Large-format retail chains in the country like Big Bazaar have been publicly opposing the entry of foreign competition like Wal-Mart on the grounds that the small kirana-type stores will get wiped out. But this has been unconvincing as the Indian corner store has lots going for itself. Apart from the personalised service and home delivery they offer, kirana stores have much lower overheads and often function with zero cash. Big manufacturers like Hindustan Lever typically offer them 15-21 days' credit, and the kirana store's distinction lies in being able to turn around its goods in less than this period. A study by Delhi-based think tank ICRIER has quantified this and other advantages. It was always obvious the organised retailers in the country were looking for some breathing space to be able to organise themselves so as to take on the Wal-Mart-Tesco challenge. Based on last weekend's cover story in this newspaper, it appears India's organised retailers have done a pretty good job of readying themselves. Big Bazaar, for instance, is expanding capacity by another three times to take its total retail space to 10 million square feet by 2008 and plans to be in 55 cities from the current 23. It has even taken a leaf out of the Wal-Mart book""getting into mall management and helping existing vendors grow so that they can offer it the kind of economies of scale that global retail leaders are known for. Others such as Shoppers' Stop argue that their establishment costs are 30 per cent lower than those of developed country retailers. And Piramal-owned Piramyd Retail is actually working on a multiple-format concept, with larger stores to cater for the usual department-store customer and a chain of smaller neighbourhood convenience stores complete with home delivery taking care of the rest of the shoppers. | |
| So now that local organised retail has more or less readied itself for the impending competition, there is no reason why the global retail leaders should not be allowed in. While it is always possible that despite all the preparations they've made, the likes of a Big Bazaar can get hit once global leaders come in, what needs keeping in mind is the significant savings that will accrue to the national economy in the process. Expenditure on food and beverages accounts for about 35 per cent of GDP and that on clothing and footwear another 3-4 per cent. Now since Wal-Mart or Tesco will have to drop prices by at least 10-15 per cent in order to effectively compete with existing players, that has the potential to add to middle class well-being and savings. Such savings, it should be pointed out, have been seen in most other consumer goods areas where foreign investment has been allowed. Most prices in the consumer goods sector, for instance, have actually fallen in real terms over the past decade. The Congress Party needs to make it clear to its Left allies that in opposing FDI in retail, they are really batting for big business, not the small trader. The latter has thrived in large metros where big retailers have established a footing, indicating that the clientele of organised retail and the kirana store are different, as are their business models. Both can and merrily survive in the foreseeable future, with the consumer gaining from the expanded choice, to boot. |
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