Financial Daily from THE HINDU group of publications
Friday, Jan 21, 2005
Industry & Economy
Foreign Direct Investment
Marketing - Retailing
FDI in retail not to affect small players: Assocham
New Delhi , Jan. 20
A STUDY carried out by the Associated Chambers of Commerce and Industry of India (Assocham) has found that small retailers in India would not be affected for the next 10 years in case FDI is permitted in the retail sector.
The study titled "Will the foreign MNCs retail chains not swap the traditional Indian outlets?" concluded that fears and apprehensions that MNCs will completely capture small retail markets in India are totally misplaced and unwarranted.
According to Assocham, the experience of even very developed markets such as the US, UK, Japan and Italy has proved that small, medium and large format retailers have been co-existing successfully after these economies opened their retail market for MNCs.
The view that India has the lowest per capita retail space availability and as economy grows and consumerism rises, there will be more and more need for retail space, is endorsed by the Assocham.
Giving the example of beauty and health products, it states that though this is an area in which retail chains have entered in recent years, they still account only for a miniscule percentage of sales.
"For every industry, there is an appropriate scale of evolution and existing ways of commerce give way to new ways of doing business. Hotels of modern times have driven the traditional sarais and dharamshallas of yesteryears to oblivion; ready-made garments have begun to replace the individual tailor; automobiles themselves have replaced the tongas and the pedal rickshaws.
"Therefore, even if the kiranawalla is substituted in some cases with a larger format store, there will still be the same or more employment of front and back-room staff, and the prices will actually be lower due to better supply chain and operational efficiencies," the chamber said.
The overall size of retail market in India at present is estimated at Rs 5,88,000 crore of which, unorganised market is worth Rs 5,83,000 crore and the share of organised market is calculated at Rs 5,000 crore.
According to Assocham, the retail sector will create 50,000 jobs a year in the coming five years.
The study also points out that franchising will emerge as a popular mode of retailing in the coming years and will lead to a proliferation of brands with foreign and Indian companies acquiring a strong brand equity for their products.
The retailing format of "chain stores" in India will also multiply in the future, it said. In 2003-04, there were about 2,500 chain stores. Among the various organisational formats, chain stores' sales grew at the fastest pace, with sales growth during 1999-2001 to 2003-04 averaging 28 per cent.
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