The good & bad of retail unveiled

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Though protest rages across the country against the move to allow FDI in the retail sector, experts say it will usher in change for the better and result in a better shopping experience for the consumer

When private players were allowed into the banking sector, it was met by opposition across the country and more so in Kerala.

But today all agree that their entry brought a customer-friendly work culture into banking and made the sector more robust.

Now years later, the move to allow Foreign Direct Investment (FDI) in the retail sector is being protested across the country , but several experts in the field believe it will usher in change for the better and result in a better shopping experience for the consumer.

They point out that large format retail in the form of Big Bazaar, More and Reliance has come to stay in Kerala, although it was initially met with resistance from the Left.

Dismissing fears that FDI in retail could drive out the small shopkeeper, these experts maintain that location, convenience and proximity determine how well a shop does as most people still rely on their neighbourhood stores for their daily supplies.

“Even if there is a big store across the road, people will still go to the shop nearest to them if it has the supplies they need.

This explains why the presence of several big names in retail has not affected small traders in the state and if they have closed down, it is because they have gone wrong somewhere themselves,” says Mr T Jojo, a city marketing expert, arguing that FDI in retail could usher in more professionalism, modern technology and front and back-end support.

"Supply chain management will certainly improve and sourcing of products will be spread across the country. There will also be more secure employment with those working in such retail outlets getting all the benefits they are entitled to.”

Mr Nawas Meeran, managing director of the Eastern Group of companies, leaders in spice products, agrees that FDI in retail will not make much of a difference to the small trader who has already withstood competition from the big retailers in the state.

"FDI will bring the government more money and improve quality of trade," he says, anticipating other changes for the better too, especially in the perishable sector, where the stress on end-to-end cold chains , he believes, will ensure better products for the consumer.

But Kerala Vyapara Vyavasayi Ekopana Samati president, T Nasiruddin, insists that FDI in retail is a threat to the around 10 lakh small traders of the state and their 50 lakh employees, although he acknowledges that the arrival of the country's own retail giants has not greatly impacted them.

“FDI in retail is against the Constitution that speaks about the rights of traders. In the past traders were not allowed to keep a stock of more than 2000 sacks of rice, but this policy was changed 4 years ago for the benefit of the big retailers.

The consumer has been the loser as rice which was sold for Rs 10 a kg a few years ago, now costs over Rs 30 a kg,” he regrets.

Even those in government have doubts

The new policy on foreign direct investment in retail allows companies with expertise in trade abroad to take 51 per cent stake in companies already doing retail business here.

This will mean that there will be huge investments which can help in improving the quality of trade, setting up infrastructure including cold chain right from where the produce is sourced to the final product on the shelf. And since products will be sourced in bulk, customers, it is argued, can have a cost advantage.

But even those in the government fear that things may not look all that simple and reports emanating from parts of the globe where retail giants have stepped in are not that good for the domestic trade.

Union minister of state for industry and commerce Jyotiraditya Scindia has expressed doubts in this regard quoting the Switzerland-based UNI Global Union’s report on ‘WalMart’s global track record and the implication for FDI in multi-brand retail’.

In a country where roughly 99 per cent of grocery sale happens in the informal sector, FDI in multi-brand retail can lead to widespread displacement and poor treatment of workers in retail, logistics, agriculture and manufacturing.

One reason cited by the government for the FDI is that there is a growing market. But trade here points out that any growth in the grocery market faster than the organized retail will amount to losses in the informal sector.

The Swiss report points to recent studies in Mexico and Central America where the retail giant has been pushing down prices paid to farmers.

Profit margins are maintained and any saving in price is passed on at the expense of the manufacturer.

How LanMark won the competition

Some seven years ago when small retail outlets were under pressure and several even on the verge of closure, a Kochi franchisee, LanMark, stepped in with a formula to help them face the competition from big retail.

Mr Jerry Mathew, who has an over 50 per cent stake in LanMark and is its managing director, recalls how it brought together around 185 small dealers from across the state to work as franchisees in the area of consumer electronics and home and kitchen appliances.

“These traders now deal in over 60 brands, both national and international, which would not have found a place in their stores otherwise,” he says, recalling the many problems they were hamstrung with at the time.

Bringing them under its umbrella, LanMark helped the small dealers with accounting and transportation, making sure goods reached all 185 of them in GPS-fitted trucks.

“We also introduced a cash-and-carry system that made things smoother," says Mr Mathew.

The experiment, which saw the dealers accept the LanMark brand, but retain their individual status for accounting purposes, has paid off hugely, so much so that it's now on its way to being replicated in Chennai, where small traders face similar problems. Lan-Mark itself survives on margins from bulk purchases.