The Hindu Business Line : Retailing protests

Last week, Spencer’s Retail Ltd, the retail venture of the Rs 13,500-crore RPG group, opened its first “hyper” store in Kozhikode, one of the most important commercial centres of Kerala. Unfortunately, the opening itself happened under rather unfortunate circumstances and constituted a kind of baptism by fire for the company.

Groups of traders and political activists marched to the retail store, threw stones at it and tried to barge in, despite the posse of policemen posted outside the store.

Such protests have also been fuelled by local traders’ associations who would like to protect their own turf, as it were. And these protests are not new.

Some months ago a meet of “nationalists” and traders was held in Kasargod to pressure the Kerala Government to enact a law to protect small-scale traders and prevent the entry of multinationals in retailing sector.

Long-awaited

These protesters may well deserve some sympathy for, after all, it is their livelihoods that they think are at risk. Be that as it may, despite these understandable apprehensions, it is strange that such protests should persist, especially since the imminent retail revolution has been in the air for quite some time.

Major corporate groups such as Reliance, Pantaloon Retail (India) and the RPG Group all announced plans long ago to expand their operations in the State.

In the present case, according to Ramesh Menon, Spencer’s Senior Vice-President (Operations), Spencer’s has been functioning in Kerala for the last 80 years. It opened its shops in Thiruvananthapuram and Kozhikode in the 1920s and 1930s.

Reportedly, Spencer’s has around 17 food stores operating in different parts of Kerala itself and the company is planning to open another 40-50 stores in the State.

Traders’ worry

It is this rush to tread into the retail market that is worrying Kerala’s traders. Small-scale retailing is said to be the source of livelihood for around 20 million urban workers and 12 million rural vendors.

The size of the retail market in India is estimated between $320-350 billion, growing at 30-35 per cent. Organised retail trade makes up about 4 per cent of the total retail trade in India. India has about 13 million retail outlets, which account for about 96 per cent of the trade, and provide direct and indirect employment to nearly 18 million people.

In such a context, will the entry of a group like RPG pose a problem? The fear, really, is that of a loss of business, especially through undercutting of prices. That, however, is unlikely to happen.

Spencer’s assurance

After all, there about 12 million retail traders in India, while the share of organised retailing is only about three to four per cent. And the Spencer’s management has gone on record to promise not to “engage in any price game to undercut local traders.”

Rather than protest, Kerala’s traders should see the writing on the wall. The ongoing retail revolution is a real one and cannot be wished away.

As an avidly consumer-oriented State, Kerala cannot but open its arms to the big names in the retail business. While there will be some losers in the retail game, these are unlikely to be the mom-and-pop stores.

Mexican example

A study from Mexico, for instance, found that Mexican Wal-Marts and affiliated stores are predominantly targeted to consumers from the middle and upper classes, unlike in the US where the target market is lower-income consumers.

Much of Mexico’s culture has revolved around the small mom-and-pop shops. A difference between these shops and the larger retailers is that the family-owned businesses typically allow purchases on credit, so shopping there may be a necessity for liquidity-constrained shoppers who cannot obtain credit elsewhere, the study found.

As one of the most brazenly consumerist States in the country, Kerala cannot shy away from the ongoing retail boom. Kerala’s traders must – and can – join the retailing revolution.

The writer can be contacted at kgkumar@gmail.com,

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Retailing protests

Spencer's Hyper Store in Kozhikode