In the euphoria of great retail boom, organised retail players have forgotten that India’s 12 million shopkeepers, 40 million hawkers and 200 million farmers can spoil their party.

Modern retail boom is the biggest story to hit India this side of Afghanistan. Nearly everyday more encouraging figures are thrown about this boom, which is going to change the face of India. As per the latest estimates, organised retail is $12 billion, which is expected to touch $75 billion by 2011 and $175 billion by 2016. India is the 9th largest retail market in the world.

Howeever, this is not enough. Organised retail is only 3 per cent of the total retail market in India. The comparative figures for the US are 85 per cent; the UK 70 per cent; Malaysia 55 per cent and China 17 per cent. Organised retail in India is expected to contribute 10 per cent by 2010. The retail dream cannot go wrong. Future looks so full of hope and promise.

But are we all missing the point?

When the opposition to big retail began in West Bengal, it was dismissed as Left parties’ opposition to MNCs and big businesses. Then it happened in Kerala, where political parties along with local shopowners and merchants opposed the opening of Reliance Fresh stores in Kochi. On August 8, a one-day statewide strike was organised in Maharashtra by retailers and wholesalers to oppose the entry of big retailers, which was adversely affecting their business. Now Mayawati has stopped operations of Reliance Fresh and Spenser’s in Uttar Pradesh citing law and order as the problem.

What’s going on? There is a problem nobody wants to see or even acknowledge. Retail giants are so busy working out their grand plans that they are completely oblivious of the volcano that can erupt anytime.

I asked this question to three CEOs of companies into organised retail. All of them were convinced that entry of big retail was not going to affect small shopowners as there was enough market for everybody. Their business model talks about speed, scale of operations, expansion plans and golden rainbow at the end of all this. They seriously suspect that they are going to change the face of India. Big research agencies like Tecnopack-KSA keep doing research, confirming this misplaced optimism.

Unfortunately, nobody has done any empirical study to understand the impact on small retail shops due to organised retail. India is a nation of shopkeepers, where 12 million shopkeepers and 40 million hawkers conduct 97 per cent of the retail business. And every time, a new mall opens, these guys get affected.

Let’s understand what happened in the US. A study by the Pennsylvania State University in US measured the impact of WalMart retail boom on prevailing poverty in 2004. It established that American states with a greater number of WalMart stores in 1987 had higher rate of poverty in 1999 than states where fewer stores were set up. Interestingly, increased poverty from WalMart operations came when poverty rates nationally were on the decline.

Three reasons were given for this state. Workers displaced had no alternative livelihood. They were forced to work in WalMart stores at relatively lower wages. In India, displaced shopkeepers have no such option (working in modern outlets requires knowledge of English). So, they will have to quit or continue with lower sales volume. I spoke to such shopkeepers where large malls had opened in nearby areas. All such shopkeeper reported drop in sales.

It had destroyed local entrepreneurship and uneducated people could not earn their livelihood, which was bound to create social unrest. This would be more pronounced in the Indian environment where generation after generation are dependent on small business, generally retail. A no-hope retail environment for young people can generate tremendous backlash.

Thirdly, WalMart transferred income from taxpayers to its stockholders and consumers. In the Indian context, organised retail players are not likely to bear the economic and social cost of their nationwide operations.

I believe that this is just the beginning. Unwittingly, Mayawati has put her foot on a simmering issue. This is a social and economic issue which can blow any time. Organised retail players have to reevaluate their business model and find a way to include the affected parties in their growth story. Their business model will remain incomplete without taking into account affected small business owners. Can these big players form a cooperative with the help of affected parties before they even enter an area? The Government needs to step in; big players need to understand the social and economic consequences of not taking any action.

Retail boom is good for consumers and good for the country. Can we afford to spoil this party?

(Hemant M Mishrra is a brand consultant based in Mumbai. Prior to becoming a consultant, he has spent 25 years in marketing of consumer goods with various Indian companies. He can be contacted at hemant@mudrabrandsollutions.com)