Walmart unveils operations near Mumbai

Walmart India, the local arm of the No.1 Fortune 500 company, opened its first fulfillment centre near Mumbai on Wednesday.

The fulfillment centre is a variation of its cash-and-carry store model that was envisaged for India, as Walmart is still not allowed to open its retail stores. Foreign Direct Investment (FDI) norms in India prohibit multi-brand retail chains to set up shop in the country.

The fulfillment centre is a new format which will focus exclusively on FMCG products and staples and will not stock fresh food and electronics. According to Walmart executives, fulfillment centres can be operationalised quickly as compared to a full-fledged cash-and-carry store, which typically take 30 months to set up. The fulfillment centre near Mumbai was up and running in just 60 days of signing the agreement for the land.

According to retail industry experts, Walmarts latest move shows that it is in a hurry to expand its operations in India as its feels that its online rival Amazon is making serious inroads into Indian consumers. Only in April this year, Walmart India had inked an agreement with the Telangana government to set up 10 wholesale stores in the state over a span of five to seven years. The company currently has one store in Hyderabad.

“Metro cities are great markets for consumers but availability of large real estate at a reasonable cost is a challenge,” said Krish Iyer, CEO at Walmart India. Nearly half its sales are generated out of its 20-odd big-box formats through online and sales staff ordering, he said.

The new format is not the only new element of Walmart’s expansion plan. In another first, operations at the fulfillment centre have been outsourced to KD Logistics, a company that so far specialised in third party logistic solutions and warehousing. Walmart’s centre is in Bhiwandi, on the Mumbai-Agra Road, which is directly connected to several manufacturing centres aross the country by road.

Walmart has tried hard to influence regulators to allow them set up their stores in India for nearly a decade now but without much success. In the interim to establish its presence, the company has focussed its efforts on building cash-and-carry (wholesale) stores, which allows its to build a robust back end supply chain with its partners. So far Walmart has built 21 such stores which caters to registered resellers and small format store owners who want to buy goods in larger quantities and at cheaper prices. Walmart, in turn, leverages it relationship with suppliers to extract a good price for the vast quantity of merchandise it buys.

The Indian unit of the world’s largest retailer launched its online platform for members of Best Price Modern Wholesale stores three years ago. But that was restricted to cities with the stores. The company will now start an online platform without a physical store.

“The idea was conceived nearly a year ago and we first piloted it in Lucknow,” Iyer said. “Last-mile delivery and the time taken are a challenge but we have to manage that. We have promised delivery within 24 hours to our hours to our members.”

Global rival Amazon opened its largest fulfillment centre in India on the outskirts of Hyderabad over a month ago, raising the overall number of centres and warehouses to about 45.