Wal-Mart Stores Inc. (NYSE: WMT) tried for at least the past two years to persuade the government of India to allow more foreign direct investment in the country so that the giant retailer could bring its superstores to the subcontinent. That did not happen, and Tuesday morning the head of the company’s Asia division said Walmart will open 40 to 50 wholesale distribution locations in India, adding to the 20 the firm already operates in the country.
The company also will launch an e-commerce website for one its wholesale distribution stores sometime this summer. Scott Price, Walmart’s Asia chief, said, “We are quite committed to the Indian market and the ability to grow [the wholesale distribution] format.” Sure.
This is not what Walmart wanted to do, but it was stymied by the government’s reluctance to remove the restrictions on foreign investment and to lift the requirement that foreign retailers get at least 30% of their goods from local small businesses. Walmart dissolved its partnership with India’s Bharti Enterprises last October when it became clear that the partnership was no help in setting up retail locations.
What the retail giant has done instead is open small wholesale operations that serve local mom-and-pop stores within a limited area. Walmart avoids both the foreign investment restriction and the sourcing requirement because it is not selling to retail customers.
Expanding its wholesale distribution operation will not make a significant contribution to Walmart’s top or bottom lines in Asia. What it does do is give the company a toehold in the country and some local allies in its struggles with the government. Walmart still wants to open its own retail stores in India, but it has faced the reality that it will not happen with the current government in power. New CEO Doug McMillon led the company’s international operations before being named to the top job, and he likely believes that patience is the best strategy for India right now.
Walmart stock closed at $77.31 Monday, in a 52-week range of $71.51 to $81.37.