India is a land of small shopkeepers. One out of every 14 employed Indians works in small stores that dot our neighbourhoods and street corners. So, there is little surprise that the coming of large organized retailers worries many, including politicians. Similar worries have rippled through other countries; even a developed country such as the US has not quite made its peace with the phenomenon called Wal-Mart.
Illustration: Jayachandran / Mint
The government had asked think tank Icrier to map out how the spread of large retail chains would impact small shopkeepers. Mint has reported the main findings of this inexplicably secret study today. The findings are predictable. Other private studies have come to similar conclusions. So, the reason for keeping this study out of the public domain, while the results remain unchanged, escapes us. It is high time the political cat and mouse games stopped.
The most significant finding of the Icrier study is that small shops have seen sales and profits drop when a big-box retailer comes in their vicinity. What worries us is that this fact may lead to all the wrong policy decisions. Modern retailing leads to higher, economywide efficiency as wastage is reduced and inventory management improves. This could lead to lower prices at the checkout counter. So, severe restrictions on modern retailing will be a setback for farmers and consumers.
The policy dilemma is to seek ways to bring modern retailing into the country while ensuring that a large part of the Indian labour force is not nuked. This newspaper has often reported how small shopkeepers have started responding to the challenge by improving merchandising and store display. But, modern retailers have a huge advantage in procurement. They purchase in bulk and use their power to beat down prices.
Small shopkeepers can get access to the same pricing advantage. India needs to quickly open the doors and allow more cash-and-carry chains, or wholesalers who sell to retailers. The small shops will be able to ride on the procurement strengths of cash-and- carry stores. That will level the playing field to some extent.
Meanwhile, the big boys have been reworking their strategies: going slow on expansion because of soaring land values and preferring low-key launches to stay clear of political controversy. They should also consider ways to partner with small neighbourhood shops that sit on expensive real estate and offer a direct link to consumers’ homes.
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