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ESSAY : Organised vs. Unorganised Retail: Making an Issue of a Non-issue
Wednesday, 17 July 2013 04:30

Organised vs. Unorganised Retail: Making an Issue of a Non-issue

“The so-called negative impact of organised retail on unorganised retail is being exaggerated; ironically, those who exaggerate also talk of democracy! It is time these people realized that in a vibrant democracy ‘one should live and let live’ ”.

A study by the Indian Council for Research on International Economic Relations (ICRIER) concluded that the growth of organised retail headed by large corporations does not significantly impact small mon-n-pop retailers. The study conducted for the government, following allegations that big retail was squeezing negbourhood retailers out of business, showed that the latter’s turnover and profit dropped 8 to 9 percent initially, but the adverse impact weakened over five years.

Significantly, the report states that a total of 151 small shops have closed down over a period of 21 months, which is about 4.2 percent of annual closure of retailers, however, only 62 of these shops attributed their closure directly to competition from organised retail.

On the domestic front, organised retailers have been opposed by several groups in states like Uttar Pradesh and elsewhere. In fact, Uttar Pradesh had in mid-2007 banned the opening of new stores by retail chains like reliance (Get Quote) Retail, on the grounds that small trades will bear the brunt of the organised retail onslaught.

As much as 49 percent of 1,999 sampled small retailers a decrease in turnover, while other reported no change or even an increase. The highest impact has been felt in west and north India. In terms of product categories, the impact has been greater in textiles and clothing shops (46 percent of the sample), and the least in fruit and vegetable hawkers (34 percent).

Surprisingly, the findings suggested that low income consumers saved more by visiting malls and super markets for discount schemes. Farmers have also benefited with price realization about 60 percent higher by selling to organised retailers rather than the mandi.

However, the report cautions that the results are not indicative of the countrywide scenario, but only of mega and mini-metro cities around a limited number of organised retail outlets.

“For the country as a whole, unorganised retail is growing at a reasonable rate and will continue to do so faor many years to come. Yet, it is clear that demand growth for retail is likely to substantially exceed any possible supply response from unorganised retailers”, the report adds.

The report forecast that India’s overall retail sector will grow 16 percent a year from $ 322 billion in 2006-07 to $ 590 billion by 2011-12. Within this, unorganised retail, which accounts for nearly 96 percent of the market ($ 309 billion), will grow 10 percent annually to reach $ 496 billion. In contrast, organised retailers will grow at 40 to 50 percent a year to expand market share to 16 percent by 2011-12.

Organised retail has not penetrated and will not penetrate rural India for obvious reasons- it is just unviable. It is only the urban areas that organised retail is slowly but no steadily growing in. milking an issue of non-issue was until recently the privilege of the politicians. Now a section of our trade and industry seems to be emulating the politicians. Whatever issues were raised by some people against the impact of organised retail seemed to be subsidies as the conclusions of the study report are against what they imagined and what they fear. If we are willing to look beyond narrow interests, then we should consider the positive benefits rather than impede the retail revolution waiting to happen in India.

Last Updated on Thursday, 18 July 2013 04:00