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JUST ONE STEP FOR BHARTI; A GIANT LEAP FOR THE MITTAL BROTHERS!
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THE WALMART BET

Their diversification into retail seems to be the best bet so far for the next big leap by the Mittal Brothers. When Bharti Walmart launched its convenience retail (Easyday) store last year in Ludhiana, it was a low-key affair, given the ongoing backlash against organised retail players at that time. So last month when Bharti Enterprises launched Best Price Modern Wholesale – a cash and carry business under the Bharti Walmart joint venture, this time in Amritsar, the PR bugles blew loud, especially because the cash & carry business does not invite the same ire as retail stores selling directly to consumers. Bharti’s Best Price (like South Africa’s Metro in India) will not sell to end customers, but to resellers, which includes retailers, offices and institutions. With each Best Price store spread across 50,000 sq-feet, existing tie-ups with as many as 800 suppliers, the retail expertise of Walmart and Mittal’s knowledge of the Indian consumer, this one seems a winner so far. Asserts Zahir Abbas, Asso. Director, KSA Technopak, “India hardly has any player in the cash and carry segment, Metro being an exception. There is a great demand for organised B2B business and Bharti Walmart has been very careful in managing expectations.” Sources suggest that the venture has already garnered over 30,000 registrations from resellers, who are authorised to purchase goods from Best Price Modern Wholesale. But then, in India, the reseller market is highly unorganised. It is estimated that in Amritsar alone, as many as 50-70% businesses run without a valid business licence, and this may be a challenge for Bharti Walmart. Agrees Abbas, “They will have to come out with innovative means to include non-licence holders into their value chain. Ultimately, success will depend on how price competitive they are as compared to traditional wholesalers and distributors.”

Some, however are not too optimistic, arguing that cash and carry constitutes a small percentage of India’s total organised retail business. Although it registered a 100% growth in 2008, it needs to be remembered that the operating base of the cash and carry business itself is still small in the country. Raghav Sehgal, Retail Analyst, Angel Broking opines that Bharti’s retail business has the potential to provide that next big leap to Bharti Enterprises, if they focus on their B2C model viz. the Easyday chain of convenience stores and hypermakets. “Every brand is driven by consumption led by the end consumer and B2C model has the potential to reach out to rural markets as well,” agrees Sehgal. And here, there is a lot that Bharti’s retail venture can learn from its telecom stint. Airtel is the market leader in the sector and there were a few primitive requirements that helped it scale this feat – vast reach and coverage, a strong network and price competitiveness. Applying these principles in retailing, the B2C model has the potential to reach out to the mass market. There can be an Easyday store opened in small towns and cities, unlike Best Price. Secondly, Bharti Walmart has invested extensively in its back-end over the last two years. Taking expertise from Walmart, Bharti is sourcing fruits and vegetables directly from farmers in Punjab. “With telecom, they understood the nerve of India and so were able to expand even into the hinterlands. Their retail venture will require them to do the same,” asserts Wadhwa of SKI Capital. Moreover, managers at Bharti are already in sync with retailer psyche (thanks to Airtel) and they can play on that. Crucial perhaps is the slow but sure manner in which Bharti is going about its retail ambitions. Organised retail is a political potboiler in India. Mukesh Ambani’s experience with retail shows the level of resistance that can be evoked with the merest whisper. No wonder Bharti has only 27 stores operating till date - a majority of them in Punjab and Haryana. Unlike Ambani, his strategy seems to be to acquire critical mass and then flex muscles. Mittal surely knows how to learn from the mistakes of others, especially the ‘big boys’ of India Inc.

But here’s the most pertinant reason why Bharti-Walmart has the potential to become the number one player in its segment. It’s the incredibly potent combination of Walmart and Bharti stupid! With annual revenues of $405 billion, Walmart is the most successful retail business in the world and the Walton family dwarfs even Bill Gates in terms of personal wealth. Their well-oiled retail business operational skills are stuff of global legend now. Sunil Mittal and his brothers on the other hand have already shown proof (with Airtel) of their acumen for succeeding in sunrise businesses. If anyone can work magic in the sector - apart from Mukesh Ambani of course - it is this combine. “Bharti group is known for its scale and all its business ventures have the ability to become cash cows. Given the nature of partnership, the chances of success of the ventures are much higher,” agrees Jagannadham Thunuguntla, Equity Head, SMC Capitals. Even the Mittals are banking heavily on at least one or more of these businesses to firefight its way to the top. They’ve tasted success once and are not happy remaining a one trick horse anymore. Their diversification strategy seems set to reap results - at least in the organised retail biz. Ready to usher in India’s next home grown conglomerate then?

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