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Wal-Mart India Woos Mom-and-Pop Stores to Tap $50 Billion

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June 16 (Bloomberg) -- Wal-Mart Stores Inc. has opened an e-commerce website to supply goods to mom-and-pop merchants in India as the world’s largest retailer seeks to dominate a market it estimates will be valued at $50 billion by 2020.

Wal-Mart is counting on its online operations to help fuel sales as it grapples with a slowdown both at home and abroad. The Indian website is only for existing users of its members-only cash-and-carry stores and may help draw orders from small businesses more than 20 kilometers (12 miles) from outlets and that aren’t serviced by sales representatives, said the company’s chief executive for India Krish Iyer.

“The mandate from Wal-Mart for me is to focus on the cash-and-carry business.” Iyer said in an interview in New Delhi June 13 . “We are into cash-and-carry for the long-haul and the prize is big.”

The retailer this month promoted Latin America executive Fernando Madeira to chief executive officer of Walmart.com, the e-commerce division that’s leading the company’s battle against Amazon.com Inc. Online revenue accounts for less than 3 percent of the Bentonville, Arkansas-based group’s total sales.

Unlike the Sam’s club and other member-based store formats, India’s cash-and-carry services are only for mom-and-pop shops and other traders who need government tax documents to become members. Ordinary shoppers are not allowed to enter the stores or shop on this new website.

Educating Customers

The web-based ordering platform is being being piloted in two cities -- Hyderabad in southern India and Lucknow in the north -- and will be rolled out across all its stores by January 2015, Iyer said. The company’s sales reps will train small business customers to use the website, Iyer said.

“The small mom-and-pop shops is where the challenge lies in terms of converting them into e-shoppers,” said Iyer, who was appointed chief executive in January. “A deliberate effort is required to educate them in the whole process,”

The company aims to have 10 percent of orders for each store from the website within two years of operation, Iyer said.

The operator of Sam’s Club outlets said in April it will add 50 more stores in India over the next four to five years. Most of the new locations will be in the nine states where the company already has a presence, and the first of those will be opened next year, Iyer said. Rival Metro AG said last month that it plans to have 50 outlets by 2020, from the 16 now.

‘Huge Potential’

Wal-Mart’s e-commerce initiative may boost orders from hotels, hospitals and web-savvy businesses, said Ruchi Sally, head of retail advisory at consultant Elargir Solutions Pvt. in Mumbai.

“Initially it may be only in the cities where they have stores, but they can roll it out nationwide,” Sally said via phone from Mumbai. “I see a huge potential in this.”

Competitors such as Metro and Reliance Retail may follow Wal-Mart’s lead and offer similar services, she said.

Billionaire Mukesh Ambani’s Reliance Retail was a late-entrant into the cash-and-carry business, though it has grown bigger than rivals. Reliance had 32 stores as of the end of March, compared with Wal-Mart’s 20 and Metro’s 16.

Asia’s second-most populous nation doesn’t allow foreign-controlled companies to sell products online. That’s led web retailers to a different model than the one pioneered by Amazon: they operate online marketplaces and local traders sell goods on them.

Amazon, EBay Inc., and local rivals Flipkart.com and Snapdeal.com operate such marketplaces selling everything from t-shirts to mobile phones, in a market that CLSA Asia Pacific Markets estimates was worth $3 billion last year.

During his election campaign earlier this year, Prime Minister Narendra Modi indicated he might loosen rules to allow foreign control in all kinds of e-commerce. This would allow operators who also sell their own inventory, as Wal-Mart does in the U.S.

Any such rule changes would present a “future opportunity” for the retailer, though the current focus is on growing the wholesale business, Iyer said.

To contact the reporter on this story: Adi Narayan in Mumbai at anarayan8@bloomberg.net

To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net Suresh Seshadri, Dick Schumacher

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