Truth Behind the Walls of Walmart

In last few days, we heard lot about the FDI (Foreign Direct Investment) bill on all the visual and print media. Even about the opposition of that bill in the Parliament and around the country. Opposition, other Parliamentary parties and even the trade unions of retail shopkeepers are opposing this bill because of challenges it may pose to the Indian retail market. Because, it will give full control of the Indian retail market to few companies like "Walmart". The citizens are not ready to wait and see that is this policy a boon or bane after the implementation.

What is Walmart?

Of course, many of us know about the Walmart. It is one of the biggest chains of retail shops in the western world especially in America and Europe. In other words we can say it is a centralized shopping mall, where we can find everything from a needle to a motor car. In fact, we can say that you name a product and it is available there.

It is always a need of western world to make available all the goods in centralized place. Otherwise they cannot lead there Life with ease. The problem with America and European countries is, all their daily use products and groceries are not produced or grown across all geographical locations. Due to which they need to transport goods from one location to other or they need to import goods, which is a costly affair for an individual entrepreneur. The other obvious reason is that people cannot travel to different locations to buy things. Above all weather conditions are not favourable most of the days of a year.

So it is necessity for them to have centralized shopping market, where they can buy commodities. To make available all the goods in one mall requires a very handsome amount of investment. They found that it is not much profitable if we invest such a huge amount on establishing single centralized shop. So, they come up with a concept of chain of centralized shopping malls. Walmart is one of such biggest establishment which has hundreds of branches across America, Canada and Europe. Its annual turnover is 3 times more than Indian annual GDP.

Indian Market

Indian market is always a de-centralized from past hundreds of years. In India all groceries, commodities, fruits, vegetables, spices are produced in all the cities, towns and villages. It is the beauty of the Indian market. God has bestowed us with such a beautiful weather condition and natural resources and fertile land that we can produce most of the goods and food stuffs in any part of the country. It is the proof of self sufficiency of any country or geographical location. In the past, the major market was depending on barter system. Where, if I have rice and need wheat, then I will share the rice with you in exchange of wheat. This is essential to be independent market, in broader terms vibrant economy. Because, in case of war or natural calamities, it is always good to be commodity wise independent to handle such situations, because transportation is easy.


Why there is ambiguity in its success in India?

Many invaders tried to collapse this de-centralization of market in India for instance Islamic invaders, European invaders from the 10^th century to 19^th century but failed. Now, the current government is again trying the same thing, but there is doubt that it is going to succeed due to one significant reason.

· There are two sections out of 110 crore population in India

o First one is India, under which urban and semi urban population falls. It will consist mostly middle and upper middle class. It is just around 25% to 30% of population of India.

o Second is Bharat, which lives in the countryside, which is the major chunk of total population and it is self dependent, which can produce whatever it needs to lead a good life in any terrible condition. It doesn’t depend much on modern amenities and machineries, like home appliances, electronic and electrical goods and big retail markets.

The myths created to welcome these new trends of investment

·         Myth: It will strengthen the Rupee value in the world market

Truth: There is a section of population which we named as India; most of them have only currency / paper notes, nothing else solid (food grains, fruits, etc…) in their hand. The problem with this is, suppose tomorrow, Indian economy collapses and Reserve Bank of India asserts that it cannot guarantee the face value of the currency* (It is not a hypothetical situation I am posing here), then what? All the currency we have will become paper. It does not carry its face value or weight-age in the market. There is a chance of collapse in future if we depend more and more on foreign investment. It is like surrendering our economical and social sovereignty to others.

For e.g.

* Our neighboring country Malaysia has implemented same growth pattern and on one fine day the Governor of Reserve Bank of Malaysia said that the economy has collapsed and RBM cannot guarantee you that the currency I am giving you is worth the amount it is printed on the currency. By experiencing sudden economic down turn, they warned the world economies especially growing economies about thinking twice before adopting such a growth pattern.

* The case with Zimbabwe is worse than this. It is almost the surprising or un-imaginable case. One fine day the Government of Zimbabwe announced that it has lost the value of its currency. Immediately after the fall down, the exchange rate was initially Zimbabwe Dollar 100,000 = US Dollar 1. Now also it is Zimbabwe Dollar 37,350 against 1 US Dollar. Think of this.

Do you think we should learn from these economies?

·         Myth: It will generate huge employment in the country

Truth: In fact, it will promote un-employment. How? It is few lakhs of people who will get the employment at the same time there are crores together people who will lose their jobs. How? The competetion of Walmart and other similar chains of shops of world retail market is with the small businessmen / entrepreneurs and nukkad shops. Because, the Walmart which has opened its retail house near our house is selling the same product/grocery with lesser price. It is obvious in such a situation; everyone would like to buy from there. It is possible for Walmart to give the attractive offers, quote lesser price, and offer discounts.

It is possible for them because they directly buy the goods from the farmers and producers. There are no middlemen or brokers involved. Offers are like, if you buy one shirt, second one is free, where the price of one shirt is 1200 to 1500. Why? Who decides the price? God knows… J That means the single shirt price includes the cost of two shirts. Then they are not doing any favour to the customer by giving second shirt free. Then think if the offer is not there, then how much profit the company makes by selling single shirt?

It is not possible for the small retail sellers to give such offers. Because, they need to add all their expenses they incurred to bring the goods to their shops and after that needs to add their profit. Of course, in this case the rates will be high and they cannot give competition to the international wholesalers. They will slowly close their business.

According to Indian statistics there are around 2 crore such small entrepreneurs exist in the country. If they lose their business then almost 10, crore people life will be under stake, because, on an average there are 5 people depend on single earner in the family. This unemployment is gradually going to kill the purchasing power of those 10 crore people which gives way to considerable reduction in production and that leads to further un-employment. The sustained existence of such recession in the retail market for 2-3 years may end in collapse of the economy. Does the Indian government have any scheme for these small sellers to save them? If the answer is ‘NO’, then is it a fair competition?

·         Myth: Indian economy will grow due to the FDI

Truth: How much Indian economy will boom? Can any one tell the citizens the expected percentage of growth? If the economy booms also, where it is going to take up side lump? It is only in the few big and semi-big cities. So, it will create a centralized growth pattern, of which India is already facing the consequences. The most important problem is infrastructure and standard of leaving. Which Indian government is failed to improve the conditions in last 65 years. So, it is going to worsen the life of average Indian. Who will take the profit? It is the marketing giants who invested in this project to their own country. If this is the reality, what are these centralized marketing giants are? No more than middlemen or dalals. Now, think that what is the difference between East India Company and these new trend markets? It is just a difference in implementation. Is it the right decision then? Where is the economic growth?

·         Myth: Welcoming big companies will create a healthy competition among the entrepreneurs

Truth: Can you ever imagine that there can ever be a competition between two in-equal parties? Can a dear fight the tiger ever? It is just an eye wash.

For e.g.

We think that the competition is there in the market between certain companies who sell beverages. It is not. No, it is the competition of these beverage selling companies with the Indian fruit juice, lassi, nimbu-sharbat sellers. Nowadays we see that there are hardly anybody left in this business. Don’t consider Bangalore and other similar cities.

·         Myth: It will provide variety of choices in each section

Truth: Just think for a second that is it necessary. If you have answer ‘Yes’ then I would like to ask you a question here. Suppose, you want to buy a bathing soap, you have 20 varieties or 100 varieties does it matter while using? Does it yield milk / cream when you apply? NO. On the contrary, the huge options in each section will create confusion in buyer’s mind.

For e.g.

Say you have 200 TV channels in your home? How many you watch yearly? It is hardly, 10-15 on a regular basis, but still we pay for all the channels? Why just thinking on some day if someone asks that “Did you watch that program on that channel?” then you don’t want to afford to tell that you do not subscribe that channel. It’s matter of status. But while selecting a program it will create a big confusion and at last you do not watch any. Now tell me, what is the use of such a variety of choice beyond a limit? It is just an illusion.

·         Myth: We will get quality products

Truth: Why we are depending on other’s saying that it will be a quality product. Can’t the government ensure that current products in the market are of acceptable set standards? It is just a mental illusion.

Why there is a sudden need for FDI (welcoming these international retail brands in India)?

It is evident that it is an act to save Dollar, save Pound, save Euro. There is a big recession again hitting these so called western developed economies. These counties have still not recovered from the 2008-2010 recession.

We need to ask our government that why we need to cut short our own fellow brother’s meals to fill the bellies of these countries. We all know that charity begins at home. Then why?

Whether the Indian economy failed to overcome the inflation existing in the country from past 2+ years? Does the policy makers have decided that only FDI could resolve this?

It may happen that the centralized malls would sell the goods at competitive price only for initial years. But, what is the guarantee that after establishing their control on the market, they are not going to sell the goods at their own price by taking the advantage of their monopoly in the market? Then we do not have any choice than buying from them by paying the price they demand. Then think, the prices of life saving products or medicines you need.

At the end of this analysis, it is left to our discretion that "Is it just the glittering India we want to see or we want to see the emerging, self dependent, glorious Bharat?"

-- K. Kalyan