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INTRODUCTION
We are known as a nation of shopkeepers with over 12 million, the highest outlet density
in the world in the world with an estimated turnover of $ 200 billion. However a
disturbing point here is that as much as 96 per cent of them are smaller than 500 square
feet in area. This means that India per capita retailing space is about 2 square feet
(compared to 16 square feet in the United States). India's per capita retailing space is thus
the lowest in the world. Another point to note is that only 8 % of our population is
engaged in Retail whereas the global average is around 10-12%.
Traditional retailing has established in India for some centuries. It is a low cost structure,
mostly owner-operated, has negligible real estate and labour costs and little or no taxes to
pay. Consumer familiarity that runs from generation to generation is one big advantage
for the traditional retailing sector. However this is set to change with the entry of the
corporate sector into the retail domain.
The question that is being discussed, given the corporate onslaught with big bucks and
deep pockets, what will be the impact on the traditional mom and pop store? Will they
survive this or will they fold up and leave the field only to the major organized retail
players?
The answer could be a co-existence. The major advantage for the smaller players is the
size, complexity and diversity of our Indian Markets. If we look at the organized retail
players, most of them have opened shop in the Metros, Tier 1 and Tier 2 towns. Very
rarely do we find organized players in the rural areas and we have more than 70% of the
population living in the rural areas.
So what could be the scenario? One of the fallouts of the organized retail onslaught
would be that the smaller stores in the areas where the majors operate could get squeezed
out. The superior purchasing power of the majors and the volume of business generated
can result in lower prices thus moving the custom away from the traditional store to the
organized retail. The customer loyalty today is towards the price. This fear has
manifested itself in Metros, Tier 1 and Tier 2 towns by the unorganized retail staging
strikes against the majors and trying to influence Government policy toward the retail
majors and making it difficult for them to operate. In UP, the Government has banned
organized retail major based on the demands of the unorganized sector. While this may
happen in the short run, in the long run the majors will come back and cannot be
dislodged. The rising disposable income of the techies today, who having been exposed
to top of line retail outlets in the foreign countries, will sooner or later generate a demand
for the same facility. At this juncture, the majors will step and service this need.
There are a number of factors which are unique to our country which would make it
difficult for large players to spread pan India. A few of these factors have been analyzed
here.
The first factor in the favor of the unorganized retail in rural areas is our mindset.
Organized retailing also has to cope with the middle class/rural psychology that the
bigger and brighter a Sales outlet is, the more expensive it will be.
This is very evident from the fact that despite the government’s effort in extending rural
credit, it is still the money lenders who hold sway in the rural belts and not the organized
lending institutions.
Given the above, it is too early to predict the erosion of the mom and pop stores in India.
This is also proved by countries where Wal Mart the world’s biggest retailer operates.
The smaller stores have a peaceful coexistence in these countries with the number one
company in the fortune 500 list.