While foreign retailers such as Wal-Mart Stores Inc. and Metro AG, which ironically don’t have a single retail store operating in India (the latter has three cash and carry stores that sell to other retailers and institutions), have been the focus of many protests, the findings of the survey clearly point the finger at the country’s own, home-grown retail chains as the source of small retailers’ woes.
Gandhi’s letter forced PMO and the commerce ministry to call for a national survey, which got under way back in March. More than nine months later, there has been no official word on the final results of the survey.
Mint has independently verified that the finished survey has been sitting for about a month with the Indian Council for Research on International Economic Relations, or Icrier, a quasi-government research agency that is often used by various Indian ministries to conduct politically-sensitive surveys.
While there have been selective leaks during the course of the survey that appear to downplay the impact on small stores, Mint has also ascertained that the survey’s final data has formally concluded that unorganized retailers have seen sales fall—by a significant 16%—after big, branded stores opened within a 2-5km radius, depending on whether it was a supermarket or a hypermarket.
Meanwhile, small retailers in so-called “control” areas of the same cities—or where organized, branded retail hasn’t yet penetrated—showed a 2% increase in sales in the same period.
Subhiksha, which opened its first store a decade ago, has crossed the 1,000-store mark
In other words, based on the Icrier-sponsored survey’s findings, if organized retail hadn’t opened up in the vicinity, the affected small retailers would have generated 21.4% more revenue from what they actually did. On an annualized basis, their sales decline was estimated at 10%, still a significant fall for any retailer.
More alarmingly, profit data shows an even greater impact on small retailers, suggesting that big retail is putting the squeeze on margins at the so-called mom-and-pop stores and hurting their ability to respond to larger competition in times to come.
Those small retailers surveyed who had to contend with branded retail chains saw average profits fall 16% before and after such stores opened, but the real impact was much higher because retailers in the “control” group, who didn’t have to face such new competition, had actually posted a 5% increase in their profits in the same period.
This means that essentially there was a decline of 20% in profits for those unlucky enough to be in areas where Reliance Fresh, Subhiksha or other branded retailers have opened shop.