Why not Walmart if you have malls?
If foreign direct investment in retail will ruin the next-door kirana shop; so will investment in this crucial sector by the domestic large industrial houses. This is how Commerce and Industry Minister Kamal Nath, a strong votary of the FDI in retail, is trying to build a case for allowing the likes of Walmart to open their huge malls on the outskirts of Delhi, Mumbai, Chennai and other major cities.
His argument is: Either both FDI and large domestic investment be disallowed from dealing in kirana stores or both be allowed. He would like an equal footing for both Shoppers? Stop and Walmart. While it is true that the Big Bazaar can have an impact on the growth of sales for the Mom and Pop store next door; you cannot equate the home-grown super stores with the US or European retail stores whose business turnover exceed the size of the entire government budget or the gross domestic products of many nations.
It is nobody'scase to insulate the Indian retail sector, which remains in the unorganised sector to the extent of 98 per cent, from the global trends of modern supply chain, inventory and management. But there has to be judicious and calibrated way about it. Let our traders get used to facing competition from the Indian big houses like the Shoppers Stop and Big Bazaars before they are thrown helplessly to face the muscle-flexing of the Walmarts who know the games of the volumes.
Retailing is considered as ?services? within the WTO definition and India is almost ready to have a trade-off between market access in retailing and getting some notional subsidy cut by the developed countries.
It is all a game of volumes in the organised retailing. You source your material in bulk not only for meeting your requirements in one store in one country but many stores across many continents. That is what gives you an advantage over the unorganised retailers who do not even have the bargaining power to lift his stocks on credit.
It is not that the organised retailing will kill the unorganised trade completely. The mega stores have not totally wiped out the small retailers even in the developed nations. There are many scientific ways to equip the traders to face the competition. These would include improving their display, giving personalised attention to the customers (this is one area they would score over the malls and super stores) and working on smart inventory management. Besides, the stores next door to the Big Bazaar would also learn how the big brother is offering sales-pushing schemes like ?Buy One Get One Free?.
The other positive aspect of the Indian retail segment is that it is growing at a fast pace of over 20 per cent per annum. Which means almost 25 million middle-class buyers are getting added to the economy. The small traders by improving their services and display can grab at least half of this share even if the malls come up in metro suburbs. But if we allow FDI and the foreign players in one go; there will be a ruthless impact on the domestic players. But then, there is a pressure on the government to open up this sector. Retailing is considered as ?services? within the WTO definition and India is almost ready to have a trade-off between market access in retailing and getting some notional subsidy cut by the developed countries. While the developed nations will get immediate access to our market in the retailing, the trade-off in agriculture would take years before our farmers can hope to be competitive in Europe and the US. They must first be competitive within the country within which the movement of goods is not freely allowed. The domestic reforms in agriculture have not even started as yet; how are we expecting to gain from globalisation?