Analysis

Foreign Retailers Seek Entry into India

Many proponents, including Prime Minister Singh, want Wal-Mart, Tesco, and other foreign retailers to sell products in India. However, Indian retailers are not interested in foreign superstores entering the retail marketplace. Their arguments against Wal-Mart and the others are no different than the ones made by small American shop owners when a Wal-Mart store comes to town.

A fear exists that the small specialty shops (bakeries, tailors, convenience stores, fabric stores, hardware stores, etc.) will not be able to compete and will go out of business; store owners and employees would lose their livelihoods. Also, contrary to the assurances given by the Singh administration that foreign retailers will buy products from Indian suppliers, critics believe that initially foreigners may do so, but, in the end, they will buy from any country in the world where costs are lower. Such action would harm the Indian suppliers monetarily.
 
Another interesting argument is that foreign retailers are not manufactures—just sellers. Wal-Mart is not a manufacturer; it is a superstore, made up of many small shops underneath one roof. It is merely transferring the activities of buying and selling from small merchants to their megastores. This process hurts the small merchants in that Wal-Mart buys goods in bulk at prices it dictates, taking advantage of economies of scale. By so doing, Wal-Mart can then sell merchandise at lower prices than the small stores.

However, supporters of foreign retailers argue that consumers may find prices at foreign superstores lower than those at “mom and pop” stores and may get better services; Indian merchants, for example, do not accept returns if a consumer is dissatisfied with a product or finds it defective.

Both sides are missing a genuine point.

Americans built Wal-Mart, so why can’t the Indians build a giant “India-Mart” in India? Indian ingenuity is no different from that of the people of America or any other nation. The answer has to do with perception: policymakers see Indian entrepreneurs as weak, wishy-washy, and incompetent, whereas foreigners are viewed as competent and confident.

The current United Progressive Alliance (UPA) government stresses that foreign direct investment (FDI) in retail industries, and for that matter in any industry, is good for India’s economic progress and will cure her economic ills. Furthermore, the government questions its opponents as to why foreigners cannot open a business in India. Nationalists remind the government that once upon a time the British East India Company came and opened a business in India; later Britishers enslaved us.

Many business professionals ask why the Prime Minister and chief ministers fail to inspire and provide incentives for Indians to build supermarkets in India and remove the impediments to building them.

The business cycle is simple: buy, transport, store, shelve, and sell products. Once the products are depleted, repeat the cycle. Why aren’t the governments, both central and state, doing their part to help create this cycle, namely building airports, seaports, roads, and railways for transporting the goods?

Will foreign retailers do this?
 

05-Feb-2012

More by :  Vasant G. Gandhi

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