FDI in retail: Kiranas unfazed; ask what's the fuss all about?

Ramdin Gupta, 72, owner of Gupta Kirana Stores in Gandhi Nagar in Thane, on Mumbai's outskirts, is unfazed by the cacophony over allowing foreign ownership of supermarkets.

"See, even if another kirana store opens up near our store, our business will be impacted. Whether it is small, big or foreign, there will be some impact. Why make fuss only about foreign companies then?" said Gupta.

On the face of it, Gupta does not seem in a minority. Rajesh Shah, owner of Mahaveer Stores in same locality, feels his clientele and the services he offers are differentiators between stores like his and the big chains.

One of the benefits he offers to his customers, like many kirana stores spread through the country, is shopping on credit.

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"We mostly cater to construction workers and (people from the) local neighbourhood, who do not go to bigger stores unless there is a sale. Bigger stores won't give you stuff for Rs 2 or Rs 3 neither do they give you groceries on credit. If they (customers) have cash, they go there; if they do not, they come here," said Shah. "I am not sure whether FDI will harm my business in any way," he said.

A clear edge

Kirana stores, equivalent of 'mom-and-pop' stores in the US, seem confident of holding their own against any foreign investment onslaught in retail.

They say "clear differentiators" in their services such as long histories with customers, groceries on credit and free home delivery will stand them in good stead.

The owner of Welji Provision Store on Marve Road in the Malad area of Mumbai, an area with hypermarkets such as Hypercity and D Mart, is more emphatic than Shah and Gupta.

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"I do not think there is any impact of foreign direct investment (FDI) in retail. We have loyal clients who are shopping with us for the last 50 years. We also do home delivery, which you do not find in bigger stores," said Welji, who uses only one name.

Shah of Mahaveer Stores said he had not seen "much impact on business" though a shiny, multi-storeyed Reliance Mart, promoted by Mukesh Ambani's Reliance Industries, opened in the neighbourhood a couple of years ago.

Shah, in an interesting admission, said he is himself a Reliance customer sometimes, buying oil and packaged products from Reliance Mart if there is a sale. "What is the harm in saving some money," he said.

Modernising

Kirana stores are modernising as their customers change. Amit Kakkar, owner of Shop Next Door in Noida, an upmarket corporate and residential neighbourhood near Delhi, has tied-up with an e-commerce website for online orders.

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"The entry of foreign players would definitely increase competition, but surely not provide the same comfort to the customers as the traditional stores do," Amit Kakkar.

"We are changing with the times and emphasising on providing more comfort to the customers while they shop," said a store owner in Delhi who has centralised air-conditioning in his store. He said, though, that the air-conditioned comfort was not an attempt to beat foreign retail.

Analysts back the anecdotal conclusions of kirana store owners. "Kirana stores in India have relied on small-ticket purchases, as well as home delivery, as important aspects of their offering," said Ajay D'Souza, research head at Crisil.

"We believe these will be important needs of the Indian consumer."

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Another think tank, The Indian Council for Research on International Economic Relations (Icrier) in the largest ever survey of unorganised retailers in 2008, said unorganised retailers in the vicinity of organised retailers did experience a decline in their business and profit in the initial years after the entry of large organised retailers but this impact weakened over a period of time.

The survey said 4.2 per cent of small stores face closure every year, lower than the rate of closure in overseas markets. Of these, 1.7 per cent closed on account of big chains.

Icrier said the unorganised sector will grow 10 per cent every year from $ 309 billion in 2006-07 to $ 496 billion in 2011-12 and organised retail will grow 45-50 per cent per annum.

Coexistence

"In short, both unorganised and organised retail are bound not only to coexist but also achieve rapid and sustained growth in the coming years," said Rajiv Kumar, Iceier's former director and chief executive in a comment on the survey. The survey was paid for by the government.

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Big retailers back these findings, though critics can argue it is in their interest to do so, given the political outcry. Retailers said they did not find any significant impact on kiranas after they opened their hypermarkets.

"We run over 150 Big Bazaar stores in the country. We have never seen any kirana stores winding up because of our stores," said Kishore Biyani, chairman of Future Group, India's largest retailer by size.

"I think retailers and kiranas have peaceful co-existence. I think the bigger issue for us is to find right properties, malls to expand," said an executive from Spencer's Retail who did not wish to be named.

With inputs from Dilasha Sheth in Delhi.