Multi Brand retailing, FDI


 

The FDI in Multi Brand retailing has generated a lot of interest of late. So what is this MBR? Why the fuss about MBR? Why are some people pushing it so fiercely and at the same time there is an opposing faction which is equally fierce? What does this all mean to us?

 

Well MBR is something very similar to a super market where all the retail products are available under one roof. The only difference with the familiar big bazaars is that the FDI in MBR would bring in the foreign players like walmart,  Carrefour (France ), Metro (Germany) . Currently India offers FDI up to 100% only in the SBR- Single brand retail wherein only a single brand could be sold under one roof- like adidas, reebok, puma, etc.

 

The entry of foreign players in the retail sector would mean access to the most basic items and the most common necessities like our spices or vegetables. For now we allow that only in the wholesale or the cash and carry business only. The entry of FDI into MBR would mean a  little more competition to the local small stores called the mom and pop stores / Kirana stores!

 

 

Looking at the reasons as to why I would support it, I could enumerate a few

 

 

  • Introduction of better technology and better storage facilities for the fresh produce like vegetables, fruits, etc
  • Competition in the existing market which would mean the quality would have to be on the dot. In other words, quality would take a greater precedence.
  • Competitive pricing! Now that there would be many players offering the products, businesses will be forced to compete at the price and the quality arena to attract the customers.
  • A good sign for the farmers is that their produce can find a competitive market as well and translate that to meaning that their produce would be better stored, thanks to the refrigeration and preservatives.
  • Generation of local employment, a big company coming in and setting themselves here would need man force and thus generate employment to the locals which would answer a lot of the money woes.

 

Coming to the negative list:

 

  • The presence of big companies pose a threat to the small mom and pop stores which can’t easily compete with the big brands
  • It would drive out the small businesses out of the jobs
  • Farmers would come under the mercy of the big companies eventually cos the big companies are driven by profit and not a social idea
  • Small and medium enterprises would have to close down since they cannot face the competition.

 

Trying to analyse things,

 

 

I can see that the role of the mom and pop stores may change but given the fact that these huge stores would be located far off and the amount of time involved in billing, I would still prefer the small stores. Also talking about the fears of people going out of jobs, I think it would generate more jobs than those that would be lost. Also most mom and pop stores run on the concept of light loans, no wonder it would be a hard bargain to move from them to the big chains at ease. From my side I would really vote a go ahead for the FDI, maybe not the total 100% but atleast 51%. Every policy has an opposition, the NEP of 1991 also did but it turned out to be a great decision.

 

Maybe it is another one of those tough decisions. But from where I see it, I don’t see many complaints against FDI in MBR. What about you?

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14 thoughts on “Multi Brand retailing, FDI

    • I am sold on the idea of FDI in the retail sector. Have to still see how it takes shape in India. Hoping to see a pilot project soon so that we could see how it may turn out ..

  1. Wouldn’t the prices be higher in the large stores? They usually are. If so, the smaller stores would still maintain their cash-only, local trade.

    • Well if they price it higher, it would be at their own risk. They still would have to compete with the others.

      Institutional pluralism does bring the benefits of competitive pricing to the table and I guess the customer would have better price ranges to choose from once this is done 🙂

    • Exactly Umashankar. It is not as bad as it is being portrayed. I hope it does not end up as a prey to the political ideologies and clashes.

  2. Sabyasachi Patra says:

    Unfortunately FDI in multibrand retailing is not the panacea of all ills. Any one of you remember Reliance Fresh? Yes it is an Indian company. However, it was forced to procure from the dalals and not directly from the farmers or mandis. So the same old story of getting poor quality. The need of the hour is in strengthening our cold storage chains. That can be done without opening up the FDI in multibrand retail.

    It has always been seen that the mom and pop stores will still retain their business as they have better contact with their customers.

    • I agree it cannot be the panacea. I do however bat for the idea of FDI with a faint hope that they would do something with the storage, processing sectors. I think with the international competition coming in, they would be forced to woo the customers and the only two ways are- improving the quality or reducing the price. Since it is a competitive pricing, I think the focus should naturally move to the quality.

      Well it still is very much a theory, I hope it turns out the same way.

      And regarding the kirana stores, even I dont get as to why they are portraying this as the main reason, It somehow doesn’t seem very convincing a reason..

  3. Big stores will have funds to sell for a loss for few years, drive competition out of business and then recover their losses with huge profit

    • It may be a possibility Shrinidhi. But I think the concerns are the same as the pre 1991 new economic policy allowing privatisation, liberalisation.

      But as it turns out, it did work in our favour, And i think ours is still a govt dominated set up. A free run could always be roped in through certain regulations.

  4. As an American, I can tell you that the convenience is great, but it does gravely effect the mom and pop stores, driving most out of business. People tend to lean toward convenience over loyalty. All those entrepenuers will be forced to shut down and then be forced to wear a cheesy Walmart greeter grin. It saddens me to think you will have Walmarts there, too.

    • Thanks Cheryl. That is a very interesting view point.

      Walmart is something very new to us, but we do have the chains like Big Bazaars, reliance etc. They have already started and at the same time, the mom and pop stores exist. But like you said, if the same thing as it happened there in the US repeats here, then it should be a matter of concern..

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