New Delhi: A politically-sensitive survey, ordered by the Prime Minister’s Office (PMO) at the behest of the ruling United Progressive Alliance chairperson, Sonia Gandhi, on the impact of big, branded retail chains on unorganized individual stores has confirmed—and quantified—a significant decrease in both revenues and profits at India’s smaller retailers that are battling large, deep-pocketed chains.
It also shows that a whopping 50% of small retailers surveyed reported lower sales and 61% of all retailers pointed to competition from organized retail for their declining financial health. The scientific survey looked at some 1,600 small retailers in four Indian cities, including 800 who were within a 2-5km radius of new organized retailers. The survey also talked to 500 consumers who shop at both small as well as branded retailers.
The study (See: key figures), which is yet to be made public, will likely cause significant debate over the Congress-led government’s stance on the retail sector, including its decision to allow giant foreign retailers to enter India and the lack of a cohesive policy on allowing major industrial conglomerates, such as Reliance Industries Ltd (RIL), the Aditya Birla Group and Bharti Enterprises Ltd, which are planning thousands of stores across the country.
India is home to hundreds of thousands of small shops and there has been growing concern, hitherto only anecdotal, that the current government’s policies that allowed unfettered entry of branded, large retail chains were likely to have a devastating impact on tens of thousands of shop owners and their employees within a relatively short time.
If and when the Manmohan Singh government chooses to publicly disclose the findings of the survey, it could set the stage for a showdown over the government’s retail policy that is aimed at modernizing India’s rather archaic retail formats and one that the survey shows is clearly benefiting mostly urban shoppers because of lower prices and wider choices, but, at the same time, threatening to have a large impact on small and mostly unorganized neighbourhood retailers who have been the mainstay of the Indian household’s shopping experience for generations.
Amid rising tensions, including organized vandalism and small-scale riots against branded chains, some state governments such as Uttar Pradesh have forced the likes of Reliance Fresh, a unit of RIL, to stop expanding. And a growing chorus of protests, including from its Left allies, forced Gandhi in early 2007 to write to the Prime Minister to ask if the government has fully examined the impact of its laissez-faire retail policy.