Bharti announces $2.5 billion retail rollout; partner Wal-Mart stays low key

Bharti Retail has made its mega retail plans public, but partner Wal-Mart has chosen to keep a low profile to avoid further controversies over the retail FDI issue. Wal-Mart executives, who stayed away from the press meet to announce the plans, later clarified to the international media that the global retail giant would provide technological and logistical inputs for the venture.

It is significant that Bharti has announced plans only for the front-end business of retail stores and has not revealed any details of its back end sourcing and logistics business. The retail stores business would be run by Bharti Retail Private Limited, which is now a wholly owned subsidiary of Bharti Enterprises. Wal-Mart has so far not taken any stake in this company, though it can acquire up to 24 per cent as per existing norms.

Organised retailing represents only 3 per cent to 5 per cent of Indian retailers while small single-store enterprises represent the vast majority of the market. Various industry estimates put Indian retail spending at $300 billion (Rs 1,323,000 crore) each year, with the figure set to double by 2015.

The Group plans to open stores in all Indian cities with a population of one million or more. It is not yet clear whether Bharti would roll out the stores under its own brand or under the Wal-Mart brand. The group maintains that existing FDI regulations do not prevent the use of Wal-Mart brand, but the company would take a decision only after a detailed market survey.

On the back-end business, Bharti group maintains that discussions with Wal-Mart are going on and detailed plans will be announced only later. It is almost certain that the sourcing and logistics business will be under a separate entity. Wal-Mart can take a majority stake in such an entity, which can also do wholesale cash and carry business as per existing norms.

Bharti is planning to invest up to $2.5 billion (over Rs 11,000 crore) by 2015 in front end stores under different formats. The company is looking at building a total retail space of 10 million square feet and is targeting all cities with a population of over 1 million. The venture will employ around 60,000 people directly. The first store is scheduled for opening by the first quarter of calendar year 2008.

Apart from the usual formats like hypermarkets and supermarkets, Bharti is also looking at the small store format. The company said it is planning to partner existing small store owners under a franchisee model.

If successful, this could become a unique initiative that has the potential to blunt the biggest criticism against organised retail - that it would throw small storeowners out of their business.

Small storeowners can remain in business by tying up with large retailers who would bring in better technology and systems besides improving logistical efficiency. The proximity of existing small stores to residential areas is a major advantage, which the storeowners can leverage.

"After revolutionising the Indian telecom sector, retail will be the next big focus area for Bharti. Organised retail, which currently accounts for only 3 per cent of the total market, has tremendous growth potential in the fast expanding Indian economy. Not only will it benefit millions of consumers but also farmers, small manufacturers and artisans", Rajan Mittal, joint managing director of Bharti Enterprises, said.

"The sector will also offer enormous direct and indirect employment opportunities while attracting huge investments in building the supply chain infrastructure, adding to the economic growth of India, especially in rural areas", he added.

"Bharti with its in-depth understanding of the Indian consumer, experience of running all-India operations, ability to attract and grow talent and capability to deliver a great experience at affordable prices, is uniquely placed in the Indian retail sector. We will bring great value to consumers by offering quality products at affordable prices", he finished.