Walmart Report

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CASE STUDY REPORT WALMART AND BHARTI: TRANSFORMING RETAIL IN INDIA MKTG 4400 A - International Marketing Professor James Gordon October 24, 2023 Ali Jafri Nicholas Levesque Alexa Giron Cortes Akriti Kaul Julie Alex Kanish Shah

Overview Walmart is one of the largest retailers in the world, existing in 27 countries in both retail locations and through e-commerce presence. It was founded in 1962 by Sam Walton in Arkansas, and has one mission - to help consumers “save money, live better”. It competes primarily on volume; because of the low-price strategy that it implements, margins are minimal, and so profits rely on the number of sales made. Notably, Walmart has sophisticated logistics models, as well as efficient and innovative tech that help it cement its place as one of the most powerful retailers in the world. Target Market The central focus of Walmart's target strategy is to understand and cater to the needs of the burgeoning middle class. With a rising middle class that values affordability, quality, and variety, Walmart is positioning itself to become a retailer that provides a one-stop shopping solution for a wide range of consumer preferences. The middle class in India represents a significant portion of the population, and its purchasing power is on a steady upward trajectory. This demographic, while being price-conscious, is keen on acquiring quality products and having a diverse range of choices. Walmart aims to capitalise on this by offering an extensive product catalogue with competitive pricing. This will allow Indian consumers to access both essential and premium products without straining their budgets, making Walmart an attractive option for a broad spectrum of consumers. Walmart's strategic presence in India predominantly targets urban centres. These locations offer proximity to distribution centres, aiding in mitigating supply chain inefficiencies. With high population density and foot traffic, Indian cities serve as ideal settings for Walmart's retail operations. The convenience and accessibility of Walmart outlets in urban areas cater to the needs of busy city dwellers, offering a hassle-free shopping experience. Indian cities are renowned for their cultural diversity, and Walmart's extensive range of products can seamlessly accommodate these varying tastes. This one-stop shopping experience is a compelling draw for Indian consumers who appreciate variety and choice without compromising on convenience. Competitive Landscape To analyse the market into which Walmart wishes to enter in India, we have based our analysis on Porter's five forces model (refer to Appendix 1). Starting with the threat of new entrants on the market, which is relatively low on the Indian Market, primarily due to the significant capital requirements and the need for an extensive distribution network. Walmart, as a global retail giant, has already established itself in the market. The existing regulatory complexities and the need for local market knowledge act as barriers for potential new entrants. Concerning the competitive rivalry, rivalry among existing competitors in the Indian retail market is intense. Walmart faces competition from local retail giants like Reliance Retail and Future Group, e-commerce giants like Amazon, and established supermarket chains. The battle for market share is fierce, driving innovation and service improvements. Furthermore, the Indian retail market is characterised by price-conscious consumers who seek value for money. While Walmart's competitive pricing and quality products provide some control, buyers in India have moderate bargaining power due to their wide range of choices, especially in the rapidly growing e-commerce sector. On the other hand, while Walmart's global scale gives it some bargaining power, suppliers in India still hold moderate power due to the diverse and fragmented nature of the market. Many suppliers have multiple options, and Walmart must maintain good relations with them to ensure a consistent supply of products. Additionally, in certain niche segments, suppliers might have more leverage. Finally, Walmart's primary business model in India is a mix of physical stores and e-commerce through its subsidiary, Flipkart. The threat of substitutes is moderate, given the convenience and growth of online shopping options in India. Walmart has ventured into e-commerce to address this threat and remains competitive in this segment. Positioning From our analysis of the market, we have developed a coherent positioning strategy that is primarily based around the theme of compromise (refer to Appendix 2). We believe that we can position Walmart in a way that satisfies the core principles of the company while still adapting to and

satisfying the Indian market. Our first point is that we are a one-stop shop. One stop shopping is an important attribute of a retailer in India due to the rise of mall culture and the wealth of families. We will carry a huge variety of products between international and local brands. We want people to be able to check every box on their shopping list while also having a strong enough selection for people to impulse buy. We will also meet the demand for affordable brand names by using promotional events such as deals-of-the-week and rollbacks frequently. We will look to promote Indian products as well. Whether it’s selling locally farmed produce or locally made clothes, Walmart will ensure that buying local is an option. It is hard to compete directly with the unorganised sector but we can offer some of its domestic appeal. Walmart can create a massive competitive advantage by being a one-stop shop for shoppers whether they prefer local, international, or a mix of both. Finally, we will iterate a commitment to corporate social responsibility. Walmart faced recent backlash from Indian civil rights groups due to a class action lawsuit about gender inequalities in hiring and pay. We’ll aim to mend this damage by emphasising an equal hiring and compensation process and position ourselves as a responsible company with a positive impact on local communities. Strategy #1 One strategy that Walmart should use when expanding their business in India is that they should adapt their product offerings to the consumers in India. The products and services being sold in North America may not be as successful in India, as the target market has different needs and interests. For example, things such as winter coats, snowboarding gear and mittens will do very poorly in India as they have hot weather year round. India's per capita income as of 2022-2023 is around 2380 Canadian dollars, meaning it falls in the lower middle income countries. Since people there are not as wealthy, a new pricing strategy is required as well and the income of the population needs to be taken into consideration. A demographic survey is required and Walmart needs to study what people are interested in and what their target market is going to be. Based on this information, they can remodel their strategy and provide products which are more likely to sell in that demographic and geographic location. Along with this, these surveys will also help them price products appropriately, to see the maximum amount of sales. Sourcing products locally can also give them a boost in popularity, as it is proven that Indian consumers prefer to support small, local businesses who are independent. Families in India tend to go shopping store by store, and chain stores are not as popular there. They can find the same product for different prices as these independently owned stores. This is essentially because local products are more trusted by them and they feel more comfortable using them. If consumers see a variety of products made locally in India, they will be more likely to purchase them. Strategy #2 A recommendation for Walmart would be for them to focus on adopting a multi-format approach when entering the Indian market as this could assist them in their expansion across India. This multi-format strategy would constitute of offering numerous store formats that are able to appeal to consumers shopping behaviour, patterns, and preferences. It is noteworthy that the case study highlights how Walmart is struggling to cater to over 6,000 castes and sub-castes, which reinforces the idea that by adapting to the preferences of consumers may improve their overall shopping experience. In addition to this, Walmart should look to establish convenience and supermarket stores as it can pose a benefit as it will target highly populated urban areas. Thus, by placing convenience and supermarket stores in traffic-driven areas, it can create a sense of urgency for commuters and strengthen Walmart’s position in India. It is apparent that a recurring issue within the case was Walmart’s inability to change how India’s retail industry and overall efficiency was unorganized, in turn, if Walmart leverages on this idea by creating a shopping experience where consumers can get everything in one stop, it can be a pivotal moment for the company. In appealing to their large hypermarket by selling products from apparels to groceries, Walmart will be able to reshape the consumer shopping experience. However, it

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is crucial that Walmart remains consistent across all their formats since it will demonstrate that they value their consumers, brand transparency and the quality of their products. Strategy #3 Integrating ecommerce into Walmart’s business model in India, specifically building their own platforms, is a strategy that can help the company grow in the region. India’s ecommerce market is growing exponentially and is one of the fastest growing in the world. A few years ago, only a few million people in India purchased something online. However, in 2022, approximately 200 million people had purchased something online (Ellis). In a country of 1.4 billion, these numbers are only expected to grow (refer to Appendix 3). To take advantage of this growing market, Walmart should invest in e-commerce and digital infrastructure offering a multi channel shopping experience through online ordering, in-store pick-up, and delivery. First, Walmart should invest in a user-friendly online platform. Its platforms should cater to the Indian market by offering support in multiple languages and allow for easy navigation for all users. Next, to become a trusted player in India, Walmart must implement secure and convenient payment measures. This should accommodate traditional payment methods like debit/credit cards but also methods like cash-on-delivery. Further, Walmart should invest in its logistics infrastructure to meet the demand of its ecommerce customers. Forming a strong network of fulfilment centres will ensure products are delivered on time and ultimately improve efficiency. In addition, the company must apply data analytics and artificial intelligence within its online platforms to personalise and improve their customers’ shopping experience, similar to how the social media giant, TikTok, does for its users. Leveraging such technology would ensure customers are offered product recommendations, content, and promotions that align with their preferences and interests. Overall, as India's e-commerce market continues to surge, Walmart's effective integration of e-commerce is critical for sustained success in the region. Outcome In the present day, Walmart has managed to succeed in the Indian market. Though they managed to open just under 30 retail locations, with the first one opening in 2008 in Amritsar, the true area where Walmart shines is e-commerce. Currently, Walmart owns about 77% of FlipKart, a leading Indian e-commerce space This investment took place after a 2013 split from Bharti, leaving Walmart uncoupled with an Indian corporation, and therefore unable to work in physical retail. Instead of bowing out from the country, Walmart chose to leverage backend tech infrastructure for an interface that the two companies were collaboratively designing, and appeal to Indian consumers virtually. This wound up being a strategic decision for two major reasons. Firstly, being a part of the e-commerce space rather than brick-and-mortar retail enabled Walmart to maintain significantly better margins (on account of reduced overhead and store-based expenses) and avoid abiding by the retail company laws forcing joint ventures for foreign MNCs. Secondly, it enabled them to return to their tech roots, and focus on innovation in that space; consequently, they were able to introduce a greater deal of variety in products FlipKart’s dominance in the Indian market can partially be credited to their flexible payment and return models, which allow for a “cash-on-delivery” option, which was well received by the market, who prefer to feel “safe” and certain with their purchasing habits. Additionally, Walmart has also been able to expand its scope in e-commerce in India, acquiring Myntra, an online fashion retailer brand that is wildly successful, as well as maintaining “Walmart Global Tech”, a base for their online support, in Chennai and Bangalore, some of India’s biggest tech hubs.

Appendix Appendix 1 Appendix 2

Appendix 3 Market size of e-commerce industry in India from 2014-2018, with forecasts until 2030 (Statista)

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Works Cited Askinasi, R. (n.d.). Walmart is the biggest retailer in the world, but its stores in other countries often go by different names. here’s what they look like and what you can buy there. Business Insider. https://www.businessinsider.com/walmart-owned-stores-around-the-world-photos-201 9-2#shop-at-a-walmart-overseas-and-you-may-find-yourself-wandering-past-a-fish-ta nk--38 Ellis, Hannah. “Innovation and exploitation: India's e-commerce boom threatens to upend local businesses and workers' rights.” The Guardian , 30 July 2023, https://www.theguardian.com/world/2023/jul/30/innovation-and-exploitation-indias-e- commerce-boom-threatens-to-upend-local-businesses-and-workers-rights. Accessed 23 October 2023. Hynes, Erin. “The Power of a Multi-Channel Strategy.” StackAdapt , 5 Sept. 2023, blog.stackadapt.com/multi-channel-strategy. Accessed 23 October 2023. India . Walmart. (n.d.). https://corporate.walmart.com/about/international/walmart-india Indranil Bose, Shilpi Banerjee, Edo de Vries Robbe. Wal-Mart and Bharti: Transforming Retail in India. HBR Publications, 2009, www.hbsp.harvard.edu/product/HKU845-PDF-ENG Minhas, A. “India: e-commerce market size 2030.” Statista , 15 September 2023, https://www.statista.com/statistics/792047/india-e-commerce-market-size/. Accessed 23 October 2023. Pauline, Jesura. “(PDF) an Analytical View of Hypermarkets vs Supermarkets - Researchgate.” ResearchGate ,

www.researchgate.net/publication/351357791_AN_ANALYTICAL_VIEW_OF_HYPERMA RKETS_VS_SUPERMARKETS. Accessed 23 Oct. 2023. Tandon, S. (2018, May 9). A decade later, Walmart’s secret E-commerce dreams in India are coming true . Quartz. https://qz.com/india/1259361/walmart-flipkart-deal-a-timeline-of-walmarts-history-in -india

Walmart Report

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