What is retail revolution?

Answer 1

Yet another study has predicted that India is on the cusp of a retail revolution. Global management consultancy firm McKinsey's report on the retail sector says that the country's overall retail sector will become a $450 billion industry by 2015. This would place it among the top 10 retail markets in the world. It also says that organised retail will create 1.6 million jobs in the next five years. This transformation will take place from a very low base.

At present, organised retail accounts for only 5 per cent of India's annual retail business with an estimated 12 million mom-and-pop stores garnering the bulk of retail trade. By 2015, organised retail is expected to have a share of 14-18 per cent of business. According to the McKinsey study, there are several things going for the retail revolution, including a huge growth in the number of people with disposable income.

The growth of big retail stores is a welcome trend. Besides the potential to generate significant employment, there are other benefits that could accrue from organised retail. One, standardised goods and cheaper prices for consumers. Two, better prices for farmers. There are studies that show that agricultural producers are getting a better deal since big retailers directly do business with them, eliminating the middlemen who cut into the farmers' profits.

However, it won't be smooth going for big retailers. Small traders, who form a crucial support base for political parties in urban pockets, have been resisting big retail stores. Reliance has shut down its fruits and vegetables outlets in Uttar Pradesh and Orissa because of protests. Other companies are rethinking their plans to expand. High rentals, too, are a problem. At the same time, companies like the Future Group have been expanding rapidly with its Big Bazaar stores set to cross 100. In West Bengal, where there has been conflict over big retail, the way has been cleared for German wholesale major Metro Cash & Carry to begin operations.

So it's a mixed picture at best. A study by ICRIER, a think tank, says that though mom-and-pop stores are hit by direct competition from organised retail, less than half the stores that down shutters do so due to competition from big retail. So, we need not assume that all mom-and-pop stores will go out of business with the entry of big retail. Significantly, the McKinsey report says that 64 per cent of buyers don't mind paying more for convenience. Some small stores are also teaming up to buy goods jointly so as to cut purchasing costs. There is a message here: innovation and not violent protests can help mom-and-pop stores survive.