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Can too Much Retailing be bad? - a Supply Chain Professional's View

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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.

Comments

I find it hard to agree to your view point. Here are my views on a couple of questions posed.

1) Should we encourage retailing - Yes but it should be organized
2) Should big players in retailing - A resounding yes because it will be organized i.e. Govt. will earn thru. taxation, employment will be created (and not casual labour), comsumers will have better choices at competetive prices
3) FDI in retail - Why not, if local big business can't then somebody has to, secondly expertise will be brought in, supply chain will be improved, producers will get better price for their produce.

The mom and pop shop won't die but I would like retail business to be more professional and better organized.

Mind boggling write up, Srinivas! Pinpointing one of the issues of our world today...

Somewhere I read that the Indian farmer gets only one third of the price paid by the final consumer. In other words, there is more than double mark up in the prices before it reaches the consumer. Where does this margin go now? It is expected that due to the procuring efficiency of big retailers, the original producer/farmer will get a better price or the final consumer will pay a lower price, eliminating too much mark up by middlemen. Also, in a large country like India, the large retailers will be restricted to bigger cities at least in the first decade. In smaller places, Status Quo will continue if you like it. The original post in this link does not look at this angle.

one thing is sure that large retailers allows one roof purchasing and gives variety to offer consumer for a competitive price.
Organized better storage facilities etc will help consumer as well as idusties

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