Great Leaders Will Make Good Policy Decisions In India: Walmart CEO

At a time when India's foreign investment rules have been evolving over time and some of them have been perceived restrictive for foreign firms to grow in the country, Doug McMillon, president and chief executive officer of Walmart Inc, said that rules change everywhere and the retailer is familiar that government policies would get modified wherever it operates globally. He said Walmart’s big bet is that India is going to grow and the country wants competition for market dynamics, consumers being able to save money and have access to higher quality merchandise. The country also wants the taxes being paid.

“If you want all those things, then you should be for investment and for competition,” said McMillon at the Hindustan Times Leadership Summit 2020. “Some money will come from within India, and some money should come from outside India for it to fulfill its potential. So that's our long-term bet.”

Even before acquiring e-commerce firm Flipkart and digital payments firm PhonePe, McMillon said that Walmart experienced changing government regulation. “So we expect that. But what we think is as things evolve over time, great leaders will make good policy decisions,” he said.

He said Walmart is engaging with Indian governmental leaders and with all the stakeholders in India and other countries where it operates to keep demonstrating the work that the company is doing. “We're a company that operates with integrity and has a mission of saving people money. We care about the environment. We work on climate,” said McMillon. “We want farmers to make money. We've got the right incentives, which are completely aligned with what the government would want.”

He said that Walmart's expectation is that over time people will see that and welcome it to invest and hold it accountable for doing good work. “And when that happens, everybody wins,” he said. “We tend to build bigger businesses on lower margins. That's the value model that we want for consumers.”

He said that Walmart needs to be able to invest in a broad section of the supply chain to deliver all of that. It can't be just put capital into the cold chain and have no profit centres in stores or an e-commerce business. “The math has to all work out as any business does. We think over time things will work out and we're so excited about how it's gone so far.”

India will be the third-largest economy in the world by 2030 and a leader in many industries. McMillon said the company is committed to supporting the economic growth of India. This includes providing resources to local partners and taking made in India products global.

He said the company would like to invest more in the cold chain and the supply chain, as it has experience helping farmers raise yields and get paid more with a direct relationship which is challenging in India. But it doesn't have stores in the country because multi-brand retail is not allowed in brick and mortar.

When asked if Walmart would be tapping the multi-brand opportunity in the country, McMillon said that the company cannot make that decision.

“We'll be patient and try to show everybody that's good for the country and wait for our moment,” said McMillon. “And in the meantime (we will) invest to support Flipkart and PhonePe.”

He said that the retail market in India is projected to grow to over $1 trillion by 2025. The Bentonville-based company (in Arkansas) is locked in a battle with US rival Jeff Bezos-led Amazon and Mukesh Ambani-owned Reliance’s JioMart for dominance in India’s online retail market through Flipkart, which it bought for $16 billion in 2018.

McMillon said India is a remarkably competitive environment and e-commerce only accounts for about 4 per cent of total retail in the country. He said there are a number of companies competing in the market, including Amazon, Reliance, Snapdeal, and Paytm.

“We think this is a good thing. The competition will improve services, bring down costs for consumers and give additional value to producers,” said McMillon. “Customers in India today are getting high-quality goods at affordable prices from companies like Flipkart, Reliance, and Amazon. This competition will help local companies grow into global brands like Flipkart and PhonePe.”

In July Walmart also led a $1.2-billion investment in Flipkart, valuing the e-commerce firm at $24.9 billion. The same month, Flipkart strengthened its wholesale presence with the acquisition of Walmart India, which operates the Best Price cash-and-carry business. Flipkart is now also doing a partial spin-off of PhonePe to help it access dedicated, long-term capital to fund its growth ambitions. In this financing round, PhonePe is raising $700 million in primary capital at a post-money valuation of $5.5 billion from existing Flipkart investors including Tiger Global, led by Walmart.

Flipkart and PhonePe are also gearing up to go public in the next few years. When asked to share insights about the IPO plans of these companies, McMillon said that when Walmart had invested in these companies, it had mentioned the goal for them to go public.

“I don't have any other specifics to share beyond just pointing to the model in Mexico, (where) Walmex (Walmart de Mexico) is a public company,” said McMillon. “We today have other investors in Flipkart and PhonePe, we don't own 100 per cent. So in the future that could diversify in a number of different ways including IPOs. Flipkart and PhonePe both need funding; they're both growing so quickly. There's lots of room to invest and we're excited about being a majority investor.”

McMillon also said that Walmart is happy with its investments in Flipkart and PhonePe.

“We got to know the leaders at Flipkart and PhonePe, Kalyan (Krishnamurthy) Sameer (Nigam )and Rahul Chari, and the teams are just really great problem solvers and leaders,” said McMillon. “We became convinced that they could do what they wanted to do and with some investment from us.”