Walmart entered India’s tightly controlled retail market with the sole ability to sell to wholesalers; India protects small retailers from large groups like Walmart.  Walmart recently conceeded that doing business in India has tested almost every aspect of their business model.  The following was reported in the Business Standard:

• Each purchase must be at least 500 rupees.  This created problems with purchasers needing credit which Walmart does not provide.  Retailers returned to the local sellers who have always provided credit.  Walmart has brought in local banks to offer credit to purchasers but this credit is likely hard to get.
• Walmart’s tested model for rating suppliers finds that no one in India can match effeciencies needed.  The average score is 60 out of 100 where in the US its 95.  Walmart forces inventory control onto suppliers and expects them to manage inventory for them.Deliver problems have forced them to take on additional inventory which is an anathema to their model for profit.
• Getting product from the store to the retailers has proven to be difficult.  They have some carts which have been destroyed over the past 15 months through intense use.  They now deliver to retailers.
• They work with 110 farmers in India vs. 300,000 farmers in China.  Because of the lack of scale they are unable to make larger commitments to farmers and use only verbal contracts to establish relationships.
• Walmart has discovered that each region in India is very different.  They are working on creating region specific plans to cater to local marketplace needs.

There is a lot to learn from Walmart’s experience in India.  Every firm entering India retail can look to them as a model for possible changes in a business model that works so well in the US, but relies on infrastructure that does not exist in India.

Thanks to McKay for this picture: http://www.flickr.com/photos/mckaysavage/