“Any new reform in India is often clouded by debates and discussions about its need and viability. Opposing a change comes naturally for the self appointed so called public messiahs of the country. One such reform that has not been able to meet its due fate is the issue of FDI in retail. Anaggh Desai shares an interesting take on the benefits of FDI from a customer perspective”…..This article appeared as a Perspective in StoRai magazine Jan-Feb 2012.
A debate on this question has been going on for a long time; with government wishing to introduce the bill, it just gathered momentum recently.
The past couple of weeks, every platform/gathering somebody or other has asked me the question ‘Why should FDI be allowed in India?’ I do not object to the question on principle, it is quite amusing to note that everyone has a view about why it should be allowed/not allowed – mostly like East Bengal & Mohun Bagan match in Kolkatta.
I personally think there are a lot of merits in FDI being allowed in India. Whilst, economists and other experts have their own views supported by a lot of data, I am looking at it from a pure consumer perspective and decided to list some of the reasons:
1) Realty – Like it, Hate it but you don’t have an option – real estate prices in the top 12-15 cities of India have shot up to unaffordable standards in the past half decade. This means influx of capital is vital.
a) Here small time retailer or mom & pop shop cannot look at purchasing or investment with the margins and return they get.
b) Existing hereditary business occupying premium space may not give enough return to the next generation e.g. Irani café in Mumbai and hence may be advisable to lease or sell it.
c) The opportunity for smaller retailers to evaluate options and manage their business with large names (Shop in Shop) or even look at leasing places in some of the malls thereby de risking their stand alone shop.
2) Processes – The benefits of well documented processes – which cover the back end (supply chain) to the front end and you are not dependent only on face recognition & relationship. Things like – fixed prices, Returns, complaints, escalation are the benefits that consumers enjoy globally but not here currently.
3) Economies of Scale – Large Retailer – Deep Pockets translates into increase in planned purchasing power, which in turn gets transferred to the consumer. It should also be borne in mind that even the small retailer who can pick up at cash n carry also benefits largely and is not dependent only on the company supply chain.
4) Variety of choice and options – Large Retailer – large space – variety of choice & options. The need of brands to introduce and being able to do so without constraint of space leads to variety of consumer selection.
5) Moving up the value chain for the consumer is another benefit for the consumer. Today the perception of wanting to try but ‘may be expensive’ stops a lot of consumers to actually try out products/merchandise that they may well be able to afford but do not have access to.
A decade ago before the organized retail actually started off, it was difficult to think of how it would affect/help the consumers.
Shoppers Stop was amongst the first, followed by Westside, Lifestyle, Future group and a host of others. Did the stand alone retailers such as Amarsons, Sheetal shut down? No, on the contrary they kept reinventing themselves finding their niche and gained traction. In fact a classic example if of Jade Blue of Ahmedabad. A once upon a time small one shop tailor has a chain of stores across Gujarat all come up in the past 6-8 years.
We had only Spencer before Big bazaar, Hypercity, Star Bazaar, More, Reliance fresh coming up and all of them do business.
There were just your plain family jewelers once and in the last decade Orra, Gintajali, Tanishq came up and changed the way people buy jewelry.
It is time for us to accept that India is the 2nd largest consumer in the world and consists of a large young population which has in the past decade or so become evolved, having been exposed to travel, food, people and is hungry for options, variety But is looking for accessibility, value which it does not seem to find easily in the current scenario, even with organized retail gaining traction year on year.
The need of the hour is actually a burst of infusion to cater to this segment of consumer which only FDI in Retail can quickly bring in and delaying this is denying the consumer their right.