Modern retailing approaches are evolving in India, especially inthe food sector. It is common practice to shop for groceries inkirana stores, small neighbourhood shops and produce marketsoperated by entrepreneurs. In these retail outlets, the fruits andvegetables often are not good quality or in good condition, and theshops are not attractive or comfortable for shoppers. The ownersare known for being wasteful, buying in small quantities, sellingat high prices, lacking storage capability, and having no expertisein inventory control. There are about 12 million of these smallfamily-operated outlets. In addition, there are 200 millionpushcart vendors and hawkers who depend on the highly fragmentedretail market for their livelihood.
Large Indian corporations have entered the market, such as RelianceRetail Ltd., with 300 stores in 30 cities across India. Some areopening modern North American-style supermarkets and hypermarketswhile others are operating chains of produce shops. These storesare air-conditioned, brightly lit and clean, with trained workers.A greater variety of higher quality fruits and vegetables areavailable. Goods are neatly packaged, accurately weighed, andrefrigerated. Most importantly, prices are lower. Modern retailingsupply chain practices are being introduced, including distributionefficiency, high technology farming, and waste reduction. Somesuggest that the farmers will receive more for their products asmiddlemen will be eliminated from the supply chain.
Another dimension of this issue is the restriction on foreignretailers’ entry into the Indian market. Foreign retailers cannotsell directly to consumers. To avoid this regulation, foreigncorporations are entering at the wholesale level or in jointventures or partnerships with Indian corporations. For example,Walmart has a joint venture with Bharti Enterprises, an Indianconglomerate. Other foreign retailers are attempting to enter theIndian market, including the U.K.’s Tesco PLC, and France’sCarrefour SA.
The operators of the smaller stores have protested this trend andhave called upon government to stop the large corporations fromentering the market. They fell that they cannot compete with thenew retailers and would become unemployed with no other form ofwork available to them. The Indian government is monitoring thisretail revolution closely and is under political pressure from thesmall shopkeepers, opposition parties, and socialist groups. Thereis concern that the arrival of modern retailing reduces theopportunities for self-employment, especially among the poor. Thestate of Uttar Pradesh even ordered the closing of ten Reliancesupermarkets to calm protestors.
Economists argue that the retail market, estimated at US$328billion, is large enough for both traditional and modern retailers.The liberalization of retail trade in India is not yet arevolution, and barely an evolutionary trend. In November 2012, theIndian government announced that it would allow foreign investmentsin supermarkets and department stores.
Questions
1. Who are the stakeholders involved and what are their positions?2. What are the issues relating to business and society? 3. Shouldforeign corporations be allowed to operate freely in India?
