Retail Sector Gearing Up For FDI, Are Local Retailers Worried?

Posted on January 22, 2011 in Business and Economy

By Dilasha Seth:

Though, the government panel has deferred its decision on 100% FDI in multi-brand retail, the small retailers of Delhi echo, “Bring It On”. While the government seems nervous in giving a green signal to the opening up of $435bn retail sector, the retailers seem optimistic enough. Don’t they feel a threat to their business?

“Our experience with big air-conditioned departmental stores has given way to our apprehensions. The customer loyalties do not change”, says a confident Rajeev Mishra, owning a general store for the past 15 years in Rohini.

Yes, after all it’s these ‘kirana shops’ that made Subhiksha run for its money. And today it’s battling court cases slapped by its lenders. Vishal Retail got no better treatment, and it’s desperate for a sellout due to the accumulated losses. Reliance Fresh and Aditya Birla Group’s More retail chain join the league, reporting losses of Rs135 crore and Rs541 crore respectively.

“The customers feel more connected to us, as the discount that we give is nowhere close to these big mega marts”, explains a Janakpuri retailer.

Proximity plays another role. Though these big retail chains have claimed to cover the whole of Delhi, it cannot be compared to the next door shop in the societies. “It is more convenient to just hop out of the house and buy your requirements than travelling 2-3 kms to reach Big Bazaar”, justifies Ms Sonia Kumar, a Wazirpur resident.

Stores such as Big Apple and Spencers went packing from Tilak Nagar within 8 months of commencing their operations. The number of buyers kept falling, till no sales were reported for a number of days consecutively, forcing them out of the area.

According to the owner of ‘Ankush General Store’ in the area, this can be credited to the home delivery and credit facilities he offers to his customers which resisted the sliding of the customers to these, ‘all-under-one-roof’ stores.

Seeing the pro side, foreign investment will enhance India’s retail sector through augmented investment in the cold storage, reducing the wastage immensely. It is this lack of investment in logistics of retail chains leading to inefficient market mechanism.

Though India is the second largest producer of fruits and vegetables, it’s battling double digit supply-side food inflation for the past 2 years. Wastage due to lack of cold storage is the prime factor.

A 100% FDI will draw a lot of foreign players in the market leading to employment generation and increase in competition, much to the advantage of the consumers.

“We are not opposed to FDI, given our business should not get affected”, says a Bittu Singh, a small retail store owner.

Therefore, the entry of foreign players must be gradual; cautiously and vigilantly checking its impact on various sections of the society.