Wal-Mart and the rest

Even a couple of years back, terms like SKU (aka Stock Keeping Unit) and hypermart were largely unknown to common people. Today – if not SKU as yet – hypermart and supermarket are no longer some Latin or Greek lexicon to us. They are flowering here, there, everywhere.

Admittedly, the concept of supermarket is not new for many of us, the city dwellers. We’ve several of them in Mumbai and southern cities for quite a long time.

But hypermart? Even the most ardent shopper will admit that hypermart is a recent entrant to our city-world. The way things are going, we may soon be face-to-face with the big daddies of them all, the ‘giant hypermarts’.

What’s up, you may wonder. Well, I’m referring to the feverish debuting of retail stores of all size and shape. Wal-Mart is still some way off, but there’s suddenly a lot of competition in the retail space.

The latest buzz is the proposed tying up between the French giant Carrefour and the Aditya Birla group for opening hypermarts in India.

As we know, in most cases, retailers sell branded items they do not own, but they are brands unto themselves. The biggies (apart from Wal-Mart, Carrefour) that come to mind are Kmart, JC Penney, Target, Tesco, Marks & Spencer (clothes and accessories) and of course our own Pantaloons and Shoppers Stop.

Then there are retailers like US’ Home Depot that is like an umbrella organization to which are enlisted thousands of small to big retailers and brand-owners, who collectively sell a mind-boggling array of items both online and in brick-n-mortar stores.

In an earlier post, I’ve mentioned how Reliance is planning to push its yet-to-born retail venture. Though not apparent yet to most eyes, the stage is clearly getting ready to witness a triangular battle of turf with Wal-Mart pitted against the might of Reliance at one end and all else grouped at other end.

You can safely bet it will be a closely-fought battle for at least some years in the beginning to garner maximum share of consumers’ preference before the dust gradually settles down. India is a country of huge population, so perhaps all of them can have enough space to themselves.

If so, what about us, the consumers? We can certainly look forward to lip-smacking low prices, especially since Wal-Mart’s motto is just that – Always Low Prices! But, will everyone be happy? Not really. I’m not taking sides with other retail giants.

Contrary to popular belief that street-corner grocery shops will be affected most, I feel that will not be the case, at least not for some years. The reason is grocers keep excellent relation with local populace whom they frequently give items on loan. Wal-Mart or Reliance will not do that. For the likes of Wal-Mart and Reliance, it’ll take pretty longish time to undo this and other related advantage.

Who then suffers most the onslaught of giant retailers? It’s the small to medium suppliers. No, their dues will not be kept pending. It’s rather that they’ll be relentlessly pushed to lower their prices, come what may. For them, if the lure of their brands displayed in giant stores and accompanying huge sale is irresistible, the possibility of getting wiped off in the process by endless lowering of prices is also a real possibility.

I’ve been looking at this 2003 article, The Wal-Mart You Don’t Know. It’s a good study of the retail giant in graphic detail. Though 3 years old, one may still have a fair idea about Wal-Mart. I’ve summarized some points below (excerpts):

1. Wal-Mart is not just the world’s largest retailer. It’s the world’s largest company.. Wal-Mart sold $244.5 billion worth of goods last year. It sells in three months what number-two retailer Home Depot sells in a year.
2. The giant retailer is at least partly responsible for the low rate of U.S. inflation, and a McKinsey & Co. study concluded that about 12% of the economy’s productivity gains in the second half of the 1990s could be traced to Wal-Mart alone.
3. Wal-Mart bought some $12 billion in merchandise from China in 2002. That’s nearly 10% of all Chinese exports to the United States.
4. The retailer has a clear policy for suppliers: On basic products that don’t change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year.

Well then, dear readers, it won’t be a long wait before the giant sets foot in our cities. The moot point is, can other retailers including our own Reliance measure up to the might of a single Wal-Mart? This is something only future can say.

Related reading: Onrush of retailing

Technorati Tags: wal-mart, reliance, retail, retailing, retailer