A day after Mint carried a report saying a government-sponsored study showed that the business of small retailers had been hurt by the growth of organized retail, anti-organized-retail protesters upped their calls for a national retail policy that would protect owners of small stores. Meanwhile, large retailers said they offer better deals to farmers from whom they source products, and consumers.
The study shows that 50% of small retailers surveyed reported lower sales and 61% of all retailers pointed to competition from organized retail as reason for their declining financial health.
On Wednesday, activists said their fears had been confirmed in this study and that the government should now set up a special task force to create a national retail policy. “No one can deny the impact of corporate retail on small retailers anymore,” Dharamendra Kumar, campaign director for FDI Watch, an anti-organnized-retail group said. “The government should try to address rather than do an eyewash on this now.”
The Icrier study confirms smaller studies done in Mumbai and Hyderabad and is reflective of what is happening to India’s more than 12 million small traders, said Banwarilal Kanchhal, a Samajwadi Party member of Parliament, from Uttar Pradesh.
However, retailers say any government intervention that prevents large companiesfrom entering the retail business will prevent farmers and consumers, who outnumber traders, from getting the best prices.
“As much as traders are important, are consumers and farmers not important too?” asked R. Subramanian, managing director of Subhiksha Trading Services, which runs a neighbourhood convenience store chain and a mobile store chain.
Vinay Kumar, who had been running a small grocery store since 2001, had seen business slumping after Reliance Retail Ltd, an arm of Reliance Industries Ltd, opened a store near his Shanti Bazar Departmental Store, in the New Delhi suburb of Noida. “I could feel the heat within 15 days of Reliance’s (store) opening...I was badly affected as my store is so close to theirs,” 38-year-old Kumar said.
Three months after the Uttar Pradesh government asked Reliance to close stores in the state, Vinay is seeing his store regain lost ground. “Majority of previous customers have started to come back to me,” he added. “Whatever policy the government brings, they should ensure that small retailers are not hurt by the bigger ones,” Kumar said.
That’s a tough task. Currently, modern retail accounts for just $12 billion and is expected to grow to $78 billion by 2012 and further swell to $165 billion in the next 10 years, according to Technopak Advisors Pvt. Ltd.
The shift towards it is already visible. Carole DeMelo, a secretary at Sony Entertainment Network, a Mumbai based entertainment company, said she buys her monthly requirement of provisions from a hypermarket close to her suburban Mumbaioffice, rather than her local provision store.
Raghu Pillai, president of Reliance Retail Ltd, said: ”Whenever there is a change, there is always some shifts and balances. If you look at the overall macro picture, I believe even if the organized retail grows to 5-10% in the next five-10 years, it will only participate in the growth and will not take market share from anybody. India is a growth story: there is an incremental market of minimum Rs40,000-50,000 crore of private consumption every year, and clearly there is no organized retailer who will get anywhere close to that size”.
Organized retail will drive consumption in the country despite hiccups, said Kishore Biyani, chief executive of Pantaloon Retail India Ltd, India’s largest listed retail. “Whatever changes we brought, we always faced the issues... India that way is a democracy.” Biyani said protests from small retailers were triggered mainly by companies such as his retailing fresh produce. “I believe if (the business of) fruit and vegetables was not done by larger players, then the issue would not have been there.”
Subhiksha’s Subramanian said the study’s methodology seemed flawed to him.
“Even (if) there are 10 kirana stores and an 11th one opens then the original businesses will lose some business. This has nothing to do with organized and unorganized. The key way to do this is to study this over a two- or three-year cycle,” he added.