COMMENTS

I remember one of the Retail Chain Advertisement "From Farmer to Fork". The experience shopping in these stores and common corporate supply chain knowledge tells exactly the opposite. The reality is Farmer to Cold Storage when rates are low. Cold Storage to consumer when rates are high or expiry dates are close. As a result vegetables purchased in Retail chains do not last at home and spoil fast. Vegetables from the street side are fresh and last longer.

Food is Genetically modified to last longer in storage and survive conveyer handling. Classic example is the Tomatoes. Couple of decades back tomatoes were thrown on people knowing well it will break and splash. Today tomatoes are hard enough to play cricket. This is engineered for the ketchup factories. The Tomatoe which was good for health is now a health hazard by way of forming stones in Kidney and Liver.

The volume game was supposed to bring price advantage to customers but sadly they have made only the Retail Chain owners richer at the expense of the poor farmer. The wealth which was shared by a large number of families  who make a living, now goes into a few pockets making already obese people more obese.

A huge amount of non value add costs come into the price of daily needed articles by way of airconditioning, real estate, massive amounts of electric energy, staff(MBAs etc). To keep competitive pricing with the hawker the bottom most part of the value chain the farmer gets squeezed.(Of course the inbetween trader used to do this earlier).

Government must create large trade centers( Organised well designed Mandis) where farmers can come and sell the produce completely free of any costs. Police to ensure weeding out any brokers who will just occupy and sell even free space. I have seen these in Bhutan.

I prefer the small shop round the corner for daily needs than the big mall.

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Study by ICRIER (INDIAN COUNCIL FOR RESEARCH ON INTERNATIONAL ECONOMIC RELATIONS)

Authors - Mathew Joseph, Nirupama Soundararajan, Manisha Gupta, Sanghamitra Sahu

Important Study Findings:

Positive Ones

• Retail trade is expected to grow at 13 per cent per annum during 2007-12. Its value will then be about US$ 590 billion in 2011-12. With this expected increase it is inconceivable that the rising demand would be effectively met by the unorganized sector. As in other countries, this provides the basis for the expansion of organized retail.
• The adverse impact on unorganized retailers tapers off over time.
• The major factors that attract unorganized retailers to consumers are proximity, goodwill, credit sales, bargaining, loose items, convenient timings, and home delivery.
• Lower income consumers have saved more from purchases at organized outlets.
• Organized retailers are themselves investing heavily or through third-party logistics companies on temperature-controlled warehouses, cold-chain transport, etc., to modernize the distribution system.
• Small manufacturers, in general, are yet to feel any major impact of organized retail as a large number of unorganized retailers continue to constitute their clientele. They are however, optimistic

Negative ones

• Unorganized retailers in the vicinity of organized retailers have been adversely affected in terms of their volume of business and profit. Unorganized retail has maintained employment levels perhaps as a result of competitive response.
• Intermediaries do not appear to be adversely affected so far although there are signs of their losing business in products such as, fruit, vegetables, and apparel.

Final Remarks

"...results are not indicative of the countrywide scenario, but only of mega-and mini-metro cities around a limited number of organized retail outlets. The results of the control-sample survey conducted for the study indicate that traditional retailers are not affected adversely even in these cities, away from organized outlets. For the country as a whole, unorganized retail is growing at a reasonable rate and will continue to do so for many years to come. Yet it is clear that the growth in demand for retail business is likely to substantially exceed any possible supply response coming exclusively from the unorganized retailers..."

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The full picture has to include the other two key entities 1) producers/farmers, and 2) consumers. The supply chain mechanism in between is a detail that will play out to reward the most efficient systems.

Priority #1 - What safeguards the interest of producers?

• Proactive measures to prevent creation of monopolies at lowest levels of sourcing. Private monopoly, or cartel will be worse than the monopoly of sarkaari mandis
• Making sure that producers get access to wider markets (better supply chain, fast/safe/cold transportation etc)
• Access to demand forecasting so that producers/farmers can do some planning and prevent supply flood (will lead to lower prices like what regularly happens with tomatos in Kolar) or a shortage.
• Incentives for long term procurement contracts so that producer/farmer and sourcers share the risks.

Priority #2 - the consumers? Simple are their needs:

• Quality
• Cost
• Choice

Now, the kiraanas, chains, sourcers etc. Haven't the inefficiencies of unorganized retail and supply chain simply added to the costs we pay? Eventually, a hawker would pass on even the costs he incurs on "bribes paid to police and municipal workers" to the consumers, wont he? Is he the only real victim of the bribes etc that he paid? I think not.

But practically speaking, in our country, you can't just wish things away. There is a human aspect here, and changes need to be eased in and watched for social impact. To this effect,

• I liked on item in CPI-M's report on this subject (came out about 3 years ago). We must ensure that big chains don't use their deep pockets to take losses for first few years to wipe out local kiraanas by selling at deep discounts. Under the same token of "level playing" field, kiraanas and hawkers etc must pay the "full costs" of doing business, which would mean paying the rent for their business space, parking etc
• Can there be incentives to make kiraanas cooperate? There never was a need earlier, as they literally "cartelized" the market by selling at or above MRP (the MAXIMUM suggested price). They know the business, and the communities - can't they compete by joining hands?
• Can the chains be "forced" to hire x% of their workforce from local kiraanas and hawkers?

Oh my God. real long comment. And a boring one too.

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Murali-sir, they should have done a survey of big chains as well.  Business is falling for them too.  This is probably due to the slowdown. 

Walmart is watched with great trepidity each time it opens a new store.  The rest of the neighbourhood shuts down.  They have extraordinary leverage with suppliers, pay their staff unfair wages, don't allow collective bargaining, etc.  I can imagine how a town feels when a sidewalk full of grocery stores, cafes, etc is replaced by one big box. 

Another AMUL is probably needed in India - this time for grains and fruits and vegetables.  Our rural supply chains are not very good.  Not enough cold storages, no proper warehouse receipt systems.  A good futures market will also help in smoothening prices.

http://en.wikipedia.org/wiki/Amul

Srivathsa

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...looks like you are still in with a chance. Not good tidings for capitalism everybody is baying for free market economy blood.

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