Fear, Danger are the Instincts which are continuously haunting India's retail, all thanks to the 51% foreign direct investment (FDI) declaration for retail on 14th September, 2012 and the political gimmicks taking the advantage of the same. Debates are many but are these instincts really from those whom everyone says will be affected?
Retail is always a buzzing sector, whether offline or online, but just three alphabets – 'F D I' – from the Economics book has fueled an unruly fire, mostly at a superficial political level as the political toddlers create a hue and cry to get their "power lollipop." Before starting the drum beats on the political debate, let's look at the "common man and the kirana stores" relationship to understand the situation.
The common men's retail life
My neighbor, a 60+ retired man (referred as Uncle M); my aunt, a 40+ housewife in Bangalore; my maid who has an unemployed husband and two kids; my friends at their twenties and thirties — I will take them as examples of how the common men dwell in their retail lives.
Uncle M is a huge fan of mushrooms and, till a few days back, was willing to travel even 6-10 kms to the marketplace just to get those. Because unfortunately, his near-by kirana shops could not tend to his demand. He would bring a packet of mushroom for Rs. 33 from the supermarket or incase its out he would lazily move to the mall and get some. After four months, one of the kirana shops got the same packet of mushrooms and put those up for sale at a price of Rs. 40. Instead of cribbing about the high price, Uncle M took in the opportunity and grabbed three packs immediately. His reasoning was – "Instead of going to the supermarket by paying an extra Rs. 40 to the auto-rickshaw driver, this deal is far better and less tiring."
Aunt loves the bulk shopping. She would move to the near-by shop, order the entire monthly ration, pay out and happily head for home. All the supplies turn to her door-step as the shopkeeper arranges for a free home delivery for her. She prefers her wholesome shopping sometimes even from outlets like Big Bazaar or Nilgiris or Spencer. But the load that she has to carry home makes her hesitant to make that a regular habit.
My maid being the sole provider of the family, her monthly income is barely enough to meet the needs of her family, with both of her children attending school. She maintains a hand to mouth living and has to buy things on a daily basis. She would go to her nearest kirana shop and buy few grams of daal (lentils), rice, and vegetables (optional) within a limited budget. She would have been able to buy the things may be at Rs.5-10 less at a supermarket, considering the changing weekly offers. But for 100gms of rice, or 50 grams of daal, she fees a trip to the "big" store is unnecessary and time consuming. It might come to one’s mind that why wouldn’t she stock up the cash till the end of the month and buy large quantities together at lesser cost. Her answer to that was just as expected – “If the money remains at home, by next day morning the cash will vanish. So, buying fragments of groceries on a daily basis is the only option left.
Moving on, all on-the-job friends will agree, month-ends are a mess. With Cash-strapped hands, one will be desperately eyeing the next month to begin. So, think about the debt sheets (khata) we maintain with our local shopkeeper, whereby one buys as many things as needed and the entire amount is paid at the beginning of the month as the salary drops into one's account. Isn't that a life savior sometimes when one is truly cash-strapped and some urgent house requirements needs to be meted. Can one think of maintaining a similar option with a Food bazaar, or the shops in the near-by mall? Leave Wall Mart.
Here is the fact. Majority of the consumers of Indian retail are more convenience conscious than cash conscious. Even if big foreign retail bodies like Wall Mart make an entry into the retail, our dear kirana shops will always be dear as none can replace the shopping ease they enable.
About the ongoing retail debate
While the ruling party opened up the retail to sneak in those into confidence, who wanted to see the economy thriving, it will be safe to say that it isn’t much of a reform. Foreign companies were permitted to invest in the back-end even earlier. They were barred only from the front end. If the main benefits of big retail are supposed to come from back-end ops, this option was always available to the Wal-Marts of the world. So putting a Wal-Mart board on the storefront, cannot be considered much of a reform. It’s more like improving the bottle shape of a drink for a better hold in the hands while drinking and claiming it to be a Big Bang reform. In reality, the FDI act is actually a minute part of all the so-called reforms being laid on a silver platter by the government, after four years of colossal mismanagement. The irony lies in the sudden interest only in the last year before the fates are sealed in a new election. Coming to the opposition, well to oppose seems to be their primary responsibility. Various points were raised, and hence here is a little glimpse of the primary ones.
Kirana shops can't close down
I asked some of the retail shops, why would they charge the extra cost while the supermarket (I haven't even touched the malls' grocery store prices) is charging less. With a long list of excuses each of them ended with the conclusion – "We cannot decrease prices." Well that's about it, and each time I ended up buying the groceries and coming home. Hence, the debate of kirana shops being impacted is baseless with they being undaunted by the supermarkets which are spreading branches at a speed more than a roots of a tree. In fact, each time you pinpoint of an advantage that the super market gives, the kirana shop too competes equally providing some real local benefits. Take for instance, food coupons that many super market accepts. When I pinpointed the same to one of the local shops, the next day I could see a board hanging 'Sodexo coupons accepted' in the same shop. And the likes of Wall Mart won't even have a branch spreadout like the supermarkets, so it would be even harder for them to get some regular loyal customers who would hop in to satisfy their daily needs. Once-in-a-while shopping spree is different from the regular day-to-day tight deals that people have with the local shops.
Jobs will be balanced
While some supermarkets might be at risk, many of the employment opportunities created in the newly built ones will almost balance the gap.
Self-made employers will thrive
The self-made employers are competitive and many would bring in diverse tactics to keep the customer loyal. Moreover, if it is said it will widen the gap between the rich and the poor – the gap is already widened. India going strong in the road to development, there are more chances of the gap being reduced than further widening. With that in mind, it will help emerge some new enthusiastic people, who would turn to entrepreneurism. However, if 7% GDP growth turns to be the new normal in Indian economy, many of the entrepreneurial ideas will be nipped in the bud. At least in the current situations some amount of new investment is essential. Though a mere FDI opening in retail may not achieve much, yet it should not be completely nullified.
Organized retail is a small fish that would neither threaten the livelihoods of “kirana” shops, as portrayed by the Opposition, nor would it dramatically restore the financial health of the nation, as hoped by the government. End of the day, the little baby steps in the name of reform needs to be accepted to ensure the country do not turn a victim of a xenophobic outlook and with a hope of witnessing future real reforms.