The small-store owner is too important, nimble and innovative to be bumped off by big-box retailers in India.

Kirana RIP? Not Yet.

The arguments for and against FDI in retail are, at a generic level, valid on both sides. However, since the devil is usually in the detail, the facts about India’s small retailers and suppliers, the conditions stipulated for FDI, and recent experience with the effects of domestic modern retail need to be viewed together before the likely outcome pronounced. The big fight is about whether this new policy will kill small shops, massively destroy livelihoods and take away GenNext’s opportunities. Facts suggest otherwise. Consider the kirana, the one most feared to be at risk. About 5-6 million of the 8 million FMCG-stocking kiranas are in rural India, and are totally safe, as the new ones can only come into the top 53 cities.

R Sriram, founder of Crossword and retail expert, tables two insights. One, in many big cities, kiranas are already not participating in the growth offered by the newer settlements like Gurgaon or Powai, because without their advantage of historically-priced real estate, they are not viable. Two, increasingly, small shopkeepers’ children are getting better educated and want to exit ‘sitting in the shop’ as soon as possible, just as small farmers’ children are exiting farming. Sadly, the country’s retail density has been increasing in recent years, not driven by passion or profit, but because of lack of options — hopefully that will change. It is true that traditional income streams of small shops in the vicinity of a large supermarket plummet; but we have seen that they soon recast their business model, exploiting the inherent advantages they have that the supermarket cannot emulate: free, prompt and no-conditions home delivery, superior and customised customer relationship management, khaata- credit and willingness to stock small quantities of something used by only a few people in their catchment — a classic ‘long-tail’ strategy. Notice two more things: even in upper-class areas in large cities, despite large retail chains in the vicinity, the small vegetable vendor and kirana continue to find a place in the household’s shopping basket. The kirana also continuously morphs, and is already moving to a more specialised and selective portfolio. We will find them variously choosing to become more of a convenience store (7-Eleven-type), or fresh-food store, a home-delivery store, maybe even express-format franchisees of large retail, and so on.

Another reality check: how much consumption capacity do even the top 50 cities have? Seriously, how many more Ikea, Zara, Walmart, Tesco and Best Buy can a Surat, Kanpur or Indore absorb, in addition to more Big Bazaar, Megamart and Croma? Further, foreign specialty retailers targeting the rich consumer will create never-before custom, and not at the expense of existing shops. Two decades ago, we had the same hue and cry that Indian brands would be wiped out; but they got better and bigger than they would have had they been left unchallenged. Now for the suppliers. Large suppliers will lose the pricing power they had with small retailers and nobody on any side of the FDI debate is grieving for them. Small suppliers, even without FDI, are being mercilessly squeezed by middlemen. The hope is that large retail chains, unlike the broker middleman, have more incentive to pay more because they have customer loyalty and a brand to build; in exchange for steady, loyal, consistent quality supply, they will pay more, guarantee offtake, improve product and production efficiency. The FDI norm of at least 30% sourcing from small scale pushes this further. Walmart potentially could kill the small suppliers of anything by importing 70% from China cheaper; but loads of small traders are already doing the same, flooding our markets with Ganesh murtis, chappals, clothes, watches, etc.

The Achilles’ heel for a lot of skilled artisans, specialised producers, grass roots innovators, etc, is market orientation and marketing. Producer collectives have managed to organise themselves on the supply side using government assistance schemes, but they struggle to manage the demand side. That is the missing link that large retailers in vendor development mode can provide, just as the auto industry has done to ancillary suppliers. Both sides agree that customers will gain because large chain retailers can provide better for cheaper, given the discounts they get through buying large quantities and sourcing smartly. Customers will also get a wider range, more innovative products and more comfortable, truthful and informed shopping environment. Poor customers won’t get discriminated against, because the hypermarket is anonymous, transactional, classless and nonjudgemental. They may not get better service because the small Indian retailer is the champion of good service, from atta to electrical, the likes of which we haven’t yet seen any big retailer match, anywhere in the world. That’s another reason why he will always survive.

Before we fight further, consider this. This network of commercially-savvy supplychain linked small retailers is an invaluable asset: as one report said, they are not ‘unorganised’ by any stretch of imagination; we agree and have refrained from using this phrase in this article! It is unlikely that Indian jugaad will let this network disintegrate. Perhaps in rural India, where they would have been more hard hit had the big-box retailers been allowed, they would have been garnered by banks as new extension counters for financial inclusion.

economictimes.com: RAMA BIJAPURKAR INDEPENDENT MARKET STRATEGY CONSULTANT

Retailers Work under one roof by sharing space.

Now Rival Retailers Work under one roof

SHARING SPACE TO EXPAND SPECIALTY CHAINS

THEY are fierce rivals in the marketplace, but big retailers such as Future Group, Reliance Retail, RPG Retail and Aditya Birla Retail now tap each other’s synergies to expand their specialty chains.

So, walk into a ‘Central’ mall of Kishore Biyani’s Future Group and you may well see Reliance TimeOut, the gift-music-book format of Mukesh Ambani’s Reliance Retail. Reliance’s optical chain Vision Express shares some premises of Birla group’s ‘More’ hypermarkets, while RPG Retail has rolled out 20 Music World stores inside Future Group’s Big Bazaar outlets.
“Retailers have now realised that they alone cannot manage all categories on their own, how much hard they may try,” says Arvind Singhal, chairman of retail consultancy Technopak Advisors.
Future Group CEO Kishore Biyani says it’s a win-win model for both retailers and customers. “The retailers can exploit each other’s synergies in non-competing categories, which ultimately helps the customer get a wider choice from the same store,” he says. “We are open to locate our specialty stores in other’s premises, if such opportunities come up.”
There has been a flurry of deals and expansions in the $20-billion organized retail sector over the last five years since companies such as Reliance, Aditya Birla and Bharti entered the turf and started floating specialty chains on their own or in tieup with foreign players.
“There are obvious opportunities to associate with each other, provided the brand positioning of the stores match,” says Bijou Kurien, president and chief executive
(lifestyle) of Reliance Retail.
He says that this model of co-locating stores could emerge as a way to expand. “We understand each other’s issues like constraints in standalone expansion and profitability.”
The concept of shop-in-shop within largeformat stores such as hypermarkets is selling like hot cakes among garment and other single/limited product retailers because it saves them the cost of operating standalone stores and gives access to a captive consumer base of the large format.
Also, specialty shop-in-shop owners need not worry about associated costs like security, civil engineering and air-conditioning, says Mr Singhal of Technopak.
Retailers say running a shop-in-shop costs at least 25% less than a standalone shop of the same size.
These deals mostly follow a revenue-sharing model, but retailers say there is no standard formula on the percentage of revenue shared. It depends on the customer traffic the large store is able to drawn.
In some cases, there could be sharing of shop-floor employees, sharing of loyalty schemes and payment counters.
“The model of collaborative expansion will drive efficiencies,” says K Dasaratharaman, president (speciality retail) of RPG Retail, which plans to more than double the number of its music-and-movie chain Music World outlets inside Big Bazaar. “We are talking to few others like Aditya Birla Group to expand on this model,” he says.
Shoppers Stop vice-chairman B S Nagesh says the chain will explore this model to expand its book retail chain Crossword. “Distribution has emerged as the key point in the country,” he says.
Reliance Retail
Reliance DIGITAL — Consumer durable & information technology
Reliance TRENDS — Apparel & accessories
Reliance WELLNESS — Health, wellness & beauty
Reliance FOOTPRINT — Footwear
Reliance JEWELS — Jewellery
Reliance TIMEOUT — Books, music & entertainment
Reliance AUTOZONE — Automotive products & services
Reliance LIVING — Homeware, furniture, modular kitchens, furnishings SPECIALTY CHAINS OF BIG RETAILERS
Future Group
PLANET SPORTS — Sports lifestyle NAVARAS — Jewellery aLL — Fashion for plus-sized people DEPOT — Books
RPG Retail
MUSIC WORLD BOOKS & BEYOND
Tata Group
LANDMARK — Books, music, gifts, movie

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