Washington: Wal-Mart had big plans to expand in India, with its sights set on becoming the country’s top retailer by 2015, but the licensing issues are preventing the U.S. retailer from hitting its targets.
Three years ago Wal-Mart Stores Inc. set out to be India's top retailer by 2015, calling it Project Jai Ho, meaning ‘let there be victory’.
According to the Wall Street Journal, today, the company opened just five wholesale stores in the country last year—well below the 22 planned. This year, it plans to open eight locations, a person familiar with the company's plans said.
Part of the reason lies in what people in the industry said is India’s labyrinthine process for developing commercial real estate and operating stores.
But one of the biggest reasons has been a compliance crackdown at Wal-Mart.
According to the report, the Bentonville, Arkansas, company disclosed in November that it is investigating possible violations of the U.S. Foreign Corrupt Practices Act, an anti-bribery law, in India, Mexico and other countries. The company has not been charged.
Since that internal probe began, Wal-Mart said it has stepped up efforts to keep partners and employees in line with U.S. and Indian laws.
The company said that running people through those hoops has slowed its expansion.
According to the report, Wal-Mart’s international operations are driving its overall growth.
The company’s sales rose 5 percent to 466 billion dollars in 2012, with sales in its international division up 7.4 percent to 135 billion dollars.
However, the U.S. stores still account for a disproportionate share of Wal-Mart's operating income.
In India, the retailer is well behind its modest goal of opening eight outlets this year; it last opened a store in the country in October. Wal-Mart has been operating wholesale stores in the country since 2009 and has 20 now, the report said.
The company plans to open supermarkets in two years, after the government in September opened up foreign investment in such stores, it added.
According to the report, to that end, Wal-Mart in the past several months has enlisted a phalanx of lawyers from a U.S. firm to develop compliance procedures and train employees in India.
The company also has begun requiring its Indian landlords to attest that they haven''t greased any government palms.
Developing and operating stores in India is complicated, even for locals. Dozens of permits and licenses are required from various agencies down to the municipal level, and businesspeople in various industries say, they commonly pay bribes to move projects along, the report said.
Licensing requirements also get thorny for companies throughout India, which requires separate permission for some individual types of produce.
To strengthen compliance, Wal-Mart in July brought in U.S. law firm Greenberg Traurig LLP and auditing firm KPMG LLP, the Wal-Mart spokeswoman said.
The firms have developed compliance procedures and provided training to nearly 1,700 Wal-Mart employees in India. The two firms also perform due diligence on the company's partners and suppliers in India, the report added.
First Published: Tuesday, April 2, 2013, 18:15