Gameplan Retail, Part II

Troubled over nationwide protests against retail, companies are re-shaping their strategies to counter the heat. VIVEK SINHA and MORGAN HARRINGTON track their game plan

THEY ARE calling it the new face of the great Indian retail dream which cynics felt had died a premature death, or at least, was pushed on the back tracks, because of nationwide protests threatening their very existence. But in reality,it has changed its tracks in order to organise the backstreet boys so that the second thrust hits the bull’s eye without a hitch. If you are keen to see the new face of Indian retail, or how it is shaping in its newavatar, you need not visit a swanky retail store in downtown Mumbai or Hyderabad to check out whether prices have fallen further. Small and big farmlands dotting all over the country’s landscape will provide a ready answer.

Meet Kartar Singh. If he is in his farm, you could miss him as just another worker tilling land. But in the evening, he dons starched jeans, drives a Pajero, talks of sending his children to the upmarket Doon School in Dehra dun and is ready to hire a chopper for weddings in his family - after all, it’s just Rs 90,000 for an hour, right? In fact, he has plans to have a mega Lohri (a north Indian festival that heralds the end of winter) at his farm house this year.

Singh is India’s new gypsy jat, a breed of farmers the retailers are slowly, yet steadily, developing for their backroom supplies. That is important, ostensibly, because when the pro - tests happen outside the stores in metros, the retailers hope to counter it with nationwide support from Singh and his friends, all happy at selling the product at their desired prices right outside their doorsteps. In fact, no one travels for miles to reach the village mandi to participate in the daily auction anymore. Singh’s products pass into the hands of representatives from Reliance Retail. “It is a great relief. We save transportation cost and do not have to see the ugly face of the middlemen who robbed us daily. We, in fact, lost nearly 30 per cent of the earnings to these people. Today, we do not wait. What more, we get paid in cash on the spot,” says a gleeful Singh.

Singh has Reliance Retail. Some miles away, his friends have Subhiksha Stores as their procurement company. Some have Pepsico Foods and other have ITC e-choupal as their buyer. No more middlemen, no more delayed cheques. “It makes astute business sense to source the products directly fromfarmers.We pass the cost benefit to the consumers and, in the process, farmers get remunerative prices for their products,” R.Subramanian, MD, Subhiksha Retail, told TEHELKA. What he does not spell out in as many words is this: Keep the farmer in the wellness loop to counter all resistance against retail. It is just one part. The next one is a similar approach with unknown suppliers to both branded and unbrande products.

AGREES ASHISH Chabbra, a young designer whose products once adorned the stores of Abu Jaani-Sandeep Khosla but who now finds space in as many as ten Pantaloon stores across the country: “I want to grow big with my earnings and do not want to live under the shadow of brokers constantly looking for the cream and leaving us with not even the cake but mere crumbs.” His monthly earnings, ever since the direct dealings started, have zoomed past a neat Rs 100,000 mark. Similar views are echoed by Kishore Biyani, chairman Future group, in an interview: “The direct sourcing is the best way to do business.”

Arm to fork or home to shop, the retailers new found way to drum up support at the brass track level has not gone unnoticed. “Beneath this rosy picture lies the shadow of gloom. In the long run it would ultimately prove to be iniquitous,” warns Kishan Bir Choudhary, president, Bharatiya Krishak Samaj (BKS). His fear is simple. Once the big corporations grab a major share of the market, they will form cartels and exploit the farmers.

Dharmendra Kumar, director India FDI Watch, simply says: “Soon, small retailers will be wiped off and the only buyers left in the market will be big corporations thus limiting the sale options for farmers. The big companies will motivate the farmers to go for contract farming. For instance a farmer in Punjab may be forced to grow tomatoes all the year round. And the quality norms of corporate retailers are so stringent that any deviance from the pre-conceived quality is out-rightly rejected and the farmer forced to either short sell his produce or dump it at substantially lower prices.”

Jayati Ghosh, economics professor at Delhi’s Jawaharlal Nehru University joins the gang: “Loads of evidence from Latin America and Turkey show that once a farmer starts dealing with a regular buyer it leads to a bonded situation and a monopoly situation. She found support from Rupa Vajpeyi, editor Consumer Voice magazine, “A modern retail store is presumed to be beneficial to the consumers, where the right to choice is cleverly manipulated. Once the honeymoon phase is over the prices are bound to rise.”

Retailers counter the charge as baseless. “How many in India have got troubles with big corporations? Pepsi changed the landscape of Punjab. Why don’t these troublemakers visit the countryside and see for themselves? Even small retailers will benefit if prices drop because there are no middlemen,” says Abhiram Seth of PepsiCo Foods.

Subramanian vehemently denies allegations of contract farming: “We do not advocate contract farming. In fact, it is not the right model for India and neither good for the farmer or the retailer.”

He should know. Issues related to the farmers have always been emotive in a nation where agriculture remains the primary occupation. With the first generation reforms completely bypassing agriculture, the sector remains mired in a host of complex issues such as retrograde farming practices, land fragmentation and low irrigation, among others.

Experts say the advent of corpo-rate retail was viewed as a major liberating force for the farming community, but before it could take off, and changes felt the ominous threat of contract farming looms large.

MOHAN GURUSWAMY, chairman, Centre for Policy Initiatives (CPI), disputes such anxieties: “Farmers will be the ultimate beneficiaries and the fear about contract farming is misplaced as it would ensure better and assured prices to the farmers. They would not be at the mercy of middle men who often dictate prices and laugh away with maximum profits.”

Adds Biyani: “Modern retail captures less than 4-5 percent of current consumption in India and hence hardly has any bargaining power against millions of farm producers.”

But why would a country like India need companies like Reliance to sell salt and pepper? Saysan Ernst & Young report:“The Indian retail market is highly disorganized and fragmented. But with rising disposable incomes (especially amongthe middle class), increasing urban consumer base and a potentially strong rural market, the need for organized retail is increasingly being felt.”

Thereport says the real driver for the Indian retail sector is high income and the upper middle income groups which together comprise 81 million households (see graph). Also the country’s population is urbanizing at a rapid pace with the urban Indian population projected to increase from 28 percent to 40 percent of the total population by 2020.No wonder then, that AT Kearney GRDI Index has rated India as the most attractive emerging retail market in the world for the third time in succession.

With rise in incomes and nuclear families becoming the norm, bigger stores are here to stay. Experts say engagement at all levels is what the retailers need to do. Once done, the tensions of job losses and the roadside kirana stores losing business will be doused. The game plan is already working with the gypsy jats and backstreet boys and triggering an agrarian revolution. Now, it has to work in the front office for the nation to see. Unless that happens, the fireworks will continue.