NEW DELHI, MAY 3: With the country’s budding organised retail sector facing growing dissent from local traders for allegedly eating into neighbourhood mom & pop stores’ market share and profit pie, some of the majors like Kishore Biyani’s Pantaloon Retail and Subhiksha Trading Services have started offering baits to mend fences with the ‘small fish’. They are making concerted efforts to involve small shops in the overall organised retail process in a bid to convince state governments, some of which have already slapped restrictions on the entry of big retail, that their expansion will be a positive sum game in which existing unorganised sector participants, too, have an economically viable role to play. Pantaloon Retail, one of India’s largest organised sector players, has concessionaires in its outlets which it sublets to small retailers. “We have offered space within our outlets to local mandi operators in six of our stores in Mumbai. We intend to replicate this in our other stores as well,” informed Future Retail CEO Rakesh Biyani.

Similarly, Vishal Retail, as part of its plans to invest Rs 450 crore by the year-end for capex, has decided to franchise its branded retail outlets to kirana shop owners. “We have started the process of identifying mom & pop stores willing to become franchisees for our retail chain. A team of five-six members has been formed to scout for such potential partners in Delhi,” said Vishal Retail Ltd CMD Ram Chandra Agarwal. This model was pioneered by Subhiksha Trading Services, which had launched a massive expansion drive and now has 1,200 stores across the country.

What we are witnessing here is not, however, a new phenomenon globally. “Big box retailers have partnered small retailers to enhance capacity and gain critical insights into consumer behaviour,” said Technopak Advisors Pvt Ltd principal consultant Gurpreet S Randhawa. For instance, when US-based Best Buy, a prominent electronic retailer, wanted to gain expertise and a footprint in American mobile retailing, it partnered European mobile retailer Carphone Warehouse Group.

As a part of its long-term growth strategy in India, Max Hypermarket India Pvt Ltd (MHIPL) plans to give traditional kirana retailers sub-franchisees for its supermarket format. “Their familiarity with the catchments, fundamental understanding of the customer, personalised service offerings, and customer handling makes for an interesting proposition,” says MHIPL MD Viney Singh. In fact, for its Spar Hypermarkets’ Bangalore outlet, MHIPL has hired traditional retailers as customer service executives and supervisory staff.

This trend, followed by Wadhawan Food Retail (P) Ltd at its flagship Spinach supermarket located across Maharashtra, has proved very successful. “We hired over 200 people, from push cart vendors to meat cutters, from the traditional belt. We found that not only were their selling skills much better, but attrition was comparatively lower as we allowed them to pursue their businesses after the eight-hour shift,” says Spinach CFO Pushpmitra Das.

For retailers trying to find a market for themselves, this is as much a necessity as an innovative tool to win over small traders. “Traditional retail is so widespread that the only way for a modern retailer to expand its footprint is to partner them. It has its own equity and also helps them leverage their brands,” Randhawa said. “But big retailers like WalMart don’t want intermediaries in the supply chain.”

The jury is still out. Kirana store owners have their own story to tell and very few may want to be franchisees of organised retailers. “The majority of the kirana store owners want to stay alone and compete and also want their next generation to continue. They are committed to staying independent,” said ICRIER director and chief executive Rajiv Kumar.