Why did Walmart fail in some countries?

India

 No big ticket sizes

 Consumer behaviour of stocking up
 Location of the supercentre
 govt. regulations

How Walmart entered India

the Indian government has been reluctant to allow foreign companies to enter the
retail market, fearing that they will put small Indian businesses out of business.
Wholesale cash and carry business

After a long and winding process, which began in 1997 when 100% foreign equity holding was
permitted in Cash & Carry Wholesale Trade (CCW) through the approval route, the government
finally allowed FDI up to 51% in multi brand retail trade (MBRT) in September 2012, albeit with some
caveats. In between, 100% FDI was allowed under the automatic route in CCW in February 2006. It
was also for the first time that FDI up to 51% was allowed in single brand retail trade (SBRT) through
the approval route.

Beginning September 2012, Indian laws also allow foreign companies to own up to 51% of multi-brand
retail stores, such as Walmart. These foreign investments are also subject to sourcing 30% of their
requirements from local small and medium size firms (Government of India, "FDI Policy in Multi Brand
Retail,” 28 November 2011.)

Indian laws permit 100% foreign ownership in wholesale businesses. Such whole sellers, however, can only
sell to retailers, not to the general public. (Government of India, "FDI Policy in Multi Brand Retail,” 28
November 2011.)

FDI should be of $100 million or more spread over a three year period. Half of this should be invested in the
back-end infrastructure, and the other half in the front-end operations. (Government of India, "FDI Policy in
Multi Brand Retail,” 28 November 2011.)

But the National Family Health Survey (NFHS)-5 suggests that only
about 8 per cent of Indian households — or 1 in 12 households —
own cars.
The FDI policy in retail has been extremely controversial and the
Manmohan Singh government had to stake its survival on the
issue.
What I have to present?

Walmart entered in India by a JV partnership with Bharti in 2006 wherein Both parties brought their
own strengths to the joint venture. Walmart came with its financial strength and support, its globally
recognized brand name, and its expertise in national and international retail management. It is also
known for its expertise in just-in-time inventory management, retail information management, and
retail transportation management.

Bharti Enterprises brought to the table its familiarity with the Indian laws, culture, economy, and labor..
Due to restrictions and various conditions for retail trading under FDI policy, foreign companies
were finding it more convenient to enter India through franchise route. And so did the Walmart.

But why such a big global giant failed to establish itself in a developing nation with such a
lucrative market like India?

Walmart and Bharti Enterprises announced the end of their partnership after almost seven years
in 2013. The decision to move on on their own ways by the companies seemed to be the failure
of Walmart in India and its failure their break up can be attributed to some of the following
reasons:

Government Regulations - The FDI policy in retail has been extremely controversial the Indian government
has been reluctant to allow foreign companies to enter the retail market, fearing that they will put small Indian
businesses out of business. 1.2 billion people and 90 per cent of its $500 billion in retail trade is
done at mom-and-pop shops. These small retailers are the biggest competitors of such giants.
Companies like Walmart could eat up livelihood of soo many people hence faced much
resistance. FDI Policy on retail trading classified retail trade as either Single Brand Retail
Trading (‘SBRT’) e.g. companies like Marks & Spencer’s, Ikea, Uniqlo, Nike or Apple or
Multi Brand Retail Trading (‘MBRT’) for retailers like Walmart, Traditionally, there were
restrictions in foreign investment in both SBRT and MBRT activities under FDI Policy.
Hence Walmart entered in the wholesale cash and carry business. And allegedly they
were doing retail business in the name of wholesale. the government finally allowed FDI up
to 51% in multi brand retail trade (MBRT) in September 2012, but with some sourcing requirements
law which are talked about later. There were also controversies and allegations of lobbying which
though was legal in America, was a crime or illegal in India.

Another reason can be

 Consumer Behaviour – The business model of Walmart has largely been that of retail and
buying in bulk by the customers for stocking up, which in case of India was not really
attractive. Since the major section of India belong to Low Income and middle Income group,
Indian households are used to spend in their budgets and though the discounts were really
attractive, stocking up supplies was not really what they were ready to do hence rendering the
ticket size low.

Adding to this one of the reasons can be

Out of the city limits- acc to recent survey by the National Family Health Survey (NFHS)-5 suggests
that even now only about 8 per cent of Indian households — or 1 in 12 households — own cars. Which
was even lesser a decade back and The Walmart stores are usually situated out of the cities so it was
neither beneficial nor much possible for the customers to go out of the city so that they can buy in bulk
at heavy discounts.
  Sourcing requirements laws- Beginning September 2012, Indian laws also allow foreign
companies to own up to 51% of multi-brand retail stores, such as Walmart. These foreign
investments are also subject to sourcing 30% of their requirements from local small and medium
size firms. Again, the business model of Walmart was based on maintaining relationships with
limited suppliers and leveraging it to get heavy discounts on bulk purchases. It was difficult for
small and medium firms to produce that much hence rendering the Walmart incapable to get
heavy discounts, which was the most important thing for them.

Together all of these reasons failed Walmart in India.

FDI Policy on retail trading classified retail trade as either Single Brand Retail Trading
(‘SBRT’) e.g. companies like Marks & Spencer’s, Ikea, Uniqlo, Nike or Apple or Multi Brand
Retail Trading (‘MBRT’) for retailers like Walmart, Carrefour or Tesco. Traditionally, there
were restrictions in foreign investment in both SBRT and MBRT activities under FDI
Policy.

Due to restrictions and various conditions for retail trading under FDI policy, foreign
companies were finding it more convenient to enter India through franchise route.

As far as multi brand retail trading is concerned, FDI is limited to 51%, with prior
government approval. No automatic route of FDI is available in case of MBRT.

Under Indian laws, FDI partnered wholesale stores are allowed to sell only to “retail businesses” like shops,
restaurants, vendors, hotels, and offices. Customers are required to have a photo ID to enter these stores.
There is also a minimum purchase requirement so that individuals will not take advantage of the cards.

However, according to an undercover investigation by web portal Cobrapost.com, the international

retailers, Wal-Mart, Metro Cash & Carry and Carrefour, do routinely sell their merchandise to individuals
too. (Rajendran, 2014).

This violation of law by these companies hurts the poor small shops owners who are dependent on these
individual buyers.