FDI in retail or Kirana stores : Let customers decide !

You must give it to Congress government for successfully diverting the whole nation’s attention from its inadequacies to FDI in retail sector. It’s become a hot debate in webosphere and blogosphere.

I have been reading different opinions from different ideologies and will use this platform to discuss more on this. The outrage against the move is widespread and there are common concerns prevailing out there.  

I’ll try to answer the main concerns in this regard.

Concern#1: Kirana shops will be wiped out.

When organized retail like Big Bazaar first entered Indian market, there were similar concerns. But 10 years down the lane, I have not seen kirana shops closing down drastically. They remain in business despite the clear edge organized retail has over them. Imagine asking somebody not to open decent shop with modern facilities next to a primitive one as it will force the other out? Its competition boss !

Concern #2: Will cause large scale unemployment by driving out small businesses.

The social aspect of any move should always be considered, agreed. But consider extending the same logic to any industry, especially in connection with 1991 reforms. Indians had no option but to pay hefty amounts to whatever products/services were available in market. Hasn’t competition helped customer with more choices and drastically reduced their prices.

Bajaj Chetak was the only option you had if you wanted to own a two wheeler. So was the case with telephone. Hasn’t opening up competition adversely impacted the employment of many state employees? Yes, but at the same time it had opened up new avenues of employment for many others. Why should this involve lack of exercise of choice for consumers?

Few state the many intermediaries are involved in the present retail setup which will get upset in the changed scenario. I ask, why then is farmer still committing suicides; because the benefits do not permeate up to him. The middle-men exploit the situation and themselves get benefitted. Whereas now we increasingly hear of reports of farmers able to get better prices under organized retail. Except for the traders, I do not seeing farmers and consumers suffering in the new system. And most of these traders can either be absorbed in these new retail outlets or they sure can find themselves suitable opportunity. [ I agree that the situation is not that simple, but overall its my opinion that farmers will benefit.]

Concern #3:Wal-mart will offer dirty low paying jobs. Is that really a good employment?

Try telling that to an unemployed person in India! BPOs per se are also kind of IT coolie jobs. Why work for them? This surely is a nonsensical argument. What many such people fail to observe is that back in 80s unemployment was chronic. These days, atleast people have some way to live decently instead of begging for jobs and can in the meantime improve their skillset and set further goals. Harsh as today’s employment scenario is, it is in no way comparable to India before ’91 reforms. And if Wal-mart really pays lower than kirana stores, then nobody will join them in the first place. 

Concern #4: Manpower will not be available for kirana stores? How’ll they manage?

Should that be the basis for denying a person better living through employment in Wal-mart?

Concern #5: Since Wal-mart etc. have deep pockets, they will start with low prices driving out competition.

Why should masses pay more for the inadequacies and be forced to bear some businesses only because it generates employment to certain section of people. Agreed, we are not speaking of a small no. here, but considering from the total consumers point of view, it will remain small. I read somewhere that kirana shops employ close to 1.2 million people; now compare that with 1.2 billion people in India who can exercise their choice to pay less. Why isn’t the social aspect clear here? Does less spending for the lower middle class not come into picture here?

Concern #6: The low pricing is a strategy. Once they penetrate these retail outlets will create an oligarchy and fleece customers?

I heard exactly the same statement from Cable TV association’s advertisement asking customers to trust them instead of DTHs. But eventually I shifted to DTH – why? Poor quality picture and recklessness with regard to any complaint! You will be surprised to note the clear cut monopoly these guys have. They neatly divide territories amongst themselves and do not allow competition in their area. So, if at all you want cable, you have to bear with that local guy no matter what! Aren’t people driving out these people out of employment? :)

What most of us do not realize is that choice is merely an illusion in many areas – like you have many autos to choose from, and yet cannot bargain much because all of them charge the same, allowing you no option but to comply with their exorbitant prices.

Do you have any control over the quality these kirana stores have? Even branded items are fake these days; forget about other generic items like rice, sugar etc. The product is adulterated beyond reasonability sometimes and yet when you pinpoint that to them, they just shrug it off.

Consider the impact if any of these corporate retail outlets indulge in this? They lose their reputation. They cannot simply shrug off this responsibility!

Consider the oligarchy among telecom service providers these days – yet they offer a far better choice than the monopoly that existed two decades back.

One Reasonable Concern:
The only reasonable concern that I see among all these shrill and myopic arguments is that your average kirana guy is not a well educated guy who can easily seek employment in Wal-mart types. True. But again, Wal-mart types are usually smart enough to employ them as their experience benefits them a lot. 

Considering the huge benefits majority of India can probably get, I see no reason why FDI in retail should be opposed. Just like every innovative technology and business strategy, there will be shifts and some disturbances. But if these are all the reasons one has against FDI, then they are not strong enough that merit rejection of FDI in retail,considering its long-term benefits 

Let me know, if you have anything to add. I welcome different perspectives.