As the man in charge of Wal-Mart's international business, Michael Duke runs a $62.7-billion (Rs 2,82,150 crore) retail empire, spanning 2,250 stores in 10 countries. But more importantly from Wal-Mart's point of view, Duke, 56, is also in charge of the fastest growing part of the retailing behemoth's business. Although Wal-Mart racked up $312.4 billion (Rs 14,05,800 crore) in sales year ended January 31, 2006, its growth in the US has been slowing. In India recently to meet with government officials and suppliers, Duke spoke to BT's R. Sridharan on Wal-Mart's problems in the us and prospects in India. Excerpts:

This is your first visit to India after taking over last September as the chief of Wal-Mart's international business. How do you see India?

It is very exciting to be in India. India is very very important from a sourcing standpoint already. We think it also has a lot of potential in the future of (Wal-Mart's) retailing. So for lots of reasons, India is an important country for me to visit.

How do you react to the Indian government's decision to allow 51 per cent foreign investment in single-brand retailing? Are you disappointed that the government didn't go the whole hog and allow multi-brand retailers?

No, as a matter of fact we are pleased that there's progress. We see it as a step. But it is also very important for the government to move ahead. We would like to see the ability to invest and have majority (stake) with FDI (foreign direct investment) in retailing without the restrictions. We do believe we can offer a wide array of products to the customer. The consumer wins. The consumer ends up getting the benefits from the offerings of a store like Wal-Mart.

On a scale of 10, how would you rate your eagerness to enter India?

Is 10 the highest?

Yes...

10. Or can I say 10+ (laughs)? We are very eager. We see a terrific country that offers us so much opportunity. A growing middle class, a growing consumer attitude...the retail base today is already growing. There are many stores, many formats...I've already visited some yesterday. We landed and immediately I went out to visit retailing, and we saw some retailing formats already developing and we saw a lot of customers that need a store like Wal-Mart.

That must have got the store owners worried.

We were just like other customers. We walked the stores informally to observe what is the consumer purchasing, what does the store look like etc.

Did you visit Big Bazaar? Because that has really redefined mass market retailing in India.

We saw a number of stores yesterday. We went to a couple of malls, and probably I went in 20 or 30 different stores.

How do you look at the retailing scenario in India today? Obviously, it is nowhere near as organised as in the US.

I do see there is so much more opportunity to better serve the customer. And it really does start by opening up the opportunity. And of course that is why we are also here. We are interested in talking to senior government officials about the opportunity to open up FDI to global retailers. But, we also see the opportunity to better serve customers. For example, our sourcing office is providing products to customers in other countries around the world. Beth (Keck, Director-International Corporate Affairs) and I were in Mexico a couple of weeks ago, and we saw a product made in India being shipped to our stores in Mexico.

In India, getting into retail is not easy. Real estate, supply chain, even people are all issues. What will be the big challenges for Wal-Mart in India?

"The consumer ends up getting the benefits from the offerings of Wal-Mart"

I certainly do understand the complexity of supply chain, particularly the food supply chain. I guess it's a shame that today not only is the consumer disadvantaged, but so is the farmer. The product itself-from the farm to the consumers-is disadvantaged because the supply chain is not working as well as it should. So, I do think there is a big opportunity in improving the food supply chain, particularly the cold chain. But it is also the most complex. It takes a lot of time and government support, and it takes a lot of collaboration of businesses to be able to do that.

What sort of a format would you bring to India? Would it be like what you have in the US-say, a Supercentre?

It would be premature for me to jump to that because we would first like to start with the customer. And, we need to do more research and better understand the customer. It starts with visits like what I did yesterday to stores. But, we really would like to do more research with the consumer. You probably know we have applied for a liaison office and hopefully it will soon get approved. We would like to station someone here in India to begin doing more research to help us determine what is the best format for us to develop here.

Where would you want to locate your stores, given that your stores are huge and you may not have cheap and good quality real estate in big cities?

I'd say the answer would be, 'wherever there are customers'. To be real upfront, we start with the consumer and where there is a significant customer base, we believe we can serve them well. Our vision as a company is to improve the standard of living for all our customers.

A lot of big Indian groups are getting into retail. Would you consider partnering with any one of them?

We definitely would consider partnering. Again, we are doing research to determine the best approach, but I think it is one that we've had a lot of success with...partnering around the world. If you look at our business relations, our stores in China, for example, have been very successful in working with partners that understand the market, particularly understanding real estate, development, and how to build a business. You can even go back earlier in Wal-Mart's history and look at our first steps in international markets like Mexico, where our partnering with a business called Cifra turned out to be one of the greatest successes that we've had.

And would you be happy with a minority stake, if that's what the law permitted?

I wouldn't necessarily conclude that. Our desire is for the government to allow for majority interest in wide-scale retailing like Wal-Mart has.

You already source about $1.5 billion (Rs 6,750 crore) worth of goods from India. What are your future plans for sourcing? Will you be ramping up sourcing?

India sourcing operation for Wal-Mart is the fastest growing in the world. If you look at all other countries, our percentage growth last year was 35 per cent, which is the fastest growth. I visited the sourcing office a little over three years ago and now the office is three times the size of what it was then. So, the sourcing office is growing fast and I expect that to continue in the future as well. I do believe that with retail stores here, the opportunity will be even better to grow faster. If we had stores here, it would be even easier for the factory owners, for suppliers, for our own associates to better relate to the retail stores that we operate. We do believe that the operation of retail stores facilitates sourcing and sourcing facilitates the operation of retail stores.

Wal-Mart does everything from giving a customer a haircut to changing her car tyres while she shops. Do you think Wal-Mart will ever get to a point where it says, 'Enough is enough, we are not going to sell this'?

As a matter of fact there are businesses that we don't do in certain countries or certain markets within them. We try to look at what the customer needs in a particular area. So, certainly in many areas we do provide what we, in some cases, call one-stop shopping. But where there's no such demand, we don't try to do everything. Our whole business starts with the customer. We say, 'What are the needs of the customers, and how do we help them meet those needs in an efficient way?' We don't think of our size though. We don't pay much attention to the total annual sales. We really try to think of one store at a time. Our philosophy is that retailing is local. It is about serving that customer in that local community. We think of ourselves as a local store. We don't often, back in Bentonville (the Wal-Mart headquarters), think of our size in terms of this grand international corporation. We think of ourselves more as a small company.

"We think of ourselves as a small company, a local store"

How big do you think Wal-Mart could get, say, by 2010?

Back to my point about the local store, it's hard for me to think of how big we could be. We don't ever really set a goal of being big and bigger...we really think about 'how do we provide the very best shopping experience for the local customer? How do we provide the best employment for the associates, how do we make Wal-Mart the best place to work for our associates?' That said, I do see big opportunities in India. Wal-Mart can be a big business in India.

But how long before, do you think, the anti-trust guys get worried about Wal-Mart?

Frankly, if you look at retailing, the market share is so dispersed. Even today we have a very tiny market share worldwide. Even in markets like the us, Canada, the uk, and Mexico, we don't see the market share as being an issue.

In the US, Wal-Mart has been under fire for not paying its associates well and not offering them medical cover. In fact, you would rather shut down a store than let your associates start a union. How does this go with your philosophy of being the best employer?

I guess with any successful business, there are opponents and there are false statements that are made. Yes, there have been a number of false statements that have been made about employment at Wal-Mart. The best way, though, is to actually look at our associates, or our prospective associates. In Chicago, we opened a new store just outside the city a few weeks ago. For about three to four hundred jobs, with all of the allegations and false statements made, we had 25,000 applicants. And the associates that were selected out of those 25,000 applicants, they called themselves the 'chosen ones'. They thought they had been given a special honour to work with Wal-Mart. Yes, we pay very competitive wages, we have a good healthcare plan that we are looking to improve all the time, and we do have very satisfied associates with a great opportunity. Seventy-six per cent of our store managers in the US started working at Wal-Mart as hourly associates.

But would you say the management was late to sense and react to the growing public resentment against Wal-Mart? After all, Wal-Mart has been called the Beast from Bentonville for sometime now.

Let me correct one thing. There is not a public sentiment against Wal-Mart. As a matter of fact, there is an overwhelming public sentiment for Wal-Mart. We have over a 100 million of those visiting our stores every week in the US. So your focus on this is primarily related to the US, and there tends to be a few more vocal opponents, but the public opinion is overwhelmingly positive. We'll open a record number of stores this year both in the US and international markets. Now, to be real clear, did we recognise that there would be those vocal opponents that would make false statements about us? Yes, we were late in recognising that.

On a more personal note, last September you switched jobs with John Menzer, who now looks after Wal-Mart's US operations. There is speculation that either of you could be a successor to Lee Scott, CEO of Wal-Mart.

I haven't had the time to think about that (laughs). I've been in many different countries, I've been spending time looking at our stores, visiting customers and talking to our associates. As a matter of fact someone told me about the article and I told them that I hadn't had the time to read the article. I can't ever really address speculation like that.

At what point will Wal-Mart's patience run out in India if the government continues to keep foreign investors out of retail? Will there be a point when you say, 'We've had enough of India'?

I don't anticipate that. Because I don't anticipate that occurring. I anticipate positive movements from the government, I anticipate as we get into the local levels that the state government support would be positive. I always find that in the long run, the consumer speaks. The consumer, whether it is in the US or China or India, will speak and Wal-Mart will be able to support the consumer, as will other global retailers that participate in this growing market.