Modern Retail Myths in India

Every now and then we come across the reports about the size of the modern retail in India. The experts and the analysts will predict the size of the modern retail in India in some years to come. It will be mentioned in these reports that the modern retail in India is growing at such and such pace.

For a host of problems plaguing the country, it will be mentioned that the modern retail has the cure. These reports will highlight that modern retail shall help Indian farmers, local manufacturers, generate jobs, do all kinds of value addition in a customer’s life etc. Are all these claims a reality? Or myths peddled to further the cause of modern retail companies?

Modern retail will help Indian farmers

Organized retail has been operational in the country for two decades now. In the article – Indian Farmers and Organized Retail: A Misleading Fantasy, I have given the reasons to show that organized retail has not been a show-stopper but a no-show for Indian farmers.

Any organized retail company, Indian-owned or FDI-controlled, cannot claim a substantive patch of Indian farming around their area of operations to have benefitted by them. Even after 20 years of working for the so-called betterment of Indian farmers.

Modern retail will help local manufacturers

One of the clauses for allowing FDI in Indian retail sector always mentions mandatory sourcing from small-scale industries for a given % of total sales. These government officials and ministers should consider asking and auditing Indian modern retail companies as to what % of their products sold come from Indian small-scale industries.

Just a walk in any of the general merchandise and furniture aisles of Indian modern retailers will show how much local manufacturing is promoted by them. We will come across lots and lots of made in China products in these Stores.

These companies are in a business to sell what is procured cheapest from across the globe. They are not is a mission to promote Make in India though their formal statements will contradict the reality.

Mitticool is a success story, for now. Have you ever come across their products or similar products in any of the modern retailers? There lies the answer of modern retail helping local manufacturing.

Modern retail will help generate jobs

D Mart is one of the largest Indian modern retailers. The net sales/income from operations for D Mart in FY 2018 was Rs 15008 Cr. The number of permanent employees on the rolls of Company as on 31st March, 2018 was 6,113 (Source: D Mart Annual Report 2017-18). This means that for a sale of Rs 2.45 Cr, D Mart employs one permanent employee. Is this called job creation?

D Mart will, of course, argue about the contractual jobs, security guard, house-keeping etc. But for that matter, what is the quality of the jobs that we are talking about? Even traditional retail will create more jobs at these levels than that of modern retail stores.

Have a look at near-by kirana stores. Guess the turnover and the number of employed. Compare it with one permanent job created by modern retail for sales of Rs. 2.45 Cr.

Modern retail does the value addition

Modern retailers sell the customers the same products that the kirana/apparel/plastics and crockery stores sell. The only difference is in the pack size and the discretionary stocks that a small store cannot keep. Else, it is absolutely the same, apart from the brands.

Will modern retail sell the food brands from Kerala in Delhi, cooking medium from Calcutta in Ahmedabad, savouries from Agra in Chennai? Will modern retail sell the handicraft from Lepakshi in Ludhiana, tribal products from Chhattisgarh in Mumbai?

The distribution channel for a modern retail chain is dependent on FMCG majors, Branded majors or limited from an importing port to a centralized DC.

What / Which / Where / When of value addition by modern retail is being talked about?

Modern retail would not stand on its own

Have you ever seen a sector that by itself lobbies for opening up of FDI? Is there a sector that actually does not want to be protected but be acquired readily? In the name of synergy and global best practices, Indian modern retailers make a bee-line for selling themselves off.

Amazon has bought More (limited to 49% stake, to be precise, to make a mockery of the Indian laws, but that is another story). Future Group has bought Nilgiris, Heritage, Hypercity and wants to sell 10% of the stake to Amazon or Google. Alibaba is exploring joint venture with Reliance Retail.

Modern retail is a sector in which Indian companies are either selling off or wants to be sold off. What does it say about the sector?

Conclusion

The Indians are climbing the economic ladder from one class to the next class. In a digital era, the desire and the access will fuel the consumption boom that we are witnessing.

Modern retail surely has a place in India to exist, strive and thrive, basis their business models and the environment. Just that, there does not seem to be any need to ascribe the motive of helping the Indian society. Because, it does not, like any other sector or the Indian State.

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