labels: Economy - general
Small stores survive the large retailers news
27 May 2008

New Delhi: Debunking populist misconceptions, a study by the Indian Council for Research on International Economic Relations (ICRIER) has said that organised retail, embodied by players such as Reliance Retail, and Bharti-Wal-Mart, have not even made a dent in the earnings of conventional mom-and-pop kirana stores in India.

According to the study, 'unorganised', or 'traditional' Indian retailers did experience a slowdown in their business volumes and profits during the initial phases of large organised retailers setting up shop in their vicinity, but over time, the adverse impact weakened.

According to ICRIER director Rajiv Kumar, the initial 8-10 per cent negative impact has worn off because of the small retailers' competitive response to their big and organised rivals.

The biggest weapon in the traditional small retailers' arsenal has been the thus far non-replicable door-to-door delivery. According to ICRIER, better display, provision of monthly credit, and personal interaction with customers has been an effective tool at their hands to ward-off competition  from ther olarger organised sector.

Moreover, organised retailers have not been able to poach employees from the traditional retailer's workforce, with the rate of closure of small retailers due to competition from big format stores being as low as 1.7 per cent per annum.

India's retail industry is likely to grow at 13 per cent per annum, to around $590 billion in 2011-12 from the existing $322 billion in 2006-07. The study has estimated that organised retail would grow at 45-50 per cent per year, thereby quadrupling its share with respect to India's total retail trade to 16 per cent by 2011-12.

For its part, the 'unorganised' or traditionally-organised sector is likely to witness an yearly growth of 10 per cent, taking it to $496 billion by 2011-12 from the current $309 billion in 2006-07.

The study claims that owing to the relatively weak financial state of unorganised retailers and space constraints their expansion faces, the sector alone would not be able to address growing demand for retail.

The ICRIER report also suggests that a simplification of government procedures for large retailers could help boost this sector. Kumar indicated that there are on average 22 clearances and approvals needed presently to open a big retail outlet, varying in number form state to state.
ICRIER's study has viable options for small retail as well.

It suggests that the government needs to improve infrastructure, increase cooperation between small retailers, and offer them credit through scheduled commercial banks. The were the three biggest hindrances to the unorganised retail sector's progress.

Another critical finding of the study was that, contrary to popular belief that has been projected across various forums opposed to the presence of organised retail, of big retailers have actually been beneficial for both consumers and farmers.

It said that while all income groups saved on costs through organised retail purchases, lower income consumers saved more. Also, selling to big retailers directly got farmers profits that were 60 per cent higher compared to those obtained via government-regulated wholesale markets.


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Small stores survive the large retailers