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Asian Tribune is published by E-LANKA MEDIA(PVT)Ltd. Vol. 20 No. 107

Retailing in gloom

By Chandramohan - Syndicate Features

If the social activists and righteous busy bodies are to be believed India faces an imminent threat of a sixth of its population—about 160 million, the population of Pakistan--reaching starvation levels. Not because of an impending catastrophic spell of drought or food shortages but perhaps for just the opposite reason. The grave danger supposedly comes from the business houses and multi-nationals who are trying to enter the retail and traditional small trade business in the country in a big way.

Instead of sharing optimism one would like to question the doomsday scenario. Because it is politics that is behind the increasingly violent protests that are forcing closure of chain stores like Reliance Fresh selling food items, including vegetables, fruits and groceries, and not necessarily social or economic factors. Those who are creating the scare have indirectly condemned the middle classes for not seeing any peril in what may be called the new retail chain store culture in the country. The indirect opprobrium being hurled at the middle classes is that they are hand in glove with the government in driving the estimated 40 million retails, small traders and street vendors (supporting 160 million people) into desperation.

The protests have assumed political tones—probably with polls so much in the air. Mayawati government even rescinded its own policy that had allowed private parties to buy agricultural produce directly from farmers, bypassing the middlemen who, and not the producer, are largely responsible for frequent but unreasonable hike in prices. The future of the chain stores seems sealed in West Bengal and Orissa. Even Madhya Pradesh and Rajasthan are not far behind with out of work politicians like Uma Bharti finding a badly needed stick to beat the local BJP government.

Indeed, some small traders will be hit if a big store where prices are low and quality of service and goods better opens in a neighbourhood. But the very premise that it will wipe out the small traders sounds exaggerated. India is not only a country of more than a billion people but also an increasingly urbanised country where all its big cities and towns have huge population that give enough space for simultaneous existence of both the traditional shopkeeper and vendor as well as the more modern and efficient chain stores.

If the likelihood of competition from the chain stores poses threat to the vast army of small traders the better course would be to fight it by organising themselves, improving the quality of goods and services sold to the consumer and giving up the opaque methods of doing business, which deprive the exchequer of revenue. Ways have to be devised for eliminating or at least minimising the role of the middlemen—the real villain, one might think-- to stop the arbitrary and frequent price escalation. Believe it or not there are four middlemen between the farmer and the consumer whereas there is generally not more than one such intermediary in the developed west.

Most ill-practices in trade are introduced before goods reach the retailer. It is not the small trader who manufactures counterfeit or substandard goods. If the street vendor or the ‘mandi’ shopkeeper sells stale vegetables and fruits artificially ‘coloured’ to make them look fresh the harm has been done at a previous stage.

Sympathy for the small traders is ok. It should not blind us to some of their practices. For instance, how many vendors use standardised weights and measures? One is never sure whether a kilo of tomato or onion really weighs that much. If the customer is not careful enough, he or she can be sold an item that is past its shelf live. With rising consciousness about health and hygiene, why should one buy fruits or vegetables from a shop where rats and insects run freely and the water used for ‘cleaning’ the food items comes from the nearby sewer?

It is not that small trade is totally impervious to change; its response is always slow and inadequate. When Pepsi entered the snacks market some 15 years ago, there was hue and cry but soon some popular traditional Indian snacks started to appear in attractive packages and at prices that were competitive. One big traditional Indian ‘chain’ in the business of retailing snacks rejigged its strategy, gave up traditional packaging practice and adopted attractive factory packed method.

The more surprising thing is that this change over inspired only a handful of Indian wholesale manufacturers of snacks and other edibles. The rule still is loose packaging where hygiene is of no consideration—or consequence.

Speaking of poor enforcement of laws, big sharks in India can and do take liberties with the laws. If the big stores become the norm in the country it is quite likely that the consumer will find after a while that they have become lax towards maintaining the price level. To eliminate competition a big business house will not hesitate to resort to undercutting and once monopoly is established there will be freedom to jack up prices at will.

Such fears are not unfounded but that cannot be the main argument for not allowing the chain stores to do business. With rising public awareness it should be possible to see the law enforcing agencies curbing the evil trade practices more frequently. Also, artificial increase in prices by big retail chains will almost certainly invite public wrath which has, as far as one knows, never been directed at the small trader so far.

To raise an alarm whenever any thing new is tried is normal in India. If in doubt recall the reaction when Rajiv Gandhi in the 1980s tried hard to sell the idea of ‘computerisation’. He was reviled and ridiculed and all the critics were united in declaring that it would lead to a high unemployment and poverty in our impoverished country. What happened eventually need not be recalled. The story is too well known to bear repetition.

- Syndicate Features -

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