Sunday, October 26, 2014


When FDI in retailing was permitted in India, every one thought that the small "pop and mom" stores would disappear from the Indian landscape. This Blogger was the one who argued that the super market chains can never compete with the unorganized retail sector in the foreseeable future, given their great resilience and personal type of service they offered to the Indian consumer. Though it is almost one and a half decades since organized retailing giants entered this business, none of them could become viable even to day! Their share in the retail market is a paltry 5% which is too insignificant to make any dent. Here comes a supporting report which talks about the decline of super markets in the UK during the last 10 years. 

"And yet a decade on, the supermarket sector is in meltdown. An overstatement? Hardly. In the cool-headed assessment of the Grocermagazine, the most authoritative voice on UK food retail, "consumers are abandoning supermarkets in their droves". Tesco, once the darling of the stock market, the government's pet performing British company, is in the most acute distress. From January to June this year, its profits crashed by 92%. Investigators have yet to plumb the depths of the big black hole in its books. Morrisons is also in a bad way – its pre-tax profit for the six months to August was halved. Sainsbury's share price has dropped. Even the supposedly trend-bucking Waitrose cannot be complacent: its profits for the first half of this year slumped by 9.4%. Overall, sales at the "big four" supermarkets – Tesco, Asda, Sainsbury's and Morrisons – have been stagnant, or in decline, since last May, according to new figures from the Office for National Statistics. Rating agency Moody's predicts that their profit margins and sales will shrink further. Two German discount chains, Aldi and Lidl, acted as the immediate nemesis of the fat, smug, greedy status quo of British food retail. They dealt a deadly blow to our familiar chains by exposing just how expensive they really are and continue to shave grocery market share off them. Before the discounters appeared, most British consumers swallowed the attractive proposition that UK supermarkets offer unbeatable value for money. In truth, they overcharge routinely, putting a minimum 30% mark-up on everything they sell, although the most egregious margins are systematically squeezed from sales of fruit and vegetables."

One of the strongest arguments while opening the sector to FDI was that foreign players would assure about their operations being able to support poor farmers of this country. Above report speaks about the power of the super market chains to force consumers to buy only those products with high profit margins and how healthy foods like fruits are vegetables are priced sky high! While many western countries have traveled a long way to confer almost invincibility to their retail chains by spreading their wings across the country eliminating small retailers totally, now they have nothing to fall back on even if consumers want to boycott them! In that way India is blessed with almost 8 million small stores distributed evenly through out the country and discerning consumers are likely to go back to these family friendly shops once disenchanted with the mechanical approach and impersonal attitudes of the big retailers. Hail the small fellow around the corner of our house who has been providing useful grocery service in the past and will continue to do it in spite of any move by the government to bring in large players in the name of farmers and efficiency of operation.


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