Big retail=less small retail+more consumer savings

New Delhi, May 2 There’s a sting in retail, with a spin in the tale. The sting, of course, remains for the Government that is now caught in a dilemma with a recent study by independent economic think tank, Icrier, revealing that organised retail will hurt neighbourhood kirana stores, at least in the initial years. But, for consumers, it means quality products, higher savings and a good shopping experience. And for farmers, better prices for their produce.

The main findings of the study, commissioned by the government itself, were presented to the commerce and industry minister in mid-March. The findings, a copy of which is with The Indian Express, dwell in detail on the impact of entry of organised retailing on all stakeholders in the retail trade — small retailers and vendors, consumers, intermediaries, farmers and large manufacturers. The final report is likely to be submitted on May 9.

Though small stores may face a closure rate of 1.7 per cent due to competition from organised retail, the findings do not show any significant job losses. Rather, the overall sample (2,020 unorganised retailers in 10 cities) shows a 0.8 per cent rise per annum in employment. While the western region seems to be the worst hit with job losses of 3.4 per cent in unorganised retail after big retail staged an entry, south India, where organised retail has been present for over a decade, employment has actually risen 2.7 per cent.

While the profit and turnover of these mom and pop shops are expected to initially dip 8-9 per cent, the impact, according to the study, will weaken over a five-year period. In the controlled sample (805 retailers in four cities where big retail was not in the vicinity), small retailers witnessed a positive growth in turnover and profit. But, organised retail is expected to grow a phenomenal 45-50 per cent compared with small shops that will grow at about 10 per cent during 2007-2012.

Similarly, with the entry of organised retail, farmers tend to use better quality seeds and improved farming methods. Caught in the midst of this battle, intermediaries dealing in apparel, fruits and vegetables, rice and packaged consumer products, are likely to see a squeeze in margins. Despite this, the survey says, 66 per cent of intermediaries wish to expand their business and want their next generation to continue.

Meanwhile, large manufacturers such as HUL, ITC Foods, Pepsi Foods, Glaxo Smith Kline, United Spirits, Cargill...

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Big retail=less small retail+more consumer savings

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