As foreign capital starts flowing into the $28-billion organised retail trade in India following the relaxation of FDI norms, small unorganised retailers and kiranas would need to reinvent themselves, say experts. Inability to do so could make their survival tough in face of stiff competition from the Walmarts, Tescos and Carrefours of the world.
Retail traders associations, consultants and industry bodies believe that the 1.5 lakh kiranas in the country will have to rethink their business strategies, as modern retail spreads its wings across formats and geographies.
?Small retailers will enhance their
customer proposition by steps like new product lines and brands, better display, renovation of stores, introduction of self-service and electronic payment systems,? says Praveen Toshniwal, chairman of CII (Western Region).
While CII believes that organised retailers and kiranas can easily co-exist, as they do in both developed and developing economies across the globe, an India Brand Equity Foundation (IBEF) report suggests that by 2015, the share of traditional stores in India would dip to 80%, from the current 90%.
Kiranas not only need to change their assortment of products, but also price them smartly, to attract buyers. ?From pricing to packaging, they need to change,? says Anil Talreja, partner at audit and consulting firm Deloitte. ?Their shelf assortment has to be tilted towards local goods, which the branded multi-national retailers will not offer.?
?They also need to market their schemes and offers well,? adds Talreja.
From offering more local products and attractive schemes, to re-designing their stores and shelves, the kiranas have their task cut out in the coming years.
?They have to invest in changing the look and feel of their stores and ramping up their customer service and delivery mechanisms,? says Viren Shah, president of Federation of Retail Traders Welfare Association (FRTWA). ?They will increase their free home deliveries and also make their services more customised.?
The initial offers, freebies and investments will take a hit on their margins. ?But that is the only way for them to survive,? asserts Shah.
According to FRTWA, the margins for kiranas stood at 20% about 10 years ago, when modern retail was yet to take off. ?Today their margins are at 10% and will go down to low single digits in the next five years,? adds Shah.
Shah’s concerns are echoed by the Confederation of All India Traders (CAIT), which is strongly opposing the government’s FDI policy, citing issues of
unemployment for small retailers, traders and kiranas.
?For hundreds of big corporates, lakhs of small businesses will get wiped out,? says BC Bhartia, national president of CAIT. ?The kiranas lack funds to invest in order to adapt with the modern trade.?
The CAIT, however, will impart retail training to local traders and shopkeepers to make them more acquianted with modern retail. ?We will train them for two months on branding and merchandising of products, store design, customer services and dress codes,? says Bhartia.
The association also plans to approach the government for interest-free loans for kiranas. ?Even if 50% of the local trade can survive by investing and re-orienting themselves, it will be an achievement for us.?
While some sections of the industry anticipate a bleak future for the kiranas, retail experts dismiss such notions. “The fears are absolutely unfounded and the kiranas will face no direct competition from multi-brand retailers,? says Arvind Singhal, chairman of Technopak Advisors, a Gurgaon-based retail consultancy. ?They are present in densely populated areas where the Walmarts can never reach.?
“They also have a much better understanding of the local market and will continue to do good business,” adds Singhal.