Foreign direct investment in retailing would seem attractive and lucrative to anybody. But we should look beyond the low prices and bulk quantity of commodities we may be able to buy.

Any company or organisation has the basic motive of profit-making and the Indian market is specifically profitable to international brands. So what would happen if companies like Costco and Walmart entered Indian markets?

Small-scale retailers who currently form the major part of the market will be unable to cope with the costs of international brands. Large-scale retailers attract customers with low prices and bulk buying, something a common retailer cannot provide.

When a customer sees more value for money in such large retailing companies, he is automatically drawn into these stores and ignores small retailers.

Effective strategy

With no profits or revenue, small-scale retailers are gradually forced to shut down. This allows gives rise to a monopolistic market where large-scale retailers are king.

As customers become hugely dependent on these large stores, prices are raised as the buyer has no other option in the market, enabling domination and exploitation of the market by large retailers. The strategy is simple but effective and can have an adverse effect on the market in the long run.

The common man risks losing the ability to go to the corner of his street to pick up a few groceries and ends up waiting in line at a check-out counter much further away.

(Jeremy is studying B.Com. at Loyola College, Chennai.)

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