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Wal-Mart's hot on India
No. 1 retailer sings nation's praises to analysts; calls market a 'huge organic growth opportunity.'
June 6, 2005: 1:27 PM EDT
By Parija Bhatnagar, CNN/Money staff writer

NEW YORK (CNN/Money) - Has Wal-Mart tapped India, the second most-populous and fourth largest retail market in the world, to some day become the jewel of its corporate crown?

Maybe, or at least that's the impression John Menzer gave last week when the president and CEO of Wal-Mart's international operations dedicated a substantial portion of his presentation to analysts talking exclusively about his recent trip to India -- charts and photos included.

It's interesting to note that besides India, Menzer also made pit stops to China and Korea, but those two countries only received a cursory mention during his 30-minute speech as part of Wal-Mart's annual meeting with shareholders and analysts.

Menzer's heavy pitch of India came soon after he headed a delegation to the subcontinent last month, which also marked the first Wal-Mart (Research) executive visit to the country.

Said Menzer, "India represents a $250 billion retail market, growing 7.2 percent a year, but modern retailing is just starting to emerge This shows us that India is a huge organic growth opportunity for Wal-Mart."

But it's not without some challenges, Menzer added, noting that the supply chain was still very weak in India.

Menzer's presentation was monitored via Webcast in New York.

According to Menzer, India is Wal-Mart's fastest growing sourcing market. The world's largest retailer this year expects to export $1.5 billion worth of merchandise to Wal-Mart stores from the country.

Wal-Mart already has over 2,000 stores worldwide, including 45 stores in China. Its only presence in India is through its sourcing office located in Bangalore.

Menzer said regulatory hurdles, which bar international retailers from directly entering the Indian market, have thus far stymied its plans to set up shop in the country.

"But it appears that a number of factors may change that," Menzer said. Citing his talks with leading Indian government officials, including Prime Minister Manmohan Singh, he said the government was considering opening up foreign direct investment (FDI) to retailers.

"In our six government meetings, we created a very positive image [of Wal-Mart] in what we think is a very important future market," Menzer said. "We've energized the FDI lobby and preempted the anti-FDI lobby in India. I believe we've told our story."

At the same time, if the FDI regulations aren't lifted any time soon, Menzer said Wal-Mart is no longer prepared to wait but is prepared to make its foray into India with an Indian joint-venture partner to "take advantage of this market while it's still developing."

Menzer did not say how many stores Wal-Mart was eyeing in India or where they would be located.

"The average urban household income in India is about $3,000 a year, roughly in line with China, and the consuming class has grown from 35 million families in 1996 to an expected 80 million this year. That's roughly in line with the U.S.," Menzer said. "This is a very big opportunity for us."

Wal-Mart could not immediately be reached for comment.

Click here to read more about Wal-Mart's mea culpa.

Click here to read more about how retailers are courting the baby boomers.

Click here to read more about why it doesn't pay for retailers to ignore their customers.  Top of page


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