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Small & Medium Retailers, Brace Yourself For The FDI Impact

It is not an easy task to fulfil the daily grocery needs of 1.2 billion people in India. It’s a very serious business and has emerged as world’s fifth largest retail industry in terms of economic value, currently valuing at US $600 Billion. Growing at 12% Compounded Annual Growth Rate (CAGR), the Indian Retail Market (IRM) is expected to touch trillion dollar mark in the year 2020. It accounts for over 10% of the country’s Gross Domestic Product (GDP) and around 8% of the employment.

FDI in Indian Retail Market

In 1997, the Indian retail industry took paradigm shift due to the opening of doors to the foreign brands. The potential in IRM has always attracted global single and multi-brands like Nike, Adidas, Gap, Apple, Starbucks, McDonald’s, Dominos, Walmart, Carrefour, Tesco, and others to become part of the growth story of IRM. The Indian large corporates have also started their own multi brand stores like Big Bazaar, Spencer’s, 24 by Seven, More, Easyday, Patanjali Mega Store and others.

Foreign Direct Invest (FDI) has given a competitive edge to the IRM by offering sophisticated retail stores which give amazing buying experience, customer first approach, competitive prices etc. In case of single brands retail trading, Government of India has approved 100% FDI (up to 49% through automatic route and above 49% through government approval) and in case of multi-brands retail trading, Government of India has approved 51% FDI through government approval.

Foreign investment in Indian retail market has also complimented other industries like warehousing, logistic, packaging, real estate, manpower management etc. In Pre FDI era retail market in India was largely considered as unorganised sector. After FDI, this market is becoming more professional, organised and systematic day by day by using sophisticated technological tools to identify customer buying behaviour, mapping of purchasing power with previous purchases, placement of products, check on emotional connection between customer and product, direct procurement from ultimate producer/manufacturer, storage of perishable food items, improvement in logistics, etc. Considering these factors, one can say that opening doors to FDI is considered as a good prophecy for the Indian economy.

Unorganised Retailers

IRM is the combination of both organised and unorganised retail market. Unorganised retail market has deep roots in rural India and Tier 2 -3 cities. Unorganised retail market generally includes small retail shops in which sales are made over the counter and buyers do not get an opportunity to enter the shop or experience the look and feel of the products. Sometimes these small low-cost retail shop supplies products to neighbourhood buyers on credit basis. FDI in IRM is not an immediate threat to these small retail traders. But looking from the consumer’s point of view, increase in disposable income and entertainment quotient has empowered the consumers to buy goods from supermarkets or hypermarkets.

Countermeasures for unorganised retailers

In the long run, retail FDI is definitely going to impact unorganised retailers. Small retailers have to prepare themselves to remain in the business. Here are few tips for small retailers to be prepared against the impact of FDI in retail and utilise it to their advantage.

Provide easy shopping experience:

Shopping is one of the easiest stress busters nowadays, provided that the ambience of the store is suitable to uplift the mood of the customers. Products should be placed in such a manner that attracts maximum eyeballs.

Trust of quality:

If a customer trusts you once then he/she will trust you again, sooner or later. So consistency in quality is key for any business.

Discounts and offer coupons:

Generally, small discounts pay more to the seller. By giving early bird discounts or giving coupons which can be redeemed on next purchase actually buys the loyalty of the customer.

Door to door delivery:

Delivery of goods at doorstep is now a common phenomenon, which saves a lot of time, energy & money of customers. By ensuring timely delivery of required products, small retailers can earn brownie points.

A blend of technology:

Good trading practices with the right mix of technology always pay premium. Small retailers can have tie-ups with e-commerce grocery aggregators to supply goods in the nearby locality. One can also use IT tools to identify customer buying behaviour so that demand for any given product can be predicted more accurately.

Consistent supply:

Small retailers are largely dependent on wholesalers or stockists for the regular supplies of goods. In this case, small retailers must ensure uninterrupted supplies of products.

A right mix of merchandise:

A right mix of merchandise can address shopping requirement of larger number of customers.

Expansion:

Business without expansion is like static water with a foul smell. Various financial assistance schemes of central and state governments are available to promote small and medium-sized businesses. One can take benefit from these schemes and expand their business.


With 5 years of hands-on experience, Rajeet has honed his expertise in the areas of financial planning, audits, investment planning etc. His affinity and comfort with writing have allowed him to translate these tricky subjects into simple and easy terms to understand.


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