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Walmart Inc, the world’s largest retailer, has fired more than 50 of its executives in India in the wake of lackluster sales and mounting losses.
The Bentonville, Arkansas-based company launched its bricks-and-mortar wholesale operations in the country a decade ago, but it has failed to generate profits.
Walmart laid off 56 of its India executives, eight from top management, while the rest belong to middle and lower management. They include vice-presidents across divisions such as sourcing, agri-business and the fast-moving consumer goods section.
The layoffs were announced at a town hall meeting on Friday.
The development comes 18 months after Walmart completed the acquisition of Indian e-commerce giant Flipkart to become its largest shareholder in a US$16 billion deal. Some also see this move as Walmart’s diminishing faith in the future of its bricks-and-mortar business in the country.
However Krish Iyer, the president and CEO of the US-based retail major’s India unit, said Walmart was committed to its B2B Cash & Carry business in India. He pointed out that Walmart had opened six new Best Price modern wholesale stores, one fulfillment center and sales grew 22% in 2019.
The CEO said the company was looking for ways to operate more efficiently and the layoffs were due to a greater incorporation of technology into its local operations and a bigger focus on integrating e-commerce with its wholesale business.
Walmart plans to shut the Mumbai fulfillment center, its largest warehouse in India. It will also halt all new-store expansions in the country. The real estate team responsible for new store locations has also been disbanded.
The laid-off employees have been offered enhanced severance benefits and outplacement services. Iyer denied reports that the company was contemplating a second round of layoffs in April. Walmart has 5,300 employees in India, of which 600 work at its head office in Gurugram near New Delhi.
Walmart entered India in 2007 and partnered with Bharti Group for the wholesale business. It finally bought Bharti’s 50% stake in 2013 to go solo. Its cash-and-carry business involves wholesale sales to small neighborhood stores, hotels and catering firms.
Walmart India’s Best Price stores accumulated losses of 21.80 billion rupees ($308 million) until March 2019. In the last fiscal year, Walmart India posted sales of 41 billion rupees ($579 million) and a net loss of 1.7 billion rupees ($24 million).
The salt-to-software conglomerate Tata Group had held discussions on buying Walmart’s wholesale business, but found it unviable in the current form.
In a related development, Walmart’s rival and US e-commerce giant Amazon recently entered into an agreement with India’s second-largest retail chain Future Group, aimed at building on each other’s strengths in the online and offline retail space.
Nearly a fortnight ago Reliance Industries, owned by India’s richest man Mukesh Ambani, carried out a soft launch of its online retail venture called JioMart. Reliance Retail’s entry into the online retail sector is the biggest challenge for Amazon and Walmart-Flipkart as the Mukesh Ambani-led behemoth is well-positioned to create massive disruption in the market.
Reliance Retail operates 10,415 stores in more than 6,600 cities and towns, with 500 million annual customers. Industry watchers feel this provides the company with enough muscle to swiftly launch India-based operations.
India’s retail sector continues to be unorganized with small neighborhood family-run stores dominating with nearly 90% market share. From the poshest neighborhoods to slums, these small stores, often housed in a small room, offer personalized service, including door-step delivery and interest-free credit.