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Global Retailers And The Battle For Indian Market: What Can We Learn?

By on December 16, 2011

Nigeria’s emerging middle class which is put at 38million strong is a huge attraction for investors. It has led to an increasing number of new modern shopping malls that are sprouting in the major cities of the federation. They include the Polo Park Mall in Enugu State, Ikeja City Mall in Lagos and another coming up in Ilorin in Kwara State; we have recent facilities like The Palms in Lekki, Tinapa Shopping Centre, Obudu in Cross River State and the Ceddi Plaza in Abuja etc. The large growth of the middle class is the driving force behind this new way of shopping with $3,000 annual expense.

Big Foreign Retail Corporates are concerned about capturing the urban economy while they access goods produce by rural dwellers. Sometimes they moved further into these villages and alter the rural economy. Truth is village economies, local markets, farming based families see their way of life changed forever, whether for good or bad. Farmers are known to complain about poor prices being offered for their goods. They are compelled to take what is on offer.

For the urban centers, why they enjoy low cost electronics and many low cost stuffs; it isn’t difficult to see that small businesses get suck up in cities by these retailer giants. Gradually, these small businesses owners who were once owners become employees in such companies. The distributors-middlemen in the supply chain are wiped out by the deploying of efficient models and technological systems.

Global retail FDIs hold the promise of huge of boom for these farmers.  It is if these retail giants keep to their word but they scarcely do as they extract everything they can from farmers and others in order to shore up their profits. With companies claiming patents for seeds, it is feared and suspected that these global retailers would do same and then enslave them.

The global store chains see a rich juice to be milked from emerging market economies. Indian has been seen as strategic and a linchpin for growth as developed economies struggle out of its slump in consumer activities. But a different scenario is playing in Indian as government is backtracking from total retail liberalization as it fears the impact of on its mom-and-pops which is the mainstay of her urban economy would be dire. Regions are protecting their own in every way they can.

The argument is that global retailers like Wal-Mart Stores Inc. and Tesco PLC will improve shopping options for the public and also modernize the entire economy. As the argument goes, Uma Bharti, a leader of the main opposition party, the right-of-center Bharatiya Janata Party, had threatened that she would personally set fire to any Wal-Mart stores if they were allowed to enter India.  This has led to a controversial reform and anger as Indians have strong emotional ties with these mom-and-pop shops and they worried about them being destroyed.

Further argument has it that these giant retailers could bring in total of 2 million jobs when they finally get into India’s economy. The fear of small businesses dying and endangering local economies, it is just overwhelming. Critics want the government to back down. More fears reside in people’s suspicion on possible and complete control of prices, stale food, monopoly and drop in product quality as small business competitors disappear.

Reference has been made to the impact of Retail FDIs in Thailand. The impact of their presence they said led to the closure of 60,000 small shops. Sure a huge distortion to the local economies. It is expertly argued that by market saturation, these giants can create widespread impact in an economy.

In all, the battle to grab a share of one of the world’s untapped retail market estimated to be worth $270billion has begun with sweet deals for local players accomplished supply chains. But India like Nigeria, suffers from similar challenges and that is in the areas of poor roads, absent or minimal cold storage capacity and over-regulations multiple taxes and long difficult journeys; but the government is showing skill in managing this issue as a result has approved 51 percent foreign direct investment in supermarkets, capping the end of legislative brickbat over modernising the industry. To calm the fears of those who think these behemoths will decimate local shopkeepers, they created rules which demand that foreign retailers must source almost a third of their produce from small industries, invest a minimum of $100 million and spend half of that on “back end” supply infrastructure.  They are listening and they know how not to kill local industries.