Wal-Mart Faces Protests Over Entry To India

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Wal-Mart Faces Protests Over Entry To India
Ruth David, 08.10.07, 4:56 AM ET

Brand recognition isn’t always fun, as retailing giant Wal-Mart is finding out in India. Days after it signed an agreement with Bharti Enterprises to enter the Indian market, several thousand retailers across the country held vocal protests against its plans.

In major cities like Delhi, Mumbai, Bangalore and Calcutta, hundreds of farmers and small-scale retailers took to the streets near markets where vegetable sellers usually ply their trade. Media reports from some cities said protesters had been bused in from neighboring areas to ensure the movement didn’t lose any of its fervor. Predictably, there was some burning of effigies.

Given that this is independence month, retailers chanted slogans like “Quit Retail,” harking back to the “Quit India” movement that began on August 9, 1942, and finally led to the end of British rule.

But the organizers of the protest didn’t get as many people as they were hoping for. At a rally in Mumbai, only a few hundred people showed up, and the same was the case in some other cities as well. Vegetable vendors in Mumbai’s suburbs said they hadn’t heard of any such protest, and even if they had, wouldn’t have had time to spare from their daily business for the sake of demonstrations.

Wal-Mart (nyse: WMT - news - people ) entered India this week through a joint venture with New Delhi-based Bharti, which owns India’s largest mobile service provider, Airtel. (See " Wal-Mart Inks Deal To Enter India") The venture will build 15 wholesale outlets and a nationwide supply chain over the next seven years. Multibrand retailers like Wal-Mart aren’t yet allowed to set up their own stores in India, whereas retailers that sell only their own brand can own up to 51% of a local company.

The venture with Bharti gives Wal-Mart a foot in the door of what A.T. Kearney called the world’s most attractive retail destination. But only 3% of a sector valued at around $350 billion and growing at 20% annually has been claimed by organized retail. Around 12 million mom-and-pop stores now collectively dominate the market.

Protesters accused the Bentonville, Ark.-based giant of circumventing Indian laws on retail to enter through the back door. “The livelihoods of retail traders are at stake. If big retail giants like Wal-Mart and Reliance come into the country, small traders would be finished,” said Praveen Khandelwal, general secretary of the Confederation of All India Traders in New Delhi.

Both the ruling Congress Party leader Sonia Gandhi and Prime Minister Manmohan Singh have acknowledged the dangers of corporations penetrating the retail sector, said Dharmendra Kumar, director of the group India FDI Watch and national coordinator for the movement against organized retail.

He said Wal-Mart, as well as big Indian corporations, should be prevented from carrying out their ambitious retail plans until a thorough study has been conducted by an independent special task force including stakeholders on the impact their entry will have on the small-scale retailers. Companies like Reliance, the Tata family and the Aditya Birla Group are also making an aggressive push into retail.

Wal-Mart, which has pulled out of Japan and Korea and has seen problems with supply chains and unions as well as stiff competition in China, is looking to India for growth. It has trumped retailers like Carrefour (other-otc: CRERF - news - people ) and Tesco (other-otc: TSCDY - news - people ), which are waiting it out amid uncertainty about the government’s policies.

But even as activists take the big-name foreign giants to task, vegetable sellers across India are already feeling the pinch as large stores that stack fresh fruits and vegetables spring up around them.

In the Mumbai suburb of Bandra, one such vegetable peddler whose family has staked a spot on the street for the past three decades is now dealing with competition from a retail store that’s sprung up just a few feet away. Phoolchand Gupta, 32, says his profits have been reduced by a third since customers switched over to the store, which sells vegetables and fruits for the same if not lower prices.

Gupta, who makes about 200 rupees ($4.92) a day and supports a family of four, pointed to row after row of greens he’d lined up. “Every day I throw [away] vegetables because if they don’t get sold I can’t store them. It’s the worst in the monsoons, when customers don’t want to come out,” he said.

A third of India’s agricultural produce goes waste because there are no proper storage facilities or transportation facilities for farmers who send their perishable goods into cities. Big retailers are promising to change that so profits can trickle down, but nobody seems to know what the vegetable vendor who sits on almost every street corner in India will do when his customers move over to the big stores. Neigborhood stores that sell provisions may soon be similarly squeezed.

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