Go to a big store in any mall and you will find that the person in front of you with hundreds of items is a so called “Kirana Shop” owner. The local retailer buys in bulk at big malls and sells it at a small profit to the local consumer. The consumer does not mind paying a slightly higher price from the retailer for the convenience he offers. Home delivery, one month credit and late opening hours are the reasons why a consumer will continue to buy from the retailer for daily needs.
The consumer, while buying from the retailer for her daily needs will still go the big store in the mall for monthly shopping. However that does not make the retailer lose business. The consumer prefers to buy in bulk at the mall and buy small items at the local retail shop. It is a win win situation for the mall, the retailer and the consumer.
The big debate on retail FDI is completely off the track and unwarranted. Headlines of ‘mom and pop’ stores losing business, loss of living for many retailers etc. does not have any justification. If the consumer prefers to buy in the mall, he does so because of prices and not due to anything else. The local retailer will have to bring down prices that are close to prices offered in the big stores to survive. That would mean, better inventory management, better people management and use of systems. The consumer benefits from paying lower prices in malls for monthly shopping and also benefits from paying lower prices for daily shopping requirements.
The retailer is smart. He has started to buy from big stores and sell it locally at a small margin. The retailer will also learn to stock items that go off the shelf on a daily basis. He will let the consumer buy bigger and bulkier items at malls. The retailer will have less wastage of goods due to right stocking policies and this will lead to overall efficiency in retailing.
The more number of big stores the more competition and lower the prices. The consumer will benefit in all this with wider choices and better price discovery. The retailer too will benefit as he can choose where to buy what for stocking in his store. The consumer, knowing the prices of goods will not give business to a retailer who jacks up prices for better margins. The retailer will understand that selling goods at jacked up prices will never work and he will become more reasonable in pricing.
Quality of goods sold will also improve at the retail level. Big stores bring quality brands to the consumer. Consumers used to quality will baulk at buying substandard goods from a retailer. The retailer will then look at better quality controls leading to improving the standard of retailing.
The existing malls are good examples of how big and small stores survive. Every city now has big retail stores and any localite will tell you that a small store that has been in existence for ages continues to exist. In many cities, small and large stores exist side by side and in many cases the big stores go out of business rather than the small ones. Subhiksha is a good example of mismanagement of large retail chains that went out of business.
At the end of the day, it is the consumer who will decide whether to keep big retail giants in business or keep the small retailer in business. Government policies will have nothing to do with consumer behaviour. The government has to make sure that the best is available to the consumer at the lowest price and that means opening up of retail to world class players.