If you are one of those who follow business news closely, you would have realized by now that the most happening thing in India at the moment is Retail. Almost everyone, quite literally, has evinced interest in the booming Indian retailing industry and feel that organised retail is the way forward for future.To mention a few: Reliance group has extensive plans to enter the Retail industry in a big way. The Tatas are also underway. Existing players like Pantaloon (with their Big Bazaar brand) etc are firming up for the stiff competition by having their own expansion plans. But the one that takes the cake is the alliance of Sunil Mittal's Wal-Mart. This move is said to be a masterstroke from Sunil Mittal.
But, why is everyone so interested in Indian retail? The answer seems pretty simple. Indian retail market is worth a mammoth 350 billion dollars. But only a paltry 20% of this is organised retail. The rest of the market is still with the small and medium roadside vendors. Herein lies the opportunity for growth. If anyone can capture even 5% of this market share, he will be having a 14-15 billion dollar Mcap. It is this money that is luring the whos-who of world retail to India.
However exciting these big numbers may seem, organised retail has its own set of problems. Firstly, crores of Indian families have small roadside shops and that is their bread and butter. Now with the big players planning to have so much coverage, these small players will be virtually wiped out from the scene. For the time being, this may be the case for only the vendors in big metros. But with the kind of money that is set to flow in, organised retail will soon enter small towns as well. What will happen to these vendors? People who had lived respectably till now by doing fairly good business, may be forced to do menial jobs for a living. Can the government do something to help these small shopkeepers? We need to wait and watch; However, at the moment, the future seems bleak.
There exists another not so obvious, but an equally dangerous problem. The retail segment is the last part in the customer supply chain. By this, I mean, it is the retail sector which is in direct contact with the customer. Therefore, anybody who is a major player in the retail industry will have the potential to control the country's economy. Now, the critical question arises-- Should we allow a foreign player to control our country's Last Mile, as it is referred to? This is a sensitive issue which needs to be addressed with due diligence.
Hence, organised retail, seemingly attractive at the first glance has more than its share of problems. We would be better off in solving them before the retail boom kicks in.
7 comments:
I have been thinking of this for some time because I have switched from the small neighbourhood vendor to the supermarket some years ago. I think that the people who run small businesess will simply have to start getting educated and get jobs - this is one option. Or - they will have to move into trading and other businesses. Retail I feel is best left to the big players because these small vendors I find mostly try to cheat customers. Either by overcharging, lying, not giving the free gifts that come with the products etc. One also never knows what their actual prices are as they differ from customer to customer. And some of them are sick creeps who have no respect for women.
Frankly I think think the supermarket is the best thing that has happened to the Indian customer.
Hmm...nice one Abhi. But from my experience,
It is not like the outlets don't have advantages.
- Nearly 30% of India's fruit and vegetable production is lost because of poor storage. Now if these outlets (like Mukesh Ambani has promised) set up cold chains and infrastructure to transport foodstuffs, the amount of loss will reduce drastically.
- Typically, better prices for farmers - because the vendors buy direct from them.
- Jobs. Each FW recruits at least 5-10 X Std passouts. Add management, drivers, and other help, and the numbers will be much more.
- Foriegners controlling the economy is too grim a picture. First off, they'll be JVs and not fully-owned establishments, and then there'll always be Indian competition - FW, Tatas, Reliance. And don't forget, Reliance(undivided) was over 3% of India's economy. No one then cribbed about them 'controlling' the economy.
And about the Mom and pop stores - Unlike in the US, it won't be easy for the Walmarts and Tescos to succeed. They work well in the US because of large availability of land, superlative transport systems and infrastructure and a weekend-buying culture. All of which are lacking in India.
So, if I were a retail shop owner, I wouldn't lose sleep over the entry of Walmart. Maybe I'd lose sleep over the entry of FW - but considering that none of the retailers in Sanjaynagar have had hits to their business after FW came in, I wouldn't worry.
And to clarify - FW = Food World :)
Hi Nita,
Thanks for dropping by... :)
I agree that the small shopkeepers try to cheat for trivial gains. However, we cannot single them out. Cheating is omni present in India; these shopkeepers are just a part of the big ugly picture.
Also, your solns have their own problems. The 1st one-- get educated and work; Well, most shopkeepers are middle aged with family of 1 or 2 kids. How can they start working now? If they do well in their shops, we can hope that their children will opt for good education.
The 2nd one-- I dont think most shopkeepers will have neither the capital nor the guts to migrate to other businesses...
Thus, it is vital that we support these small shop vendors so that their next generation comes out of this loop.
Hey, you're right, organized retail will mean the end of the small grocery shops near our houses...and that's the way unfortunately with every wave of globalization...big players with DEEP pockets will always slowly but surely erode away the smaller ones market share, who will be lucky if they get bought at a good price, at best...at worst, they'll lose all their consumers over a period of time and will just have to ship out.
Hi Abhi
No doubt u have deep thoughts!!! people in India are still very nascent about this unorganised retail theory, why dont u approach publications and come out with more such issues to increase level of awareness.......after all every little contribution counts ......hope m not wrong!!! would like to hear more from you .....
Hi Abhi,
Wanted to write abt this, but u have already written abt it. So have to find something else to blog about.
Now coming to retailing i think only abt 2 or 3% of the indian retail market is harnessed. So it leaves a whopping 97% market to be harnessed and thus is the rush in this sector.
I think this is pretty much necessary for the country to grow economically. But it will be nicer, if the majority stakes stays in the hands of Indians. So it will as they are just JVs and not a 100% investment from the foreign retailers. And this JV is needed to get the proper infrastructure ready for it.
Harnessing this retail industry is pretty much necessary for India to come big on the global stage. And regarding the street side vendors, i think it will go on. Reason ?? Take my example. I would love to shop in the Food World/malls et al and i won't even go towards the street side vendors, as i am more comfortable with the bigger vendors. But what abt my parents?? They wud prefer the street side, smaller vendors as they are comfortable over there with the bargaining.
Yes, the future of the small vendors may be bleak, but it is bleak as long as they don't adapt. Remember Darwin?? People has to adapt to the changing environment and it is the survival of the fittest. Don't forget we are still evolving.
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