist, investors and promoters will benefit and not the country,” CAIT said in a statement.

In a letter to Prime Minister Narendra Modi, RSS-affiliated Swadeshi Jagran Manch said, “This [Walmart-Flipkart deal] will further eliminate small and medium businesses, small shops, and opportunity to create more jobs. Most of these small entrepreneurs are already battling for their existence; entry of Walmart will further create problems for them.”

Fishman warned that Walmart would be working to increase its profits and dominance, and not to benefit consumers or the economy at large. “Walmart will do what’s in its interest. Taking care of Indian consumers, workers, and the Indian economy will be the job of the Indian officials. Walmart follows the rules, but Walmart will always push to get the best deal…for itself,” he said.

However, there would certainly be a few positives of the Walmart’s entry into India. Answering the question whether competition between Walmart and Amazon would good for India, Fishman said, “It will be both good and bad for India. If you’re a consumer, it won’t be just good, it will be great. There will be a real effort to woo customers, and to keep them. If you’re a company in India that makes products for consumers, this competition will be hazardous. Both companies will be squeezing supplier companies to offer the best possible deal to them. So while the business could be big in total volume, the profitability could be tiny or non-existent. If you are a retailer in India, selling the same things as Amazon and Walmart, the next year to three years will be very hazardous. You can’t ever beat Walmart or Amazon on price. What you can do is offer things they don’t.”

FMCG veteran and writer Gurcharan Das points out how Walmart would benefit the Indian farmer. “Walmart has worked over the last few years to neutralise the criticism that might come from retail trade. They have been working in India in the last 2-5 years selling wholesale to retailers and they are going to use those retail spots for last-mile delivery. The biggest beneficiary will be the farmer because the reason Walmart can dare to take on Amazon is because Walmart has something that Amazon doesn’t and that is the ability to take fresh farm produce through very sophisticated cold chains,” Das said on ET Now.

According to an ET report that cited sources, Walmart will likely step up sourcing from India for its global operations too as the Flipkart acquisition gives it access to the huge supplier base of the ecommerce company. Walmart currently sources goods worth over a “couple of billion” dollars, such as apparel, generic medicines and handicrafts, from Indian suppliers such as Welspun and Dr Reddy’s for its stores in the US, UK, Canada and South America. Walmart’s sourcing from India is still small compared with that from China, which ships some $50 billion worth of goods to the company’s stores, but the combination of its Best Price cash and carry business and Flipkart is now expected to help boost India’s contribution. The bigger base of suppliers from Flipkart will offer it more opportunities to source for its retail outlets abroad, while also allowing the suppliers a wider exposure to overseas markets.

Most see Walmart-Flipkart deal as a welcome sign for consumers as Walmart is known for keeping prices down to the minimum. However, Fishman sounds a note of caution: “As a consumer, it’s important to remember that the lowest possible price isn’t always the best thing. Quality is as important as price, so you need to shop with awareness.”