Retail Chains: The New Place to Shop?

Over the last few years, many large retail chains have entered the Indian market, mostly by setting up hypermarkets and large departmental stores. These range from Indian chains such as Spencers and Reliance Fresh, to international players like the American retail giant Wal-Mart. While these mushrooming stores can prove to be a boon to customers, helping them save time by selling everything from food and groceries, fruit and vegetables, electricals and electronics, home and office essentials, garments and fashion accessories, toys, food and personal care, and music and books under one roof, the reaction to this trend is mixed, with some vehemently speaking out against it.

The major portion of these protests has come from small retailers and vendors, whose business is directly affected by these chains. Protests have been staged by traders’ federations across many states, with Maharashtra witnessing some of the largest protests in terms of number of traders participating. Praveen Khandelwal, secretary-general of the Confederation of All India Traders (CAIT) said, “We will not let the control of the economy and trade of the country go into the hands of the corporate houses. This is our firm decision, our firm resolve.” Demands of the traders include a total review of the policy, stating advantages to retail trade, economy and revenue with entry of corporate houses in retail and framing of a national policy on retail trade and small and medium industries.

The Indian retail industry is pegged at 350 billion dollars, and is growing at over 13% per year. It is forecast to double in size by 2015. Of this, presently, organized retailing is about 5%. However over 40 million neighbourhood grocery stores, small shopkeepers and vegetable vendors are threatened by the growth of retail chains. The sheer size of these ventures is also perceived as a danger; Reliance has more than 590 stores, and Spencers has around 300.

The retail chains provide items like fresh agricultural produce at far lower rates than small vendors. This is possible due to two factors. The first reason is that the retail chains buy fruits and vegetables on a much larger scale, enabling them to buy cheap and pass on the benefit to customers by offering wholesale prices. The other reason is that this bulk buying allows them to purchase directly from cultivators, thereby eliminating middlemen and bringing down the cost while increasing profit margins. Small vendors are forced to buy their stock at subzi mandis which may be the 3rd or 4th stage of sale. From the consumers’ perspective, department stores offer better prices, and so they shun small sellers in favour of these stores.

Another advantage for customers is that in addition to offers and schemes being run by the manufacturers of consumer products, these stores also offer various other deal and concessions in the form of discounts on larger purchases, loyalty cards with points that can be redeemed against merchandise, as well as freebies. This is missing from family-owned businesses and corner kiraanaa stores. However, the smaller stores often offer more variety in terms of number of different products in the same category, while larger stores tend to stock mainly popular brands, and not niche products. Thus these larger chains too have disadvantages, as people may be forced to settle for the brand that the store is promoting, rather than their favoured brand, for lack of choice. This is especially true in urban areas where many people lack the time to shop in multiple, separate outlets.

Another myth is that large retail stores generate employment. In truth, they force so many stores in their neighbourhood out of business that the number of jobs lost due to small shops shutting down are greater than those created by the chains. Also, initial low prices tend to rise once the store is established in its business, because they often create a monopoly over retail in that area

Some of the traders’ federations have raised these issues with state and central governments. Recently, the re-election of the UPA to the Union government has established a sense of stability that multinational companies favour, and so many more like Tesco and Marks and Spencers from the United Kingdom have also expressed an interest in setting up operations in Indian cities and towns. Despite this, most traders’ federations continue with their attempts to have zoning restrictions imposed on mega retail stores by the government, as most feel that it is the only solution possible. Retail chains have pointed out that they control only a small segment of the retail industry in India, and they believe that this fractional share does not pose a challenge to small retailers and vendors.

Ketaki Misra

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