Thursday, July 17, 2008

ICRIER Report comes as respite for Small and Big Retailers

Contributed by Charu Gupta

The much awaited ICRIER report that was commissioned at the behest of Congress Chief Sonia Gandhi has been finally out which has good news for all.

According to the report, Indian Retail is close to $300 billion with a mix of organized and unorganized players and is set to grow at 13% to touch $590 bn by 2011-12. Share of modern retail will increase to 16% from 4% in the same period. The report suggests that the small retailers and kirana stores won’t be affected much by the presence of organized players in the industry instead they are going to stay stronger.

The main areas of research were to find out the impact of organized retail on employment, consumers, farmers and manufacturers, prices and overall economic growth.
The report suggests that the farmers would be one of the biggest beneficiaries of this retail revolution. The profit realization for farmers surged 60% when the produce was sold directly to organized retailers as compared to selling with mandis.

There was no overall job loss in the unorganized sector, says the research. However, some decline was seen in the volumes and profit of kiranas near modern retailers which is expected to decrease over a period of time. The closure rate of unorganized retailers is found to be 4.2% per annum. But all this, hasn’t dampened the spirit of these retailers and majority of them also want their coming generations to continue with this business. 10% of the respondents were also open to the idea of becoming a franchisee with a retail chain.
"Intermediaries dealing in fruits and vegetables have had some negative impact in the first few years which is expected to negate as time progresses. Some of them also seem positive about the proposition of working with big retailers in future", says the report.

In terms of impact on consumers, the report suggests, that although all the income groups have benefited from the wave of organized retail, the biggest beneficiaries have been the lower-income groups as they have been able to save more. The savings range from 4-8 per cent as per the store format.

The consumer is spending more and making bulk purchases due to availability of wider range of products, attractive offers and promotions and presence of better quality products with higher prices. 73% shoppers of organized retail chains were upbeat about opening up of more such chains while only 34% of shoppers shopping from unorganized retailers were in favor of it.
According to the report, the biggest factors which are contributing to the strong hold of small retailers are their credit facility, goodwill, possibility of bargaining, choice of loose items, convenient timings and home delivery.

The committee has also given a few suggestions which include uniform licensing policy, making institutional credit easily available to small retailers, improve the logistical response of small kirana stores by encouraging corporatisation of retail sector, creating more wet markets through public private partnerships and facilitation of cash-n-carry arrangements which can procure from farmers and sell to unorganized retailer.

The recommendations also include making a private code of conduct for Big Retailers and modernization of APMC markets.

Thus, the report has come as a respite to both big and small retailers as the findings show positive signs for both the formats.

Smaller players can very well co-exist with the big ones and compete on their strengths and flourish with few government initiatives.

Reference: Happy Retail to All, Pitch

1 comment:

aliah said...
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