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Supermarkets

Today India is shining on the world map. It enjoys the privilege of being one of the fastest growing economies. This robust and sound economic growth which has made India a cynosure among developing countries is sustained by retail sector to a large extent.

RETAIL SECTOR AND ITS IMPORTANCE IN OUR ECONOMY

Retail sector is a market for people of all classes whether rich or poor. Retail sector to a large extent comprises of small time traders, pavement vendors, small store owners and the like. They cater to the demands of both the affluent as well as low income groups by providing a variety of goods and services at affordable prices.

Retail sector is also a major source of income and livelihood to a large section of population. It is a broad economic forum that provides new avenues of employment opportunities and entrepreneurship to the youth as well as to the vast uneducated and unskilled workforce of our country. Thus retail sector is indispensable in our economy.

Till now small time traders operating in open markets had enjoyed monopoly in this sector. But today their unrivalled and undisputed position is being challenged by the emergence of a new business enterprise-the supermarkets.

SUPERMARKETS-A RETAIL OUTLET FORNEW CLASS OF CUSTOMERS

Supermarkets are newly established market phenomenon in our country which came into existence after Liberalization. These provide a variety of goods and services under one roof. These have received immense customer response in a very short span of time.

After Liberalization, the markets of our country were opened to global competitiveness. Our economy was exposed to an unprecedented level of opportunities. Tremendous FDI inflow and outsourcing to Multinational Companies have generated a lot of capital in the economy. At the same time to compete and assert ourselves in the global market our economy adapted to new methods of working which aim at maximizing efficiency of production processes through technological and with minimum investment. So the goods and services sector such as manufacturing and IT which could cater to these new demands received a major thrust in our economic planning. The new found capital was utilized in creation of IT parks, SEZ, infrastructure development and for industrial expansion. All this helped in generation of massive employment opportunities among the skilled youth and educated middle class. So, now the capital has passed on into the hands of the middle class. As a result their purchasing power also increased. With this new found buying power there has been a drastic change in the tastes and preferences of consumers from price-linked to quality and value linked product and services. At the same time there has been a dramatic shift in the cultural trend among people especially among generation-Y and middle aged groups who have been exposed to western ideology in the wake of Globalization. Today joint family has been replaced by nuclear family as a result of industrialization, globalization and liberalization. People aspire to lead a life of comfort and luxury. Both husband and wife work for higher earnings. This has increased the pace of life and essence of value of time. This lifestyle demands services that keep up with the pace and offer convenience and value. This is where the supermarkets come in. Their concept of providing all quality goods and services at the same place fits proudly into this newly formed culture. So, supermarkets cater to the needs of the newly rising urban middle class.

The success of supermarkets threatens to shatter the age-old foundation of our retail sector governed mostly by small time traders and shop owners.

SUPERMARKETS-A THREAT TO UNORGANISED RETAIL-MYTH OR REALITY

Supermarkets tend to exploit the principle of comparative cost advantage. The enhance the sale of their products by offering quality and branded commodities at discount rates and also by the introduction of several new incentive schemes to attract the customers. Any small retailer in the vicinity of supermarket offering inferior products with higher prices will face immense competition from it and find it exceedingly difficult to survive his business in the market.

Availability of and access to credit and capital help the supermarkets to implement and exploit technological benefits which remain far from the reach of small store owners mostly on the account of lack of sufficient credit. This helps supermarkets to gain an upper hand over the small retailers. Availability of huge financial resources also help supermarkets to offset any initial operating costs and losses. As compared to supermarkets the capital required to set up a small retail shop is very small as well as its operating costs are also low. But a small store owner lacks the requisite capital necessary to survive in the market in the event of heavy losses.

Small store owners obtain their commodities for sale mostly from distributors of wholesale markets at a bargained price. The small retailers then sell these products and services to customers and earn a marginal profit. However the process of retail consolidation which supermarkets are increasingly undertaking is likely to hurt small retailers. This is because supermarkets demand massive sales volume of manufacturers and distributors. So the distributors would be more willing to cater to the demands of supermarkets rather than small retailers.

Supermarkets have better storage facilities and an efficient transport system that enables them to ensure speedy and effective distribution of goods and services in a cost-effective and economical manner. Small retailers especially in wetmarkets that comprise of subji mandis are at a greater disadvantage in this context as they have to supply perishable commodities like fruits and vegetables with no storage system available at their disposal.

The emergence of supermarkets or organized retail has definitely increased the level of competition. It has also challenged the livelihood of small retailers to certain extent.

But the organized retail as identified by malls, multiplexes, supermarkets and hypermarkets is still at nascent stage in India. Unlike the developed economies where organized retail has replaced small traders and shop owners, the retail sector in our country is still dominated by small retailers. So it is imprudent to conclude that our retail sector in coming years would eventually succumb to the dominance of organized retail. There are several aspects of the unorganized retail comprising of small retailers and customer psyche that need to be considered before we make any conclusion.

1. The small retailers have begun to adapt to the changing market scenario and in tune with customer tastes and preferences. To attract the customers they have introduced several innovative services such as telephone order for various commodities, home delivery and even procurement of branded items on demand for customers. Long-term association with customers due to provision of such facilities helps to develop a bond of loyalty with them. Such customers are not easily drawn towards supermarkets.
2. The small retailers have also learnt to focus on customer/product niches where the can add value where large retail chains cannot. These include sale of goods and services such as medicines, gifts and greeting cards that customers require unexpectedly and immediately. So, they prefer to buy from their nearest retailer rather than from a distant supermarket.
3. Customer psyche also plays a pivotal role towards their orientation towards a particular type of market. Most of the middle income groups which are the potential targets of supermarkets believe that such big retail chains are expensive. So, they usually stick to their small retailers. In regard to food items, most Indians have a habit of procuring fresh food products rather than processed and packaged items. So, here the small grocery vendors who replenish their stock on a daily basis have an upper edge over supermarkets.
4. Supermarkets usually flout that their major customers are the affluent. But the reality is that a majority of rich people have a tendency to send their servants to markets to fetch for their day-to-day necessities. The servants usually feel intimidated by supermarkets. So, they turn to their friendly neighbourhood Kirana store.
5. Rural India turns to small retailers for its necessities. Rural areas have yet remained untouched from supermarkets.

So, what we see is that our unorganized retail consisting of small retailers is evolving to meet the new challenges of present scenario. This sector is here to stay.

STRENGTHENING THE UNORGANISED RETAIL

Supermarkets have been able to strengthen their roots in our country because these are the need of the hour. These are essential to meet the challenges of changing lifestyle of people in modern time. In India supermarkets are still in a blossoming stage. However in future there are ample opportunities for its expansion. But at the same time we must also understand that supermarkets present a significant challenge to the livelihood of small time traders and shop owners that form a major part of our unorganized retail sector. These are mostly low and middle income groups. Their expulsion from the market by the dominance of supermarkets can have serious social ramifications in the form of increased unemployment and perpetuation of poverty. In the light of this, we must strengthen our unorganized retail by ensuring better access to credit from banks and microfinance institutions, modernization of wetmarkets such as mandis through public private partnership, providing better infrastructure facilities and promoting new innovative market strategies to small retailers to enable them to compete effectively. At the same time we must also regulate the expansion of supermarkets.

Supermarkets and small retailers can co-exist in harmony if we generate a conducive environment for their growth. Its benefit would eventually fall upon the customers who would be able to enjoy the fruits of both the market systems.

-Anubhav Yadav