Left parties and those opposing American retail giant Wal-Mart’s entry into India will, no doubt, point to the San Diego City Council decision on Thursday to ban Wal-Mart supercentres. The two reasons cited for the prohibition are traffic concerns and the negative effect on small businesses. The problem with transposing the San Diego decision on to the Indian context is that such protectionism has always led to the Indian consumer getting a raw deal. Unlike in the US, Indian consumers not only have less choice, but the quality of the consumer experience is limited. At best, Wal-Mart could provide a ‘large-scale’ alternative that could get others in the retail business in India to improve their services. At worst, Indian consumers will prefer the local retailers — both small and large — over Wal-Mart’s giant stores. But to object to the chain setting up shop simply because Big Retail is evil is illogical and unfair to our consumers.
The Wal-Mart model of doing business is high-volume, low-margin retail — buying in bulk at the lowest prices and passing down the low pricing to the consumer. As for Wal-Mart’s reputation as a stingy pay-master — part of the strategy to keep costs down — surely, Indian retail houses, big or small, should not find that as unwholesome a practice as the Left and others are making it out to be. While consumers and Wal-Mart’s joint venture partner, Bharti, will be big gainers, there are obvious benefits for the Indian retailing business as a whole. They will get global knowhow in sourcing and supply-chain management in this expanding sector, and the Wal-Mart-Bharti model could well lead to others picking up the idea and out-Wal-Marting Wal-Mart.
Protectionism cannot be used as shield for one’s own shortcomings. The entry of McDonald’s into India didn’t mean the extinction of dhabas. On the other hand, the Wal-Mart ‘experience’, if it has to work in India, has to be tweaked to local patterns and tastes, something that should challenge local retailers, not petrify them. In the end, it’s about providing consumers with more choice.