Can too Much Retailing be bad? - a Supply Chain Professional's View
Should we encourage retailing? And, should we have big players in retailing? Isn't inviting FDI in retailing akin to inviting trouble? Won't such a step spell doom for the economy in the long run???
Inviting FDI Investment in retailing may not really augur well for the economy of a country. Not because it is FDI but because of the involvement of large firms. Every retailer is a store room in a way. Too many retail outlets will result in too many stock keeping points. Stocks block the working capital and this certainly is not good news.
An aam aadmi's (Common Man's) basic necessities are: 3 rotis (Indian Bread) & dal (Indian Curry) per day (Food), decent kapda (Clothing) and makaan (Shelter) at affordable prices. All that a poor man needs is daily bread, simple clothing and a small roof over the head. Increase in the retail outlets will only push these basic requirements out of the reach of the common man. The retailers carry stocks of finished products like biscuits, noodles, chocolates, branded clothes etc. Poor anyway cannot afford to buy these or is simply not interested in these. The retail outlets also spend huge sums of money on land, buildings and good interiors. This too makes clothing and shelter more expensive for the poor!
Thus, what is essential may not be available and what may be slow-moving or is not so essential in order to lead a decent life may be available in plenty. Stocks will be carried by the retailers expecting some business in future and Anticipatory Inventory is certainly dangerous. Cost additions would be rampant and value additions would be less frequent. To me, the 'real' value addition happens only when there is a repeat purchase by the Customer.
Every retail outlet obviously would want to keep stock of a variety of items so as not to lose a customer. The level of stock is usually proportional to the space available. A small outlet will tend to keep low stocks and a large outlet will always carry high stocks. Thus, bigger the space available, more dangerous it is to the Country and its economy.
So, should we encourage retailing? And, should we have big players in retailing? Isn't inviting FDI in retailing akin to inviting trouble? Won't such a step spell doom for the economy in the long run??? It is said that 'Information' should replace 'Inventory'. Instead of carrying 'Inventory' the retailers should carry 'Information' regarding Inventory. Inventory can be centralized and stored at fewer common warehouses. It is perhaps time for all the Big Retailers to join hands and practice collaborative Supply Chain with a view to bring down inventory and also inventory related costs.
What do you all think? Keep sharing your comments. Thanks in advance.