Changes, challenges ahead as big retailers open shop in India

India’s market reform started in 1991 and today, buzzwords like liberalization and globalization swirl freely in everything said and written about the country. But so far, these reforms have been perceived as being by and for the rich elite. The man on the street, the lower middle class and the poor, have disdainfully shrugged off these grandiose words. Nothing has really impacted their lives, they claim.

Well, something will, and soon.

India’s retail skyline is dotted with almost twelve million mom and pop stores: tiny, efficient, family-run, next-door shops that cater to every budget conceivable, and sell every product made in India or imported. They constitute almost 97% of India’s $200 billion retail sales, which explains why India is hesitant to allow direct foreign investment in this ‘unorganized’ sector. They are everywhere, the literally ‘convenient’ store, visited by hundreds of millions of people across the country every day for their smallest need to the biggest. In fact, you may not even have to pay immediately for what you buy. In most shops, your account is painstakingly maintained and meticulously reconciled in small diaries. You settle monthly, or sometimes, only when you can. No credit check is necessary. The shopkeeper knows every member of you family, where your spouse works and what your children are doing, the last probably better than you do. They are the neighborhood watchers, the community gossip clearing houses.

This year, Wal-Mart, America’s retail giant, goes to India, albeit in a tie up with an Indian company as the front-end retailer. Other foreign and Indian companies, like Reliance Industries, will also launch thousands of supermarkets all over the country in the next few years. To my mind, these seemingly ordinary events will be a watershed, a symbol of the final arrival of big business in India, the ultimate test of India’s conviction in her reforms and her ability to bear the consequences. As long as business is done behind computers in skyscrapers, one is hardly aware of it. But we are now talking street level economics.

A free market system is impersonal and impartial. It cares not for culture and heritage, and can turn centuries of tradition on its head at one fell swoop.

When these supermarkets open, they will not just displace the livelihood of twelve million families; they will uproot a phenomenon that is a part of every Indian’s daily life and literally change the geography and demographics of every street. Jobs will be created but many more will be lost in a country with very high unemployment. One can almost visualize the common man standing uncertainly on his once familiar beach, full of trepidation at the future, squinting at the tidal wave that is forming on the horizon.

But there are challenges for these new businesses too.

Decades of socialist indoctrination have made Indians instinctively wary of big business and deeply suspicious of their nexus with politicians and criminals alike, not to mention the innumerable financial scams and swindles that they get away with in India. Mega business houses from the West especially refresh painful memories of the East India Company, Enron (Dabhol) and Union Carbide. Skepticism almost instantly turns to a knowing, leery, well-honed distrust. Already there are rumors about the coincidence of the sealing of illegal retail outlets in Delhi and the entry of these powerful corporations. Fortunately, such preconceived notions and misgivings are rapidly diminishing, at least in the urban world, thanks to the IT industry.

India, like other Asian countries, drags behind it a baggage of cultural mores and conventions. There are as many rules of life as there are to the conduct of business. Every state has its own attitudes, its own language and its own taboos. Nothing is uniform; nothing is common. You can’t locate certain shops in certain areas; meat can’t be sold in certain communities. In certain places, people will not interact with you unless you speak the local language. Small town industries are guarded by fierce communal protectionism. Frozen food is looked down upon almost everywhere. You don’t get into a car and drive to a supermarket to buy a gallon of milk; you walk to the local grocer down the lane and buy a quarter liter of milk. Indians will not buy a dozen batteries when they need just a couple.

The hardened mindset of a nation will clash with a new business model. Each will adapt and change, but both, I think, will survive in the end. And just as new life returns to a shore ravaged by the waters, consumerism and big business will eventually plant their roots in India and daily life will probably be all the better for it.

I am only worried about how long that will take and what will happen to my corner grocer’s children in the meantime.

- Sundar Viswam