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Is the corner shop cornered? Unlikely, say experts. Not only is the retail pie getting bigger, local stores have already braved competition from Indian chains.
Five years ago, when 70-year-old Masood Alam - the owner of a general store in Delhi's Lajpat Nagar area - heard that a large retail store was coming up in his small neighbourhood, it got him worried. This retail chain would be more than 10 times his 120-square-ft store and stock many more products than his 40-year-old outlet ever could. When the store opened, his sales dipped. But surprisingly, he got his customers back in no time. Looking back, he is satisfied, even grateful, for the large outlet that sits some 50-feet away from his store.
Today, Alam's shop is no longer the rickety structure that it used to be. He has given the interiors a makeover, hired and trained an employee who can speak politely to the customers, and made several other small changes such as improving the lighting inside the store and arranging the products in a way that makes shopping easier. "Customers can no longer be taken for granted. You have to offer them a good purchasing experience as competition increases, " he says.
He knows that the country will soon see a rush of even larger stores that would bring along "huge capital that the government is in dire need of". But this time he is not worried. As he attends to the small but loyal crowd of customers at his counter, he is confident that the foreign retail chains will not be any more threat to him than the local chain already established in his neighbourhood. At least six other such general stores have come up in the area in the past few years, and all of them have been registering good growth, he says.
Whether Alam's complacency is misplaced or not is too early to tell. But with the announcement of FDI in retail, most mom-and-pop store owners are busy calculating their risks.
For instance, they know that fewer SKUs (stock keeping units) and small real estate work against them. But the goodwill and loyalty of their customers, cultivated over years, is an advantage that larger chains can't hope to emulate. "Customers have to stand in a queue to make payments at those big stores. But in my shop, I let them pay even at a later date because I known them personally. Customers also have the choice of buying just as much quantity as they require as I don't stock packaged goods, " says another small retail store owner. Home delivery is yet another USP of such shops.
Raj Jain, MD & CEO of Bharti Wal-Mart, says. "The ongoing protests against FDI in retail are mostly sparked by a fear of the unknown. Nowhere in the world have these fears come true and I see no reason why this should happen in India. The argument that people will lose jobs is completely unfounded. Kiranas offer greater convenience, credit and a service that modern retail can never replicate. "
Large retail chains, like Reliance Retail, Big Bazaar and Spencer's Retail, have been operating in India for several years now. "Retail as an industry is not new to India. Twenty-five percent of retail stores in Bangalore, today, are modern conveniences which co-exist with kirana stores, " adds Jain.
To safeguard the interests of domestic retail the government has inserted the clause of 30 per cent local sourcing.
India is home to a staggering 14. 6 million retail outlets. Experts say it is typically a small-retail-channel country and any more channels of trade will only improvise this native format. With advantages of a minimal cost structure and small space enabling them to be closer to their target consumer, it would be virtually impossible for large retail chains to copy the local model.
Even if the present concerns over FDI in retail were to come true, it will take some time for the minimal impact to show. "At the most, the size of the unorganised retail might shrink. But that pinch would not be felt at least in the next decade or so, " says brand expert Harish Bijoor.
According to Bijoor, the entry of large foreign chains will introduce India to modern retail for the first time. "What we have currently in the form of Big Bazaars and such others is the retail version 2. 0. FDI will usher in the next wave, " he adds.
While it would be unrealistic to deny the stronger competition that kiranas would face, experts say apprehensions have been blown out of proportion as these large chains would only come up in select towns. This effectively rules out the concerns about rendering people jobless. "If anything, the investments will bring in more jobs. In the end, it is the consumer that stands to benefit, " says Hemant Kalbag, partner and head of consumer and retail for Asia at A T Kearney.
Quite a lot of the opposition to FDI has, in fact, been coming from the middlemen or intermediaries who bring produce from farm to the market. These middlemen have profited from the ban on foreign investment and it is thanks to them that produce in your corner shop is marked up several times.
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