Wal-Mart Is Ready to Tango in New Markets
Just when it seemed as though the world’s largest retailer was finally experiencing some expansion blues, Wal-Mart Stores Inc. (NYSE:WMT) has proven its endurance again. According to company sources, not only will the retail giant expand its South American footprint in Peru, but it will also finally move forward with its plans in India.
It doesn’t come as much of a surprise that Wal-Mart is itching to break into Peru, as Reuters reports that retail sales there are expected to grow 20 percent, and the country’s economy is booming. As we know, Wal-Mart hates to be left out of any fun, and a source close to the company reported Monday that the retailer will come to Peru before the end of the year.
And Wal-Mart won’t only go south; it’ll also move east. Although the company’s progress in the Indian market has almost slowed to a complete stop on account of strict international regulations, it looks as though that’s all about to change. The country’s finance ministry is looking to rewrite its policies and has proposed new legislation that grants foreign retailers entry into India as long as the companies don’t “hold a majority stake in the Indian venture.”
This is a major game changer for Wal-Mart which has long been combating Indian’s current policy that keeps foreign retailers from holding more than 51 percent foreign direct investment. After lobbying for almost six years, the retailer was finally given the go-ahead to set up shop last September, but it continues to face strict rules that mandate foreign supermarkets set up their own warehouses and stores in India. This costly condition has caused significant setbacks, and is the reason Wal-Mart was forced to stall its expansion plans after October. The company has broken Indian ground since last fall, even though it planned to open eight stores in 2013.
But now with the new possible legislation, the retail giant may be able to finally realize the success it was counting on in the country — a pro for Wal-Mart and a con for the small grocers who will struggle to compete. Without the strict conditions and current policy mandates, it will be easier and less costly for Wal-Mart and other big name retailers such as Tesco Corporation (NASDAQ:TESO) and Carrefour SA to flood the region, offering much unwanted competition in the country.
The finance ministry will discuss the new policy during an inter-ministerial meeting on Monday. A positive verdict will undoubtedly draw criticism, especially since Wal-Mart has already been accused of bribing politicians for policies that work in its favor. But this time, the retail giant is asserting that it has adhered to India’s strict rules, and should the new policy pass, not only will small retailers be disappointed, but so too will Raj Jain, the CEO of Wal-Mart India, who just left the company on June 26 on account of the retailer’s little progress in the country.
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