Big retail has small impact on mom-n-pop stores: Study

The growth of organised retail headed by large corporations does not significantly impact small mon-n-pop retailers, a long-awaited study by the Indian Council for Research on International Economic Relations (Icrier) concluded.

The study conducted for the government, following allegations that big retail was squeezing neigbourhood retailers out of business, showed that the latter's turnover and profit dropped 8 to 9 per cent initially, but the adverse impact weakened over five years.

Significantly, the report states that a total of 151 small shops have closed down over a period of 21 months, which is about 4.2 per cent of annual closure of retailers. However, only 62 of these shops attributed their closure directly to competition from organised retail.

Icrier Director and CEO Rajiv Kumar said the turnaround occurs as unorganised retailers adapt to the new challenge and formulate their own strategies in terms of technology upgrade and improvements in the supply chain.

The findings are likely to ease pressure on the UPA government, which has been warned by the Left parties not to succumb to the temptation to open up the retail sector to foreign investment.

On the domestic front, organised retailers have been opposed by several groups in states like Uttar Pradesh and elsewhere. In fact, UP had in mid-2007 banned the opening of new stores by retail chains like Reliance Retail, on the grounds that small traders will bear the brunt of the organised retail onslaught.

As much as 49 per cent of 1,999 sampled small retailers reported a decrease in turnover, while others reported no change or even an increase. The highest impact has been felt in west and north India.

In terms of product categories, the impact has been greater in textiles and clothing shops (46 per cent of the sample), and the least in fruit and vegetable hawkers (34 per cent).