Tuesday, November 28, 2006

Detail about retail

We have seen today’s papers screaming about Walmart-Bharti tie up. According to the MOU entered into between them, Mr. Sunil Mittal will own the company running the front-end retail operations, while both Bharti and Walmart will invest jointly in another company, which will engage in ‘cash-n-carry’, logistics, supply chain and sourcing.

We all understand about front-end retail. It is a shop from where the end consumer can shop around, buy goods and services and pay for them then and there either in cash or through his credit card.

But what is ‘cash-n-carry’? It is interesting to know that there are two broad components to the same business – retail!!!

“Cash and carry” is a form of trade in which goods are sold from a wholesale warehouse operated either on a self-service basis, or on the basis of samples (with the customer selecting from specimen articles using a manual or computerized ordering system but not serving himself) or a combination of the two. Customers (retailers, professional users, caterers, institutional buyers, etc.) settle the invoice on the spot and in cash, and carry the goods away themselves.

Though wholesalers buy primarily from manufacturers and sell mostly to retailers, industrial users and other wholesalers, they also perform many value added functions, including selling and promoting, buying and assortment building, bulk-breaking, warehousing, transporting, financing, risk-bearing, supplying market information, and providing management services.

There are significant differences between "classical" sales at the wholesale stage and the cash and carry wholesaler: These differences are based in particular on the fact that customers of the cash and carry wholesaler arrange the transport of the goods themselves and pay the goods in cash and not on credit.

An interesting snippet: We all know that Walmart is the big daddy of retail worldwide. Who founded this behemoth? Any idea? It is Mr. Sam Walton.

1 Comment:

Ramakrishna said...

In market after market, we have seen that competition has only one effect – expand the market and increased value for customers.

The centre of economic gravity in the world today is shifting to the east, towards Eastern Europe and Asia. The Asian market spanning 3 time zones cover over 40% of the world’s population and over 20% of the global GDP, with a recurrent average growth of 8-9%.

Currently about 35% of the produce is reportedly wasted in the absence of cold chain systems and infrastructure.

Walmart typically sources over 95% of local products whenever stores are opened.

With its global revenues at about $316 bn, WalMart is as big as the entire Indian retail sector (about $300 bn).

It is in this context that experts argue in favour of WalMart’s entry and welcome it saying that:
1. Time is ripe for 100% FDI in retail.
2. Empirical evidence suggests that large retailers and small shopkeepers can happily co-exist.
3. Competition will impel Indian retailers to do better, invest more and provide better offerings.