Retail Dictatorship

By

Neha Verma
Lecturer
Amity Institute of Telecom Technology & Management
Amity University
C-block Sector-125, Noida-201301
 

Introduction

India is a land of retail democracy- hundreds of thousands of weekly haats and bazaars are located across the length and breadth of our country by people's own self-organizational capacities. Our streets are bazaars – lively, vibrant, and safe and the source of livelihood for millions. India has the highest shop density in the world, with 11 outlets per 1000 people. This does not include the village haats.

Retailers like kirana (mom-and-pop stores), grocers and provision stores are characterized by the more systematic buying – from the mandis or the farmers and selling – from fixed structures.

Giant corporations like Wal-Mart and Reliance has started to try and take over the Indian retail sector. When such an organised retailer opens nearby, small retailers typically lose about 23% of their sales. The entry of the giant corporate retail in India's food market will have direct impact on India's 650 million farmers and 40 million people employed in tiny retail. More than 6600 mega stores are planned with Rs. 40,000 crore by 2011.

"The size of small retail is big; the size of big retail is small"

Self-organized vs. corporate

The first strategy is to define the small scale self-organized retail as "unorganized" and the large scale corporate retail as "organized". The real difference is however not unorganized vs. organized. It is self-organized vs. corporate.

As per the definition retail industry comprises of organized and unorganized sectors. Corporate retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner operated general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.

The self-organized sector is characterized by the lari-galla vendors (also known as "mobile supermarket") seen in every Indian bylane and is, therefore, difficult to track, measure and analyse. But they do know their business – these lowest cost retailers can be found everywhere from village bylanes to where big malls are situated. As far as location is concerned, these retailers have succeeded beyond all doubt. They have neither village nor city-wide ambitions nor plans – their aim is simply a long walk down the end of the next lane. This mode of "mobile retailers" is neither scalable nor viable over the longer term, but is certainly replicable all over India. Most retailing of fresh foods in India occurs in Mandis and roadside hawker parks. These are highly organized in their own way. If we put all these hawkers together they almost measure up to a large supermarket. These hawkers have a high degree of merchandise and have a system that works. Kiranas/Provision stores/mom and pop stores

In India around 97%-98% of the retail industry is unorganized. Among the organized ones the already established corporate retailers in India are Pantaloon Retail, Shoppers' Stop, Spencers, Hyper CITY, Lifestyle, Subhiksha & Reliance Retail etc.

Impact of Organized retailing

Unorganized retailers in the vicinity of organized retailers experienced a decline in their volume of business and profit in the initial years after the entry of large organized retailers. The consumers are generally in favour of more organized retail, the entry of large retail chains have adversely affected the small, traditional retailers, who currently form 97 per cent of the sector, in terms of lower sales and profits.

The farmers of India are definitely facing a deep crisis. Corporate profits grow while farmers' incomes shrink. Average sales of the small retailers who are facing competition from the organized retail industry fell from Rs.1,16,017 in the pre-organized retail scenario to Rs.97,156 in the post-organized retail scenario, a drop by over 16 per cent. There has been increasing incidents in several states where local small retailers have physically resisted the opening of outlets of big retail chains. Such protests prompted the UP government recently to pass an order disallowing any further opening of Reliance Fresh outlets in the state.

There is competitive response from traditional retailers through improved business practices and technology up gradation. Small retailers have been extending more credit to attract and retain customers. There is also a big competition among small organized vs. big organized retailers. In 2007, Reliance took over Adani Retail in Gujarat. Also, Mumbai-based Spinach retail stores took over Delhi's Sabka Bazaar and Home Store. Recently, media reported Bharti is likely to take over Big Apple, which started in 2005 and now has 65 stores covering an area of more than 100,000 sq. ft.

The emergence of organized retail undoubtedly gives consumers a wider choice of goods, more convenience, and a better shopping environment, among other benefits.

This is feasible because organized retail can take several formats, from small neighborhood stores in densely populated cities with high real estate prices to large air-conditioned malls in the periphery where real estate is cheaper. Organized retail can appear small but spread in all local markets, providing the convenience of a neighborhood kirana store but with procurement on a mass scale that keeps prices low and provides greater variety.

Conclusion

India has the highest shop density in the world with 11 shops per 1000 person. If the corporate retail starts spreading in India without any control and if the Government brings in Foreign Direct Investment in the sector, the potential social costs of the growth and consolidation of organized retail, in terms of displacement of unorganized retailers and loss of livelihoods will be enormous. Regulation needs to be more stringent and restrictive.

With the livelihoods of small traders and hawkers in threat due to the corporate entry in retail the resistance against the later is growing in almost every part of the country. Hawker unions, trader groups, farmers unions, worker unions and many more are joining hands to resist the corporate entry into retail. The entry of the big corporations was detrimental to the business of the small retailers and hawkers, and if no strong legislation is made in favor of the latter they will not be able to save their livelihoods.

With the coming in of big retail there will be more instants of contract farming, which in turn will lead to monopoly buying powers and monopolistic control over the farmers and their products.

For the consumers rather than enhancing choice, especially the lower income groups, proliferation of large format retail stores would kill competition, lead to closure of neighborhood markets and make consumers solely dependent upon the organized retailers at a later stage. India will not be able to withhold the fall out of so many people being thrown out of employment. The government should come out with a proper policy to rein in such unrestricted growth of corporate retail in the country taking cue from the experiences of other countries where big retail have created havoc with the society and economy of the country.

Reference:

http://www.icrier.org/ICRIERRetailReport22May08.pdf

http://indiafdiwatch.org/fileadmin/India_site

http://www.retailangle.com

Business world

Economic Times

ACKNOWLEDGEMENT

I would like to express my gratitude to all those who gave me the possibility to complete this article. I want to thank my Institute for giving me permission to write this article. I have furthermore to thank my Director General who encouraged me to go ahead with my article.

I am deeply indebted to my HOD Prof. M.Sahni from whose help, stimulating suggestions and encouragement helped me in all the time of writing of this article.

Especially, I would like to give my special thanks to my husband Mr. Manish Sandow whose patient love enabled me to complete this work.
 

Neha Verma
Lecturer
Amity Institute of Telecom Technology & Management
Amity University
C-block Sector-125, Noida-201301
 

Source: E-mail June 12, 2008

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