The Telegraph
Since 1st March, 1999
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- Retail trade in Indian cities is changing shopping habits

Retail trade in Indian cities is undergoing a revolution. The local teashop, boutique, bakery, drugstore, grocer or the small joint round the corner selling garments and apparel are all feeling the heat of competition from newly emerging giant shopping malls run by big enterprises. The threat of closing down is on the cards, if not immediately, certainly in the not-so-distant future. Some are trying to fight back in a losing battle by improving the variety of merchandise and the quality of service. Others are contemplating price cuts, which, given the customary low margins in retail trade, are likely to bleed the small trader to death. In the process, the face of the Indian City is changing permanently. So are shopping habits. One may now drive down to the spacious plaza, which is typically located outside the hustle and bustle of the metropolis, park his car safely in the basement, take the elevator up and find almost everything one ever wanted to buy in one giant store, spread over three or four floors.

For the big retailers, the buzzwords seem to be variety, space and size. The trick is to display the variety using the relatively abundant space, a move smaller competitors can hardly match. The latter bunch may perhaps gather some variety but due to lack of space cannot display their assorted ware to attract customers. Most important, the huge scale of operation is giving a considerable price advantage to the large sellers who can accommodate a price cut by increasing the volume of sales. This last feature is particularly pulling in middle-class and lower middle-class customers. As a result, not only are the affluent crowding the newly built plazas, but ordinary people from the hinterlands too are arriving in thousands, in public buses, auto-rickshaws and sometimes even on foot, because they find the naked display of consumerism rather attractive and the prices just right.

It is a new experience to see these people, clearly coming from not-so-high sections of the earning spectrum, sauntering in the cool comforts of the departmental stores, moving from one aisle to another, pushing their shopping carts the way people shop in the West. It is novel to watch these humble people getting refreshed in the food court of the plaza by a variety of cuisine not only from different parts of the country but also from remote parts of the world. The change should perhaps be called a progress, at least, of sorts. Neither can we doubt the close link between this transformation and a shift in public policy towards market-oriented reforms and globalization.

There can, however, be no illusion as to the severely limited spread of this transformation. This becomes amply clear when one comes out of the unreal luxury of the plaza and faces the same old dingy city with all its tattered roads, polluted streets, slums and ghettos, filth, poverty and hunger. One is immediately reminded that globalization has so far been successful only in very small patches, and has not as yet been able to make a serious dent in the widely prevailing problem of backwardness. Should we then shun or ignore such change because it is hopelessly partial or should we welcome it'

Most changes, of course, are not expected to start with a bang. They are usually gradual. Armed with this simple wisdom, one can argue that the retail revolution, among other things, signals only a beginning and promises much more. Besides, it has a few merits in itself. It offers more variety to the consumer, ameliorates the environment in which he shops and reduces the price he pays. These factors, in turn, tend to increase demand, stimulate production and encourage investment leading to an expansion of output and employment in the long run.

The advantages do not end here though. For a long time, one of the major problems of the Indian farmer is his lack of market access. Since the farmer is unable to sell directly to the final consumer, the commodity typically passes through a thick layer of middlemen before it reaches its final destination. As a consequence, the actual producer of the commodity gets only a tiny fraction of what the consumer pays for the product. If corporate organizations enter retail business, they can directly deal with the farmers, which might significantly increase the price the farmers get for their produce. This, in turn, should give the farmers the incentive to produce more.

Yet some people, the left in particular, are viewing the recent changes in retail trade with apprehension. The fear is basically one of job loss for the small traders and the workers they employ. The left is especially averse to the inflow of foreign capital into the retail sector of the country. The worry is that the small traders will not stand a chance of survival if giant multinational corporations enter the retail market. There are several problems with this attitude. First, one should realize that the present changes might threaten jobs in the traditional retail business, but would create fresh employment in the newly emerging ones. Agile, smartly dressed shop attendants will now replace the old dhoti-kurta clad salesmen; shop cleaners in rags will be substituted by uniformed janitors. Of course, the person who will lose his job in the traditional business is not the same person who will get fresh employment in the newly emerging one. But such changes, uncertainties and redistributions are inseparable from progress. The society has to endure the pain of adjustment in the short run, to achieve a better living in future. If we do not make this sacrifice, the state of things will remain stuck at the present status quo, which is clearly undesirable. One is reminded in this context of the Industrial Revolution in England, which initially had displaced labour by machines and therefore had witnessed miseries of the working class for almost 100 years. As history would testify, in the very long run, however, the workers as a class immensely benefited from the Industrial Revolution and their living standards have now improved beyond recognition.

Second, the left's aversion to multinational corporations on the ground that they would create an unfair competition for the local small trader, does not stand up to reason. The small trader would face an equally unpleasant competition from the big domestic industry houses, which are gradually showing interest in retail trade, as he might from multinational corporations. So, from the small traders' point of view, it does not matter who is capturing the market, domestic big players or foreigners, for the small trader has to struggle for survival anyway. From the point of view of the consumers, on the other hand, multinational corporations will create more competition among big players, thereby bringing in better services, more variety and lower prices. Why resist multinational corporations then'

Indeed, the recent transformation in retail trade rings an old bell. In the third decade of the last century, the United States of America, in a desperate attempt to come out of the great depression, had built a network of roads and highways in the country. The immediate concern was to jack up domestic demand by creating construction jobs and requirements for construction materials. It is not clear how far the policy of boosting demand had really succeeded, for the economy had to wait for the outbreak of World War II for a proper recovery. After the war, however, the real advantage of building the highway network was realized. With the roads and highways in place, giant retail outlets were constructed outside the city limits. Being located outside the city, the retail stores got the space they needed for their huge constructions. This, in turn, led to construction growth, a mounting demand for consumer goods and an upsurge in the market for automobiles, the last phenomenon happening mainly because travel to the retail stores gradually became a necessity. This joint boom continued till the late Seventies.

Can we hope for a similar experience in India' One wonders.

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