The Hindu Business Line : The big and small of retail

The entry of big houses in the retail trade should be banned simply and totally, if necessary, under the anti-monopoly and restrictive practices legislation.

What passes for progressive these days is so much like the regressive school of yesterday that it is difficult to distinguish between Tweedledum and Tweedledee. These champions of nostalgic romanticism are attacking every windmill on their way — free trade, frontier technology and entrepreneurising.

There is, for example, the position of the progressive group today that includes the leftists of the United Progressive Alliance (UPA) and the rightists of the National Democratic Alliance (NDA), on the subject of organised retail trade. A recognised leader of these forces, who does not belong to the Left front but claims to be a student descendance of the Lohia school of socialism, has opposed the emergence of supermarkets in the context of demonstrations by small traders in Ranchi and Indore, Madhya Pradesh, in the following terms:

The big houses will take over the retail trade by initially offering low prices and good services to the customer in an attempt to drive out the retail trader. After that, they will start showing their true colours and exploiting the customers by cutting down on quality, services and hiking prices .

The vegetable retailer lives hand-to-mouth and will find the onslaught of the big houses difficult to sustain. The fate of the sweet-corner retailer will not be very different and he will soon be forced to down the shutters.

Initially, the big houses will be able to obtain massive loans from the financial institutions. Once the retailer is crushed, the big houses will make huge profits, pay back the loans and start making even larger profits.

The big houses entering the retail trade will corner the profits made by the wholesaler and the whole chain of intermediaries, destroying the livelihood of almost 40 million traders who would simply not be in a position to face the fierce competition from the big houses. Including their family members, over 200 million people will face destitution.

Unfortunately, both the UPA and the NDA appear to be siding with the organised retail trade and foreign direct investment therein.

The entry of big houses in the retail trade should be banned simply and totally, if necessary, under the anti-monopoly and restrictive practices legislation.

The retail trader

The retail trader who is doing well falls in a different class and is not to be confused with the footpath hawkers and the door-to-door vendors. However, together, they constitute the final link in the chain between the farmer and the consumer.

It is understandable that BJP traditionalists should be coming forward to defend this class of retail traders. That has been the main plank of the party's constituency for decades. But it is difficult to understand how the Left has suddenly developed a sympathy for the retail trader who is, after all, only a link in the chain of intermediaries whom they have always opposed.

Ostensibly to check the price rise, the UPA Government recently decided to put sugar, edible oil and pulses in the Public Distribution System. This will, of course, be at the cost of the retail trader.

A large number of street-corner shops were forced to close down due to the introduction of the rationing system. These progressive academics do not mind putting retail trade out of business as long as it strengthens the hegemony of the babus and gives the officialdom substantial patronage.

Impact on street-corner shops

True the supermarkets with their financial resources and network will impact the "pop and mom" corner shops. Experience, however, shows that these shops have not been driven out of existence anywhere in the world. Under on roof, the supermarkets have the advantage of offering a large variety of goods of an assured quality at reasonable prices.

But the "pop and mom" shops have their strengths too. A good section of customers enjoy the personal touch, more important, the buying `on account'. Also, supermarkets can hardly compete with the door-to-door vendor or the corner shop in freshness of perishable products. Also, the small shops have the cost edge over supermarkets that cannot operate without a comprehensive accounting system that includes inventory and cash control and surveillance of vast areas.

Of course, these shops barely create any employment outside the family. It is a bad craftsman who quarrels with his tools; a genuine entrepreneur counts his blessings and not the handicaps and the strong points of the adversary.

The street-corner retailer and a large majority of door-to-door hawkers and vendors have sustained because of the system of intermediaries between the farm and the kitchen. Only a few tried to organisethe post-harvest chain of operations in such a way that the farmer gets a remunerative price and the customer pays a reasonable price.

Stiff competition

Indeed, in many foreign countries there were cases of retailers coming together and organising direct purchases from the farmers as also storage, processing and transport. Some of these groups, though not quite as large, are offering stiff competition to the supermarkets. The retail trader is not doomed if he can leverage fully his advantages and builds up an efficient network from the farmgate to his shelves. The verdict lies with the customer. He literally votes with his feet by striding into the supermarkets or walking into the street-corner shop.

(The author is founder, Shetkari Sanghatana and Member of Parliament — Rajya Sabha. He can be reached at sharad.mah@nic.in)

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