Walmart CEO Doug McMillon’s recent visit to India reinforced the company’s aspiration to source US$10 billion of goods made in India by 2027. Joined by his management team, McMillon met with suppliers, merchants, grantees, artisans and MSMEs (micro and small to medium enterprises) across the company’s programs, such as Walmart Sourcing, Walmart Vriddhi, Flipkart, PhonePe, Walmart Marketplace, Walmart Global Tech In India and Walmart Foundation. The company reportedly intends to bui
to build a comprehensive ecosystem in India that will include a wholesale cash and carry business, e-commerce platforms, a payment and financial services platform, logistics as well as supply chain competencies.
McMillon also met Indian Prime Minister Narendra Modi who later commented on Twitter that the meeting was a ‘fruitful one’. The visit to India comes at an important juncture for the company.
Its first-quarter results, released in mid-May, showed a 7.6 per cent increase in revenue to US$152.3 billion, and 27 per cent in e-commerce revenue in the US, led by pickup and delivery.
International net sales were up by 12.9 per cent to US$26.8 billion, and operating income was up US$0.9 billion, up by 17.3 per cent. Interestingly, Walmart’s global advertising business grew by over 30 per cent.
International sales growth was led by double digit growth in China, Walmex (Walmart’s Mexican and Central American division) and Flipkart’s operations in India.
The company’s earnings report also showed that the post-pandemic reopening in China helped fuel a strong Lunar New Year season and sustained momentum through the entire quarter.
Building a foundation
According to Mal Siriwardhane, CEO of Bdynamic Logistics, Walmart has been building a strong foundation in India to source products for over 16 years. Just to recap, Walmart first entered the Indian market in 2007 with the wholesale ‘cash and carry’ business, Bharti Retail.
Then, in 2018, Walmart acquired a 77 per cent stake in Flipkart, India’s largest e-commerce firm, for US$16 billion. Recent reports suggest that Walmart is beating Amazon in India’s fast-growing online retail market, which is expected to be worth $200 billion by 2026.
Walmart’s existing presence in India is key to its future success, according to Siriwardhane.
“This allows them to scale up their sourcing to reach desired targets. It also helps to spread risk ensuring that they have access to reliable, quality and affordable items at all times despite world events,” he told Inside Retail.
He believes the company’s plan to have zero emissions by 2040 is leading the way in sustainability, in terms of its business model and ethical sourcing strategies.
For the last two decades, he noted that Walmart has been implementing these measures with its suppliers, merchants and wider business partnerships.
“They are very mature in the Indian market with a strong foundation. With their longevity of the supplier and merchant partnerships in India it will make their stretched targets very achievable,” he added.
Potential pitfalls
While Walmart’s aspirations could be a boon for India’s small-business sector, and signal an increase in micro-manufacturing and community-based employment, Siriwardhane believes there could be some potential complications on the horizon.
“If the Indian federal and state governments are not on their front foot to manage the large-scale change in small economies, it could present negative impacts, for example, lifestyle changes that could impact quality of life of residents,” he noted.
He also believes the political landscape could impact Walmart’s commercial objectives.
“Walmart’s strategy opens up opportunities for Indian businesses to be exposed to new technologies and training. Its direct-sourcing strategy will allow the Indian government to work in a partnership and to use its greatest strength ‘people’ to support the economy,” he said.
Ultimately, he believes that government involvement is critical to the success of international retailers, such as Walmart, as their labour demands grow. Foreign investment being channelled into the country can only be supported by long-term policies.
Innovation is key
Meanwhile, closer to home, Walmart recently opened its first high-tech market fulfilment centre (MFC) in Arkansas. The MFC is built within the store and is powered by a proprietary storage and retrieval system, Alphabot.
The digitisation of the fulfilment process promises to enhance the customer experience by making online order processing faster and more accurate. Loyalty members will enjoy free unlimited delivery while employees in the store can dedicate themselves to helping customers.
At the core of this MFC initiative, is a plan to leverage its footprint of 4,700 stores that are located within close proximity to 90 per cent of the US population. The service debuted back in 2019, at Salem in New Hampshire.