Giant Retailers vs. Small Vendors - India

Recently at Indore in Madhya Pradesh and at Ranchi in Jharkhand small vegetable vendors demonstrated violently against the ‘Reliance Fresh’ departmental store where vegetables are proposed to be sold. It is understood that some more business houses propose to enter retail business by organizing departmental stores chain. Birla, Godrej and Bharti have declared their intention, In fact a tie up with Wal-Mart is under finalization.
Availability of practically all goods, under one roof called departmental stores is a billion dollar business in Europe and USA.Emergence of this model in India has raised many apprehensions, fear, nervousness and uneasiness amongst small vendors, middle men and whole sellers.
The issues involved are (i) Whether elimination of small vendors, middlemen and whole sellers will result in availability of better and economical products to the consumers in the long run or when things get stabilized the business houses will revise costing and pocket the intermediate costs, and consumer will be back to where he was. (ii) Will the traditional middlemen and whole sellers will get really eliminated or a new set of middlemen like marketing, quality, standardization and procurement etc though employees of business houses will emerge. (iii) Will the producer/farmer get a better deal in regard to prices; advances and other supports for their products and (iv) Will this not result in large-scale employment and social upheaval. (v) Will government collect more taxes vis-a vis experience of tax payment by business houses.
Based on an estimate, currently there are 45 million small vendors in the country and on an average 4 persons per vendor form the chain excluding transporters and intermediate stores. In the event of full development of the departmental stores model, around 180-200 million people and their dependents will be affected.
In Europe and in USA studies reveal that wherever Wal-Mart and similar departmental stores have prospered, the number of middlemen has gone up. Farmers/producers return per dollar has come down to a very low level, slowly but surely. Further, as per studies, the farmers are forced to live on government subsidies or they quit. The number of farmers has steadily come down both in Europe and in USA.
Let us look at the other side of the coin namely consumer. With entry of business houses competition is expected to grow. This will result in better availability of quality products economically. The tendency of exploitation of consumers will get under check. There are success stories in Gujarat, TamilNadu and Karnataka states where producers have formed unions to ensure quality and protect their interest.
It is a proven philosophy that no market can survive based on reservation. Market is driven fundamentally on the basis of price, quality and service.
The debatable and disputed question reckoning with above scenario is how to manage the emerging change, the management of change is however must. There is no option.
The answer lies in careful evaluation of models of Europe and USA with super imposition of likely social problems and consumer interest in the context of Indian economic structure. Farmer’s interest cannot be ignored reckoning with lowest ever growth of agriculture in 2006 and steadily declining income of farmers.
Blind acceptance of western models without deep evaluation and objective studies may lead to more harm than good for the rapidly growing- over heated Indian economy.