Retail giant Walmart is firing a third of its senior executives at its India head office in Gurugram, The Economic Times reported. Those that have been laid-off include vice presidents across sourcing, agri-business and FMCG divisions, the report stated.
Profit has eluded Walmart in India with tepid sales growth more than a decade after entering the country. The real estate team responsible for new store locations has been disbanded, according to the people mentioned above.
Walmart India didn’t comment on the number of people laid off or store plans but said it remains committed to growing in India. “We are always looking for ways to operate more effectively to serve our members. This requires us to review our corporate structure to ensure that we are organised in the right way to best meet the needs of our members,” a Walmart India spokesperson said. “Impacted associates have been offered enhanced severance benefits and outplacement services to support their transition.”
The mandate to Turn Around or Face Scaledown
“The parent company has given a mandate to either turn around the business or face a massive scaledown,” said another person aware of Walmart’s plans.
Walmart India’s Best Price stores had accumulated losses of Rs 2,180.8 crore until March 2019. In the last fiscal year, Walmart India posted sales of Rs 4,095 crore and a net loss of Rs 171.6 crore. Rival Metro, which entered India in 2003, is the market leader in the segment with 27 stores and revenue in excess of Rs 6,500 crore.
The Tata Group had held discussions on buying Walmart’s wholesale business but found it unviable in the current form.
The cash-and-carry business involves wholesale sales to small neighbourhood stores, hotels and catering firms. The world’s largest retailer acquired Flipkart for $16 billion in 2018 to gain access to India’s $670 billion retail markets.
Walmart’s cutback comes as Flipkart has announced its entry into food retail in India. Flipkart FarmerMart will sell locally produced items online and can also sell through physical stores later. India allows 100% foreign direct investment (FDI) in food retail for locally manufactured items. Food is the only segment in which etailers are allowed to sell directly to consumers. The government has asked e-commerce firms to keep food-only retailing ventures at arm’s length from flagship marketplaces by maintaining separate boards, staff, bank accounts and inventories.
Walmart entered India in 2007. It partnered with the Bharti Group in the wholesale business, then bought out its partner’s 50% stake. It terminated franchise and supply agreements related to Bharti’s retail business in 2013. Walmart’s store expansion was put on hold between 2012 and early 2015 amid an internal probe to check if its local unit had in any way violated the US Foreign Corrupt Practices Act that penalises American companies for bribery and other such wrongdoing overseas.