Retail - Branded v/s Mom-n-Pop

FDI put on hold!!

2011-12-03T21:40:00.001+05:30

It appears that the Union Cabinet has put the decision of FDI in retail on hold, for now i.e. the MNCs like Wal Mart will have to wait a little longer before being able to set store in this India.

The Government of India which is currently a coalition government is once again on the backfoot. It has once again had to roll back a decision taken by the its biggest coalition member - the Congress Party. This was conveyed to the media by Ms. Mamta Banerjee, the supremo of the Trinamool Congress.

She said

"Pranabda sought our opinion on the issue and we told him that the Trinamool Congress remains firm. He informed me that the cabinet decision on FDI entry in retail will be suspended until and unless a consensus is evolved"

The government has had to face the ire of the people and a very stiff resistance from the opposition parties. Even some of its allies, including the Trinamool Congress, were against it on issue of FDI.

The traders in the country had called for a nation-wide one-day bandh on the 1st of December, a call that had received overwhelming support from traders across the length and breadth of the country.

All-in-all, the end result is that the government has finally given in to the public demand and put FDI in retail on hold.

FDI Decision faces lot of resistance.

2011-11-30T22:06:00.001+05:30

The government's decision to allow FDI in the retail sector is facing a lot of resistance. The resistance is from almost all quarters.

Parliament has not being able to do business since the decision of the union cabinet went public. The opposition - NDA and the Left Front - are going all out against this decision. Some opposition have gone ahead and said that they will go to the extent of violence against the retail outlets that come up in accordance to this decision.

So much so that, some of the alliance partner of the ruling coalition - members of UPA - have also voiced their opinion against the FDI decision.

A nation-wide bandh call has been given for the tomorrow - 1st Dec 2011 - on this issue.

Let us see what happens.

What FDI in Multi-Brand Retail means to Indians?

2011-11-27T22:06:00.001+05:30

A lot is being floated in the media - both good and bad - about the Indian Governments recent decision to allow up to 51% FDI in multi -brand retail.

But, what does it really mean for us Indians?

Multi-Brand Retail basic is a fancy name for big shopping plazas or malls, products from different manufacturers will be available for sale under one roof. Malls are the latest in fad in the economic scenario. Big Bazar, Magneto, City, Reliance Retail are some names that are already doing business in India. These the big players that chains of stores in several cities.

Every city also has some individual names that are available locally.

So, what is the fuss all these players are already doing business in India. Well - the government just opened the Indian shores for foreign players to come and set shop in India. Wal-Mart has already partnered with Bharti and has already started building its wholesale distribution outlets in several cities.

With the Cabinet having decided in favour of FDI in retail being, Wal-Mart and other similar retail outlets are likely to come-up across the country soon, if the government does not bow down to the pressure from the opposition parties and local small shop-owners.

Government of India to allow FDI in retail

2011-11-24T22:08:00.001+05:30

Union Cabinet - today - approved 51% FDI in multi-brand retail sector.

Way back in 2008, the government had put a hold on FDI in multi-brand retail, after there were wide spread protests against the large scale organized players entering the retail sector. The retail sector in India is currently dominated by the many small shops that can be seen in every neighborhood.

Way back in the 70s and 80s, the government under the stewardship of the then Prime Minister Indira Gandhi had given a lot of emphasis to self-employment and encouraged the Indian masses to setup their own enterprises. As a result, a large number of small shops that are now referred to as the mom-n-pop stores came up.

The advent of the large-scale players in the form of organized retail made these small entrepreneurs insecure, leading to large scale protests against them.

But now, the government has cleared the way for setting up large scale multi-brand retail outlets by allowing 51% FDI.

Let us see what happens, now.

GOI's discussion paper for FDI in retail sector

2010-07-19T16:27:00.000+05:30

The Government of India has set the ball rolling for Foreign Direct Investment (FDI) in the multi-brand retail sector by releasing a discussion paper. Organized players who have been eying a larger share in Indian retail are once again buzzing with activity.

The discussion paper was issued in the first week of July 2010 by the Ministry of Commerce and Industry.

Earlier, the large players for multi-brand retail outlets had to roll-back or put their projects on hold after the government had intervened following large scale protests from the unorganized sector.

Presently, 51% FDI is allowed in only single brand retail outlets in India and multi-brand retail is restricted to cash and carry format.

The retail sector in India is mainly dominated by the family owned shops - also referred to as the mom-n-pop stores.

The scope of Consumer Protection Act

2009-08-10T08:43:00.002+05:30

The scope of the Consumer Protection Act got wider on Friday when a Division Bench said "buyers of goods or commodities for ‘self consumption’ in economic activities in which they are engaged would be consumers as defined in the Act (Consumer Protection Act, 1986)”.

The observation was made by the Division Bench of Justice S. B. Sinha and Justice Deepak Verma while hearing a case in which the heir of a purchaser of a truck had approached the country's top court with a claim for damages due to delayed delivery of the necessary documents of the truck, which had been purchased at an auction after its previous owner defaulted in paying its installments.

The court observed that while enacting the provision of the Act, Parliament wanted to exclude from the scope of the definition (of consumer) the persons who obtain goods for resale and also those who purchase goods with a view to use them for carrying on any activity for earning.

Unwinding of the retail onslaught

2008-10-27T13:39:00.003+05:30

In the wake of the on-going financial crisis one business venture that is continuing to stand out is the traditional retailer of the neighbourhood. Large retail establishments have not been able to dent their existence in any way whatsoever.

The traditional neighbourhood retails stores seem to have won this round of threat to their existence from branded and large scale retail operations. Expansions plans of all malls that were mushrooming all over the country have scrapped or postponed indefinitely.

In fact, the condition of many of the existing malls atleast in the smaller cities of the country is not very good. In fact, some have downed their shutters while many are in the process of downsizing.

Retail onslaught - my comments

2007-10-10T16:57:00.001+05:30

When I started this blog sometime back, I just wanted to document some of my experiences based on my interaction with the members of the marketing and trading community in our town.

Little did I know that I would end up documenting protests against the retail onslaught at a national level.

Never did I imagine in my wildest thoughts that there would be such large scale protests in the country against the big players as a result of which a giant of the size and stature of Reliance would have to shut down its outlefts and consider withdrawal from some of the states.

We are at a stage where government intervention is desirable so that all parties involved survive and thrive.

Protest by Retailers in Maharashtra at Mumbai

2007-10-10T16:44:00.000+05:30

Today (10-October-2007), representatives from all sections of the supply chain including farmers, traders, wholesalers, hawkers and daily wage workers from areas around Mumbai gathered at Azad Maidan in Mumbai to protest the decision of the government to allow FDI in retail ventures by overseas and big domestic businesses.

Most establishments, including wholesale markets and retail shops across Mumbai, the financial capital of the country, and its suburbs were closed. The protest was organized under the banner of Federation of Associations of Maharashtra (FAM) who had given a voluntary trade shutdown across the state.

Click here for details of the protest.

Indian Druggist Association launches marketing arm to keep off competition

2007-10-09T11:25:00.001+05:30

The All India Druggists and Chemists Association has launched a marketing company in which many of its members have joined as shareholders.

The move was initiated by the top brass of the association to head-off multinational pharmaceutical marketing companies that have been trying to enter the Indian arena on a large scale.

In these competitive times activities of the large corporates are being fine tuned to harness their strengths, the weaknesses are being either off-loaded or out-sourced. Specialized marketing outfits have been reported to be approaching the Indian pharmaceutical manufacturers to take onus of marketing their products at all levels - distribution to retail.

When the office bearers of the national association learnt of the forthcoming threat to their existing work culture the initial reaction was to not allow such marketing companies to start operations in the country.

After subsequent deliberations and discussions is was accepted that such invasions by marketing outfits could only be delayed and not completely stopped. So instead of beating the competition they decided to join them.

As a result the association has floated a limited company and invited applications for promotional shares from its members.

This I believe is a novel way of surviving the retail onslaught that is making inroads in the country.

Organized Retail and Uttar Pradesh

2007-09-27T12:38:00.000+05:30

Organized retail in Uttar Pradesh witnessed a setback as Reliance has to close its Fresh outlets in Lucknow, Ghaziabad and Noida.

The retailing giant - Reliance Retail - has announced the termination of services of about 850 odd employees and has hinted at winding up operations in the state.

One of its top executives was quoted to have said something to the effect that there was no sense in staying invested if they are not allowed to open the stores.

One strange phenomenon that I have witnessed in the entire episode is that a major chunk of the protests against the organized retail has been targetted at Reliance Retail and its outlets.

Rough Weather for Organized Retail continues

2007-09-18T13:11:00.000+05:30

The latest salvo at the organized retail has come from the fire-brand leader Uma Bharti of MP.

She led hundreds of supporters in protest against the proliferation of retail chains promoted by corporates in the country. The immediate target of their attack was the Reliance Fresh store at Indore. They forced the outleft of Reliance Retail to shutdown.

The company representatives had already closed the shop before the rally reached its doorsteps. Uma Bharti still put a lock on its entrance to formalize the shutting of the shop.

The leader of the Bhartiya Janshakti Party - Uma Bharti - has set a 2 week deadline for Reliance Retail to close all its retail outlets in Bhopal and Indore threatening the organization with dire consequenses. She has also warned Walmart to refrain from advancing its plans of opening a chain of retail stores.

After UP, West Bengal, Kerala - a political leader in MP has stood up against the corporate and multinational organized retail players.

The voices from the small traders - owners of the stores in the unorganized retail arena of the country - have started getting support from some political leaders.

Reliance Retail closes shops in West Bengal

2007-08-30T10:52:00.000+05:30

Reliance Retail has announced the temporary closure of it retail outlets in the state of West Bengal.

The decision has come close on the heals of the decision of the Mayawati government in Uttar Pradesh to forcing all players in the organized retail arena to down their shutters.

Both the above decision have been support with the same reason.

In both cases the decision makers have submitted to the protests and angry demonstrations by the local traders and business community which have been led by the people's representatives. Many a times, these demonstrations have generally been followed by violence and destruction.

For many years, the policy makers of our country have gone to great lengths to promote a culture of self employment through setting up small stores - retail outlets - which are now referred to as the mom-and-dad stores by the players of the organized sector.

The announcements made by the organized retail players as they publicized their plans to launch a series of stores and malls across the country has spread a wave of uncertainity amongst the owners of these mom-and-dad storeowners, who feel their livelihood is being threatened.

Mayawati Bans Retail Outlets of Organized Sector

2007-08-24T11:25:00.000+05:30

It is for the first time that has taken a political decision against the outlets of retail sector players.

Mayawati, the firebrand Chief Minister of Uttar Pradesh, has ordered the closure of all retail outlets in the category of organized retail in the state. These include shops of Reliance Fresh which has functional outlets in Lucknow with other stores coming up in Varanasi and other places in the state.

The leader of the Uttar Pradesh government issued the closure orders citing the law and order situation in the state as the reason. A group of local shop keepers led by a member of parliament of the opposition Samajwadi Party ransacked some outlets in Lucknow. There have been reports of protests against the up coming stores in the other cities also.

The CM has said that the ban of these retail outlets is a temporary one and will continue until the law and order situation does not improve.

Meanwhile, she has announced the constitution of an 5 expert committee under the chairmanship of the Cabinet Secretary of UP. The committee comprises of Principal Secretaries from different departments. The committee has been asked to go into all aspects of the organized retailing and the effect that it can have on the tradition mom-n-pop stores in the state.

A twist in the retail story

2007-06-19T15:43:00.000+05:30

There has been a new development in the Indian Retail Onslaught Scenario.

The Government of India has come up with a scheme to introduce licencing for large retail players planning to open retail outlets for the sale of food and grocery items.

The plan, as it appears, is that anyone wanting to open a retail outlet to sell food and grocery items - including grains, fruits, vegetables, edible oils etc. with a space of 10,000 square feet or more will have to procure a licence from the local urban administrative body - the Municipal Corporation or its equivalent.

It may be recollected that the Reliance Fresh outlets in Ranchi, Indore faced stiff opposition from the local sabjiwalas (vegetable vendors) recently. Considering the shop size limit of 10,000 sqft it seems that outlets like Reliance Fresh, that are already operational in some towns, may not come under its perview as they occupy of much smaller premises.

It remains to be seen how much this proposal will effect the retail ventures of the big guys, especially Reliance and Bharti - both of whom have been preparing in a big way to open a chain of retail outlets in the country. Their outlets are being planned with sizes ranging from 50,000 sqft to 1.5 lakh sqft of floor space.

Many of the industry bigwigs are raising eye-brows at the very thought of licencing. The past experience of the licence regime have not been very good and a lot of apprehension creeps in with the very thought of it being reintroduced.

The ugly side gets uglier

2007-05-15T19:25:00.000+05:30

Rajesh Gupta was very quick in pointing out the unrest in a couple of other cities in India - see comment in previous post.

The protest that first started at Ranchi against the retail outlet of Reliance Fresh has spread to Indore and Raipur. In fact, if I am not mistaken, the retail outlet against which the vegetable vendors of Indore are protesting has not yet opened.

It is all a reaction to the wide-spread publicity that the new retail outlets will sell the goods cheaper than the regular street-side sabjiwala. The vegetable vendors are scared that the huge discounted price that will be offered at these new retail outlets will be so much that their sales will be affected to the large extent. So much that they might not be able to make their day-to-day livelihood.

It appears that the news of protest in Ranchi and in Indore has inspired the vendors in Raipur to come out to the streets. Here no major new retail outlet is yet proposed or announced. The sabjiwalas of Raipur were protesting outside an already established retail outlet.

I only hope that a peaceful solution can be found, wherein both the involved parties can survive and prosper.

The ugly side of the retail onslaught

2007-05-14T10:29:00.000+05:30

The opening of the retail outleft of Reliance - Reliance Fresh - had to face the brunt of the local vegetable vendors at Ranchi.

News sources say that the vegetable vendors of the town gathered outside the Reliance Fresh outlet and started should slogans and throwing stones. They even damaged the glass panes and decor of the shop. The outraged people were asking Reliance to concentrate on their other businesses. Their main protest was that why is such a big business house trying to sell vegetables and deprive them of their only livelihood.

Till now the focus of this blog has been the effect the influx of the large business houses into the retail foray have on the millions of mom-n-dad stores across the length and breadth of this big country. This is a reaction from the tiny shop-keepers.

The vegetable vendors are generally tiny shop-keepers who don't even have shops. Most vegetable vendors squat by the street-side to sell their wares. They can be seen on all busy commercial and residential areas, where they spread a small plastic sheet on the ground and display their goods on it. They generally buy in the morning from the mandi and try to sell it off by the end of the day.

Obviously the retail onslaught is not going be easy. In proceeding on this track, the big business houses are treading on unchartered territory and there is no saying what kind of resistance or support they may face along the way.

Traditional Retailers on the Technology Track

2007-05-10T08:40:00.000+05:30

The traditional retailers have visibly embarked on the technology track.

Computers, closed circuit television (CCTV), modern gadgets are now the latest in thing in the retail infrastructure scenario. Obviously the traditional retailers - owners of the mom-n-pop stores - are gearing up.

Most of the participants of this modernisation campaign are in it to be able to meet the stricter reporting requirements of the various government agencies. Their consultants - tax advisers and auditors - are insisting that they deploy the hi-tech reporting mechanisms to be able to better comply with the statutory reporting which, in India, is clearly headed towards the e-world.

Some of the retailers are modernising because their principals - the manufacturers and brand owners of their products - are insisting that they do so. I am aware of a couple of such principals who want their dealers to be online all through the day and use their common infrastructure of their billing and information requirements.

Their is yet another group of retailers that is upgrading because it is the in-thing. They use these modern tools to demonstrate that they in sync with the latest. For this group modernisation is more of a marketing gimmick. They like to be recognized as trend-setters in their group.

Then, there is one group that is upgrading because his neighbour has done it.

Whatever be the reason, the modernization will certainly help these small retail establishments survive the retail onslaught of the big business houses.

The retail onslaught has definitely slowed down.

2007-05-02T20:11:00.000+05:30

The government interest in the retail onslaught (Previous Blog) has definitely slowed down the retail onslaught in India. The only news in the media now-a-days in the media is about the activities of the Reliance Retail venture.

This company which is a totally indigenous effort, with no foreign collaboration is going on with its retail programme. It has recently inaugurated its latest venture Reliance Digital, its foray into retailing digital products.

I certainly look forward to findings of the study that was requested by the Prime Minister's Office. The report should make interesting reading and pave out the path for future development in this sector.

Retail Onslaught has government attention

2007-02-24T18:51:00.000+05:30

The Indian Government takes notice of the retail onslaught. Prime Minister Manmohan Singh has ordered a full study on the impact of the retail chains on the existing small businesses and retailers.

Sonia Gandhi, the chairperson of the UPA government had voiced concerns over the impact of the "transnational supermarkets" on the local shopkeepers and the Prime Minister's Office (PMO) reacted promptly on the issue. It has gone one step ahead and included the retail chains being set up by the major Indian business houses like the Tata, Reliance, Bharti etc. into the scope of the study.

It must be noted that all the previous governments of the country have always promoted self employment and entrepreneurship specially at all levels and the entry of the large corporates in the retails sector directly impacts this stand.

It appears that the government is keen on making a comprehensive retail policy. In a letter to the Department of Industrial Policy and Promotion (DIPP), the department has been asked by PMO to complete the study in a reasonable timeframe so that it may be used as an input in the policy that is to be made in the near future.

This announcement will certainly make the transnational retail houses and big Indian business houses apply the brakes on their ambitious retail plans in the country.

Let us wait and what the study uncovers. Meanwhile the the small retailers and shopkeepers who were getting scared of the on-coming retail onslaught have got a breather.

Some retailers have struck gold

2007-02-17T17:58:00.000+05:30

I am posting on this blog after a long time, it been almost a month.

My work as a software developer has kept me overworked for the last few days. I have started work on a new web-site that is being developed by my company for providing information about Bilaspur in Chhattisgarh, India.

Meanwhile, so much has happened and there is so much to discuss about the changing retail scenario in India.

Most of the shopkeepers in some of the frontrunner cities that are in the immediate horizon of the new large retail players may be a worried lot. But, some of the savvy and open-minded shopkeepers who were located in the prime localities have struck a jackpot.

They have managed to encash the competition amongst the new players for prime location. They have leased out or rented their own shops to the new players who are scouting for premises for their proposed chain of stores. In fact, this solution has made them more than happy. The deals that they have struck will pay them more than what they would otherwise have earned from their shops at the end of the year.

More so, they now have the time and resources to pursue and investigate other options, options that will, hopefully, keep them busy for the day and add to their kitty.

Let us see how things unfold.

Retailing Business Model – Traders v/s Manufacturers

2007-01-15T09:57:00.000+05:30

Day before yesterday, I had a discussion with a friend who has spent more than 20 years as a marketing man. He has represented several pharmaceutical companies in various capacities. He has worked in several of the possible positions, both in the field and at office and has been maintaining a bird’s eye-view on the developments in the retail sector.

Here is one interesting view point that emerged from the discussion.

Organized retailing has been in existence in our country for quite some time in two basic forms…

Manufacturer Retailing through Exclusive Showrooms

Organized manufacturer retailing has been in practice for a long time. Several companies, specifically in the textiles segment, have set up their showroom chains in the country in past. These showrooms had one common characteristic and that was they all displayed and sold only the products they themselves produced. These were exclusive showrooms.

There are umpteen examples where it was observed that such showrooms started with a bang, with all the company fan-fare and marketing strength. They did brisk business in the beginning. As time passed, people started wandering away in search of something new, something different and sales would decline. The very USP (unique selling point) with which these showrooms were launched – exclusivity – went against them.

Trade-Oriented Retail - Departmental Stores

Similarly, trade-oriented organized retailing has been around for quite some time now. It is visible in the form of single large departmental stores. The types of products that they offer cover a wider range and in every product category they competing products from competing manufacturers.

Again there are plenty of examples where we have observed that the wider the product range and variety the more customers are drawn to them. This retail model is very popular because it allows the consumers to compare a wider range of products before concluding their purchase.

It will be interesting to see which business model the new corporate giants planning to foray into the retail sector will be adopting.

The plans made public by these players so far reveals a mix of both models. Some have announced their plans of displaying products from various categories and multiple options within each product category. Some of the new retail players are manufacturers or brand owners who will be selling only products of their own brands.

Who’s Affected, who’s Not?

2006-12-25T13:04:00.000+05:30

I have been trying to evaluate the affect of the onslaught of organized retail on the shopkeepers of our region. The shopkeepers in India can be broadly classified the following categories…

1. Aware and wary of the Retail Onslaught
The people in this category are mainly the larger shopkeepers with ambitious growth targets and keep abreast with the latest developments in the industry. They participate in the race for the being a best retailer in any of the many possible classes. They keep in touch with the industry trends and benchmark the industry leaders and try to better them.

2. Aware of the Retail Onslaught and Not Bothered
The people in this category are those who have inherited their shops and clientele. They have always seen a steady flow of customers on their counters and find it hard to imagine that these customers will not come to them. In fact, some of the members of this category go to the extent of believing that the new organized retailers will find it difficult to survive in their traditional market.

3. Heard of it in the News
This is the group of people who regularly read the newspapers and keep up with the latest news on the radio and / or television, but strongly believe that the news does not affect them.

4. Not aware of any such thing
Last but not the least the un-bothered group. Either they are too small to care or do not have the resources / desire. They just do not give a damn to what is happening around them. They live in their own world and are not aware of what is happening in the world around them.

In which category would you classify yourself?

Toll of the retail onslaught!

2006-12-12T20:47:00.000+05:30

He has already decided he is closing down his shop!

This Sunday I went to meet an old friend who lives in the state capital. The state capital can be categorized as one of the tier two cities of the country. He has his own shop. It is big spacious showroom in the posh locality of the town. He deals consumer durables like television, refrigerator etc. He has the authorized dealership of some of the big companies in the durables sector.

We discussed several topics and one was the changing retail scenario in India. This is a topic that has caught my interest for some time now and I bought it up to get his views on it. But, I certainly was not prepared for what came up in the discussion.

In response to my observations. He told me that one of the big retail players (who is planning a chain of mega stores all across the country) had procured a place across the street, quite near his shop. A big shopping mall would come up there shortly. There has been news in the media that the company had tied up with many companies. There was some discussion about the discounts and incentives that were being planned for the customer. My friend dealt in the products of some of the manufacturers whose names had come up.

"It is a volume game" he said. "I know how the companies are willing to offer discounts and schemes if we can make bulk purchases - the larger the quantity the better deal we get. There is no chance for players like us to compete with a national chain on the volume front.” and went on to add that he was seriously considering about wind-up his business within the next one year.

I was completely taken aback.

Here I was carrying out an academic discussion on my blog (this blog) about adapting and gearing up to the new challenges and my friend was already facing the hard reality of the retail onslaught.

If this is the reaction of a big dealer, whom I have seen enjoying the pampering from his companies, I really wonder, what the smaller players are doing?

Changes Expected in the Retail Sector

2006-12-08T15:21:00.000+05:30

The entire retail sector is headed for a major revamp.

The interest shown by the major business houses in this sector and the quantum of size and numbers being planned will change the way things are transacted along the entire supply chain. Nothing will be left unchanged - The players, the commodities, the prices, the policies, the strategies ... nothing.

It is important that all the links of the supply chain – right from the manufacturer to the last mile shopkeeper – understand the affect the new retail mantra will have on their business before it is too late. Even the most “secure” will have to sit up and adapt to sail safely through changing winds of new retail.

Following are some of the changes that I can envisage in the consumer retail sector …

Mega deals will be struck at the manufacturing level. The new players, especially those that are coming up with chains and mega mall projects will strike deals for bulk purchases at the corporate headquarters itself.
The burden of sales, which is presently on the manufacturer, will be shifted to the retailer in exchange for a larger share in the profits.
For an additional share in the profits the retailer may take up the responsibility of distribution of the goods for his chain of outlets at the national, state or city level depending on the number of stores and size of the market.
The volumes and the margins of the distributors (the stockists and the undercutters), in the present supply chain, will be compromised.
The number of the intermediaries in the supply chain will be reduced.
The customer will be offered lucrative merchandizing schemes, incentives and discounts in exchange for his loyalty.
The growth in the incomes of the consumers and easy availability of goods supported with the right advertising and pricing strategy will support growth in the size of the consumer market.
The local shopkeeper will stand to loose some of his clientele and in turn some of the pampering received from the manufacturer.
The manufacturer may end up pampering the new retail giants.