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Groceries will thrive even with FDI

By RJ Whitehead , 20-Nov-2012

According to a new study in India, 800,000 people are employed directly by organised retail in India, and even without FDI, this number would grow to 2m by 2016—and double that when indirect employment is considered.

Speaking at an event in Delhi organised by Ficci, the all-powerful chamber of commerce federation, Raghav Gupta, principal of Booz & Co, said that based on its research, retail will remain local in spite of the charge by newcomers into the Indian market.

Over the last 20 years of the globalisation of retailing, foreign retailers have had less than 10% market share in each of the big emerging economies. They have not been able to make a dent—there are more stories of failure than success,” he said.

Kirana stores set to grow

Making the point that modern retail is not destined to hurt India’s traditional kirana—or mom-n-pop grocerystores, Gupta was one of the speakers enlisted by Ficci to drive the first of a series of events designed to debate the role of kirana stores while also gauging the opinions of store owners. Ficci’s findings will later be delivered to the government.

He continued: “Out of the world’s top 250 retailers, only 50 operate in more than 10 countries. Of these, 37 are in China and 18 of them are already in India. Barring a few, most of them are facing a tough situation on their home turf, and hence are not interested [in entering India]. Therefore, it is not about foreign versus local, but about organised versus unorganised.”

However, Gupta did concede that FDI could potentially add another 1.5m jobs by 2016. Currently, 94% of the Indian market is traditional retail, meaning only 6% of the retail market is organised. And the market as a whole is expected to grow at 6-7% over the next 10 years, reaching a size of approximately US$800bn by 2020.

Growth imminent 

Traditional retail is expected to grow at 5% and reach a size of US$650 billion (about 76%), while organised retail is expected to grow at around 25% and reach a size of US$200 billion by 2020. Hence, in all probabilities, both organised and unorganised retail are set to see a boom.

Prof. Srikant Gokhale, faculty, IIMA, highlighted the socio-economic implications of FDI in retailing. “Retail is local and will stay local. In the last 20 years of globalisation of retailing, foreign retailers have had less than 10 per cent market share in each of the big emerging economies, not being able to make a dent despite presence of more than 10 years. There are more stories of failure than success.”

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