Thursday, April 05, 2007

What is bad about Reliance or Birla in grocery retail

There was this program on Showtime - Penn & Teller's BS on Hating Walmart. The theme was, it is fashionable and nonsense to hate Walmart when Walmart is doing so much for the community in terms of low cost goods and employment for unskilled. Can this be extended to India? Are Reliance and such big shops good for the communities? The answer is no.

Walmart opens shops in every place where there is scope for selling cheap goods. They probably won't open shops in glitzy malls. On the other hand, the big chain of grocery stores in India open in clearly upper middle class area. In Chennai, I see them in places like Anna Nagar, Egmore, Adyar and TTK Road. Even within these places, they stay away from lower income group areas. So, their aim is not to offer low cost products to needy community. The number of jobs they create is far few as compared to multiple small sized grocery shops catering to same number of customers.
Every time such a big shiny shop opens, they threaten the survival of traditional grocers and vegetable vendors. I find myself thinking like a commie here and with a reason. Even as big shops offer some employment, they kill the entrepreneurship of small time traders by pumping in more money. I think India's economy was kept alive during the days of socialism by this small-time business people who managed to sell products made by equally small scale businesses. They were probably below the radar of socialistic governments and their controls.
A company like CavinKare (with products like sachet Velvette shampoo) could come up just because they could sell through the regular grocery store. I do not think, a Food World or Trinetra would care to sell sachet shampoos from an unknown manufacturer. At some point, bigger shops need to care about margins vs shelf-space and can not support smaller businesses that make things like packaged food items with low investment.

I would compare the big shops to the organized religions like Islam, Christianity and Communism. They all offer some good stuff to start with. You can't complain about the teachings of prophets, messiahs and thinkers. They are probably fine. But they deny the option of alternate views and dissent by the sheer power they had acquired by setting up an organization, getting influential people to support it and marketing.

I would pay extra to keep the street corner vegetable vendor in business. I would probably do some impulse buying to encourage my grocer to compete with Trinetra opened in the same street. We need these small businesses to survive and flourish for the good of the people and the country.

3 comments:

Ramiah Ariya said...

Sridhar,
You are right about this. Here is the biggest problem that globalisation ignores:
Countires are at different levels of development - therefore it is unfair to MAKE a small time grocer compete with Walmart; Walmart is simply going to acquire a monopoly because they can undercut prices like anything. People pretend that Walmart is going to increase job opportunity - I have noticed that people say this about ANY foreign company. CocaCola opens a plant that employs a hundred people and completely sucks all the water for nerby villages - yet people argue it is about jobs for thos 100 people. Walmart is a corporation and all corporations exist to make a profit - not to somehow magically advance India.
By the way, India is still socialistic and for good reason.

Sridhar said...

An interesting view from a Westerner visiting Mumbai - http://schneeberger.rediffiland.com/scripts/xanadu_diary_view.php?postId=1175670829

Mukundhan said...

India will soon have more jobs but less entrepreneurs.

In the long run it is not just the local shop vendors, even the Trinethras & Food Worlds would be bought out by these giants. I see a striking similarity to what Oracle has been doing to capture the Business Applications market and to compete SAP. In this attempt it has consumed PeopleSoft, Siebel, JD Edwards and many smaller companies. I guess we will soon see something like this in the retail market also.