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Organised retail not a threat to small stores

Profit realisation for farmers about 60% higher: Study

To help small retailers improve efficiencies, they should be entitled to a better deal

in terms of institutional credit, the report said.

Our Bureau

New Delhi, May 26 In what may be significant for the shaping of Governmentpolicy on retail business in the future, the Indian Council for Research inInternational Economic Relations (ICRIER) has said that there would be no longterm impact due to the entry of organised retail chains on the neighbourhood kiranashops in the country.

However, from empirical evidence, the ICRIER has found that though initiallysmall stores located in the vicinity of big malls have seen a drop in sales and profit,the effect could be expected to level-out in the long run.

The ICRIER study on impact of organised retailing on the unorganised sector wassubmitted to the Department of Industrial Policy and Promotion (DIPP) here onMonday.

Supporting the entry of big retail chains, the report says that it would be beneficialto the farmers in terms of better price realisation and the consumers too would

benefit because of competitive pricing.

The ICRIER was asked to prepare the report focussing on the probable impact oforganised retail chains on small retailers and vendors in the unorganised sector,effect on employment, impact on consumers, farmers and manufacturers and pricesand overall economic growth.

There has been no evidence of a decline in overall employment in the unorganisedsector as a result of the entry of organised retailers, the report said.

Beneficial to farmers

It further said that farmers would be the major beneficiaries because they would gethigher prices for their produce by selling directly to the big retail chains while theconsumers, particularly the lower income groups, would save money.

Profit realisation for farmers selling directly to organised retailers is about 60 percent higher than amount received from selling in the mandi, it said. While allincome groups saved through the entry of the organised retail purchases, lower

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income consumers saved more, the ICRIER said.

On the policy front, the report suggested introduction of a nationwide uniformlicensing policy for setting up multi-location retail chains. The retail sector has thepotential to become a $590-billion industry by 2011-12, the report points out.

Talking to presspersons, Director of ICRIER, Dr Rajiv Kumar, said that the studycovered 10 major cities. This study has nothing to do with the impact of foreigndirect investment on retail, Mr Kumar said.

Advantages remain

The advantages of neighbourhood kirana stores such as proximity, leverage oncredit sales, bargaining choice for customers, home delivery and convenient shoptimings would remain even after the entry of big retail chains, the report noted.

In order to help the small retailers improve their efficiencies, the report said thatthey should be entitled to a better deal in terms of institutional credit.

On the farmers side, the study recommended formation of farmers cooperatives tosell directly to big super markets. Simultaneously, unorganised retailers should alsoform cooperatives and associations for direct procurement from suppliers andfarmers, eliminating middlemen.

The report recommended that wholesale markets be modernised through publicprivate partnership and the Competition Commission be strengthened to checkcollusion and predatory pricing by big players.

The DIPP, which had commissioned ICRIER to undertake the study last year, hasnow asked it to gather further inputs from all stakeholders and invite commentsfrom the public.

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