The destiny of a small retailer: How can FDI help?

There is a considerable opposition in the country on the issue of FDI in retail. A lot of political parties genuinely believe that FDI will mean larger scale, lower prices . Therefore the demise of small retail store. If we don’t take any other step in terms of triggering new innovations in consumer education, responsible retailing, reducing ecological footprint and improving both consumer and retailer welfare, then the fears may actually come true. But, as the experience in telecom sector and several other sectors has shown, FDI can improve the available amount for experimentation and innovation and thereby stimulate larger social welfare. It is true that transition does cause problem. Without getting into the merit whether less or more FDI will mean better or poorer choices for consumers and the producers, let me first discuss what kind of innovation one could generate to ensure that consumers get better products with environmental and social concerns embedded in the delivery. How could producers get more opportunities for innovations? The kind of infrastructure one would need to service the future retailing system will not be possible without much greater participation of citizens in regulating their own behaviour but also regulating the public investments with much more critical eye demanding much higher transparency than at present.

The Indian consumer is a very discerning one and it can leverage Nirma products in comparison to the ones by multinationals, it can sustain a local restaurant in contrast to Mcdonald and KFC and it can expand market for Nano and Maruti vis-à-vis other autos with much higher foreign component. To believe that such a discerning consumer can be hoodwinked by the lure of large corporations merely because of their brand name is to do a great injustice to the wisdom of Indian masses. The telecom revolution would have been impossible without FDI and who would argue that the innovation that Indian telecom industry brought about in expanding the reach would not have taught a few lessons to principal partners and investors. It is true, however, that Indian language content and information on health, farming, education and folk culture in local languages is still very deficient. But, we cannot put the blame only on the shoulder of investors. The regulators like TRAI having thousands of crores of cess funds have not used it for promoting innovations and entrepreneurship to provide these services in tribal and economically depressed regions.

In retail, likewise, we must create an Inclusive Innovation Fund for Retail through the contributions from the beneficiaries of FDI for creating markets for the products made by the poor. It could be pickles, crafts, handloom or food products or whole range of other goods that can be manufactured by small scale entrepreneurs and village communities. All the companies receiving FDI in collaboration with packaging and supply chain management industry should create institutional networks for building community brands and community based product development facilities. It will increase the percolation of benefits to the producers and at the same time, help the consumers diversify their tastes and patronise decentralised production. There is no reason that large scale retail should only promote large scale manufacturing. Every retail store should provide avenues for decentralised procurement from the hinterlands. Imagine if different communities specialise in different kinds of sprouts and if sprout bars spring up, all over the country with variety of combinations, dressings, and shelf life, will not the nutritional profile of the country change drastically. How many sprouts bar we have today? One of my students, Byomkesh at IIMA has started a Happysprouting.com as a venture and is now coming out with new combinations and dressing every week. This is the power of small scale entrepreneurship which will need to be harnessed with large scale retail. NIF signed an agreement with Future Group to set up a company viz., Idea India ka Innovation Pvt Ltd. This was precisely the logic. The products of our innovators cannot generate market unless they are made consumer friendly through investment of design, R&D and supply chain management. This company is supposed to provide that and take the products and services to a much larger scale and share the benefits with the creative communities. Whether the scaling up process will be ethical or not will depend upon the self-regulation by the supply chain manager and the regulators of the system. Sustainable extraction and utilisation of biomass for various food and other products has to be ensured. Similarly, the design of shelf space and display system will need to be changed. WE cannot follow the western model where supply manager decides that consumer will get only one or two types of potato, brinjal, tomato, etc. New models of shelf space design offering dozens of varieties with backend packaging and delivery will mean incentives for agro biodiversity conservation. The diversity food and diversity of culture are closely linked. We have organised with the help of SRISTI and NIF, Saatvik Traditional Food Festival for last seven years at IIMA campus. Small village communities and farmers producing organic goods have earned Rs.5 lacs per group in three days. With hundreds of stalls and 45,000 people visiting in three days, a point has been made. A market for decentralised, diversified and sustainable production and consumption does exist.

It is possible that all my hope about the future behaviour of multi brand retail proves wrong. But nothing prevents me from trying to prove it right. I hope the government will listen to the saner voices pleading for a partnership between different stakeholders to serve the interests of producers, consumers and retailers. Just imagine if a retailer around the corner gives you a comparative table of prices of different products from different super markets and offers to supply you at home at the retail price, why would you like to go to the superstore, locate a parking place and bear the burden of carrying goods around? I am sure there is a large number of working couples and other young or old people wanting to be serviced at their doorstep. Small retailers will serve that need, but with a t much richer catalogue on his Aakash tablet. The big retailers must incorporate the small retailers in their household delivery system so that we can reduce the transportation costs incurred by every single consumer going to super markets. Let us hope that Indian creativity will once again manifest and surprise the cynics and force the enthusiasts in creating a much more open and accountable platform for dialogue and delivery.

Anil K Gupta