Tata-Dhan Academy: PDM

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Programme in Development Management

An Organised Push into Poverty

Big Bazaar has become the popular Indian face of organised retail. It is a place where we can get all the necessary household commodities under one roof. When I first heard about the inauguration of Big Bazaar in my home­town, Kanpur, I was glad. Only recently did I realise its consequences on small shopkeepers. The outlets of organised retails display modern technology, fashion, and commodities, and are the centres of attraction for youth, children, and women. They also offer discounts on heavy purchases even on branded items—a concept somewhat new in Indian markets. Now, a homemaker prefers to purchase from organised retailers rather than from the local shopkeepers. While they offer appreciable services to the consumers, have they snatched the livelihoods of middle-class entrepreneurs?

On one hand, these Big Bazaars are good because they provide all the modern facilities to people with convenience; on the other hand, they threaten the livelihoods of millions of small-scale businesses who are already in market. The small shopkeepers invest capital to set up their business and solely depend on their shops; most of them live on subsistence. The small shops cannot compete with the capitalist ideas of organised retail primarily because they lack professional management, large scale of operations, and streamlined logistics. Gradually, all small shops would be engulfed by incarnations of organised retail that are owned by the rich and will capture most of the revenue from the market.

In the coming years, there will be great inequality in terms of income for the sellers. In a country like India, where the middle class represents a substantial share of the population, organised retailers are getting permits to operate at the cost of the small shopkeepers. This “development”, as it is popularly called, benefits only the big business persons and will increase the divide between the economic classes in the society. This may not be the best form of development for our country. Organised retail defies the Gandhian model of development which advocates “Dignity of Labour: everyone must earn his bread by physical labour.” If organised retailers spread their tentacles at their current speed, it will increase the issues of push-migration and unemployment by multiples times. Unfortunately, the State, too, has succumbed to the corporate lobby of organised retail and favours the move to create structural unemployment.

Due to this phenomenon, there is a great loss of capital and labour. Earlier, poor people migrated from rural areas to urban areas in pursuit of employment, but now, poor people have to migrate from the urban areas too. They are left with either no work or dangerous and dirty jobs. In total, organised retailing has made the families of small shopkeepers highly vulnerable. Since they mostly belong to the middle class, their life, their livelihood, and the education of their children are all at risk. A vulnerable middle class indicates that organised retail has hampered the development of society in general. Presently, the interest of this vulnerable group is being ignored by both the State and NGOs.

Shanti Gupta, PDM 11

Editorial Committee’s Note: This phenomenon is, perhaps, ignored by the State and NGOs because they perceive that the urban middle class shopkeepers are able to survive after the entrance of organised retail. This may be justified to some extent because the urban shopkeepers operate at slightly attractive margins. However, organised retail will not differentiate between urban and rural markets and soon will create unbearable pressure on small-scale rural entrepreneurs. The rural poor, who are already vulnerable to the issues of food security, health, and sustainable income, will surrender to this phenomenon without putting up a fight. Poor sellers and poor buyers who obviously operate at minimal margins and low marginal costs characterise the rural haats (rural fairs), which are the most important avenues of local trade in rural and tribal India. The villagers will be required to search for new avenues to sell their products, because the rural fairs may disappear. This is why, when visualizing the future of organised retail in India, it is necessary to act now and prepare rural and urban entrepreneurs to meet the pace and skills of organised retail. This will offer better competition in the market and better markets for the organised retailers and small shopkeepers, not to mention, another pool of happy consumers. KBP

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Filed under: PDM 11, Spectrum, ,

8 Responses

  1. Ananda Mahto says:

    Received by email from Prof. Malcolm Harper:

    I glanced at the ‘Spectrum’; rather good, I would judge. I read the short paper about modern retailing, and maybe the attached would be of interest to its author. It is a chapter from my [book] ‘Inclusive Value Chains’ (World Scientific, Singapore and Chennai, 2009). [Her] title reminded me of my new interpretation of PPP (‘private public partnerships’, the development flavour of the month): ‘Projects to Perpetuate Poverty’.

    You can read the chapter he is referring to online at Google Books

  2. shanti211087 says:

    I am glad to see your response. I belong to Kanpur (U.P.) where every six months a new mall and Big Bazar are opening. I do not know about the retailing concepts but always I thought that who is getting benefit from these showrooms and Bazars. it was clear that our middle class population is in vulnerability but this thought did not have any conceptual base. Now Tata-Dhan Academy has encouraged me to think conceptually and reflect on my thoughts. Thanks for your suggestion. I will read this book.

    Shanti Gupta
    PDM 11

  3. Manoj K S says:

    Shanty,

    I just read your article. Nicely written! But when comes to the arguments made, I have a few thoughts which slightly contradicts that of yours and those are as below. This is definitely not to undermine your views but to present an equally strong view which exists.
    I myself am a beneficiary of the organized retail outlet. Being put up in Chennai, it enables me to save at least 10-15% of my monthly outflow on consumables or more than that if am lucky to strike on a “discount” day. And my view to be statistically significant, let me state that on an average I visit more than two such stores in a month.

    Contrary to your views, my observation is that these stores benefit many and the beneficiaries exceed the losers far in number. Given that these stores are able to offer comparatively better quality products at cheaper rates as the direct benefits of this model, it not only attracts the well off but economically less privileged as well. The famous statement that ‘money saved is money earned’ is anything to go by, my fellow beings, who opt to purchase from these stores, are able to save their monthly earnings as I do irrespective of their earning band. Although the participation from the underprivileged is at a lesser rate currently, but it is growing and have every reason to believe that it will attain proportion wherever stores are at their convenience.

    Secondly, these stores also offer job opportunities for a considerable number, but a direct cost benefit analysis in this aspect is not attempted.

    Thirdly, since most of these stores procure goods directly from the producers, the later enjoy a better pie which otherwise would have gone to the infamous middle man.

    Undoubtedly the Kirana shop walas will never be able to compete to the might of these stores bestowed jointly by capital, technology and managerial skills and naturally the former will have to take a slow natural death wherever both are in direct confrontation.

    Given the benefits as stated above, the question would be that is it something to be too much worried about beyond academic interest? I definitely don’t think so. To corroborate, let us examine the revolution brought forth by mobile communication service. Though this has resulted in millions of operators shutting down public telephone booths on which they banked on for livelihood, but this technology has arguably benefited at least a numbers a high as 5 times drawn from all strata of the society.

    And finally the push and pull will continue to happen so longer the society embraces its growth and development path. Some changes benefit only few, some impact at large and yet another will take time to trickle down. So a balanced view will undoubtedly worth the while.

    I am PDM 3 graduate

    • Shanti Gupta says:

      Hello sir,

      First of all thanks for your attention and strong views. I accept your opinions and facts. I have read the book of Malcolm Harper, chapter 2 of this book titled winners and losers gave a comprehensive picture of retail sector on micro level. There is a one study of Raghunath S and D Ashok (with PP Mathur and T. Joseph): Indian Agricultural Produce Distribution System-Towards an Integrated Agri Produce Flow. This study shows the benefit from modernized fruit and value supply chain, farmers are getting higher price and consumers are getting fruits and vegetables on comparatively less price. Obviously it is good for our farmers but my concern is with “Mom and Pop” shops which are equal to Indian Kirana or provisional shop. For instance take fast moving consumer durable goods like biscuits, soap, shampoo and coffee. Supermarkets, Big bazars and hypermarkets are providing these goods and other services at a lower price compare to small provisional shop. These markets are saving our time and we feel comfortable in air conditioned atmosphere. Supermarkets are providing outstanding services, this is the reason we are moving towards supermarkets. I personally feel it is good but there is another segment of population who is already involved in their small business (provisional shop). These people are not able to compete with supermarkets.

      “The IFPRI study states that the numbers of such small shops fell by 30% in Hong Kong between 1974 and 1985, and that they fell by the same percentage in Argentina between 1984 and 1993. Modern retailing in India is in 2008 expanding at a similar or slightly faster rate than it did in those two places during those periods, so that it is likely that 30% of the present numbers employed, or some twelve million people, will be displaced from Indian traditional retailing by 2018.” (Harper)

      When I wrote my article, I do not know these data and conceptual framework and cost benefit analysis but after reading this book I came to know that millions of people are going to be in the trap of poverty due to organized markets. I am not against of supermarket even though I like malls and big bazars but being a development professional twelve million number is disturbing me. There is a question in my mind. Whether we want to reduce poverty from India or we want to shift poverty from poor to middle class people? I discuss this topic to Ananda (faculty of communication in development discipline) and he told me Hong Kong and other foreign countries had faced this problem earlier. One thing we can organize these provisional shops and equipped these shops with modern facilities to compete with supermarkets.

      It’s my personal experience of Kanpur big bazaar. This big bazar is 15 k.m. far from my house and when I need to purchase anything from big bazar, I have to plan my time to go for shopping. Sometimes I did not go because big bazar can save my time but travelling time is more than saved time by big bazar so sometimes I go to nearby shops. Travelling expense is also greater than big bazar discount on goods. Once I purchase a bulk of goods, I need private auto to go home as I belong to middle class family and I do not have personal car or vehicle. If somehow I have a car , parking coast is minimum fifty rupees. Once I will calculate discount on purchased goods from big bazar, it would be negative. I personally feel big bazar is not profitable for consumers like me. This problem gave me idea to make marketing on walk able distance where no need of parking, no time management or we can say easily accessible and affordable for the people. this will be a kind of mini bazaar. In this way people will be get benefit and provisional shopkeepers will also be benefitted.

      Obviously I cannot generalize my above paragraph it need a research and experience like you. I need to select a representative sample for a specific place. After this process I could do cost benefit analysis and other things to strengthen my opinion. These all necessary things are not present in my article .This is only my experience. Give me suggestion to enhance my knowledge and analytical ability.

      Shanti Gupta

    • Ananda Mahto says:

      Dear Manjoj,

      I will admit that I, too, like the convenience, quality, and savings that are offered by stores like Big Bazaar. Not only that, but these stores are a welcome reprieve from the summer heat in areas like Chennai, where I can go and walk around with my wife and daughter in comfort, not having to worry about things like avoiding holes in the sidewalk.

      I hope you read the book I linked to in my earlier comment since it looks at the issue from a different perspective. It acknowledges the benefits to the consumers and the primary producers, but ponders on the fate of the neighborhood shops.

      Even in many developed countries, there are additional related discussions. Some of these include ways to assure “product differentiation” offered by the neighborhood shops, or identifying ways to improve the quality of service of the neighborhood shops to make them more competitive. The desire to make them more competitive serves several purposes, not just making sure that they have a job. One externality, for instance, can be reduced traffic (and the resulting pollution), particularly if you can have an urban plan that promotes “walkable cities”.

      • Shanti Gupta says:

        Ananda,

        Off course one of the benefit we can get in reducing pollution and traffic by organizing unorganized sector market. As a student of economics, I know that organised sector is always good for the employees in terms of job surety if employ is permanent. Even though the employ is not permanent he need not to worry about his salary at the end of the day. Organised sector is better for employees also.

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