Impact of Organized Retailing on Unorganized Retailing in India
Retailing is playing a major part in Indian business emergence. There are many modern business systems taking place in Indian market because of Globalization. But retailing is the foremost part of them which is predicted to have a better growth.
When it was said retailing, organized and unorganized retailing will come in to picture to debate. Unorganized retailing is the tradition of India and organized retailing was on track from early 90’s. In this context organized retailing is successively grown in recent years.
Concerns are raised by many unorganized retailers that emergence of organized retailing is showing an adverse affect on unorganized retail. The book “Impact of Organized Retailing on Unorganized Sector” discussed about the existence of adverse affect of organized retailing on unorganized sector. This book also enlightened if there exist an adverse affect, how much does organized retailing is affecting unorganized sector. OVERVIEW: This book from ICRIER discussed many considerations to bring the real impact of organized retailing on unorganized retailing.
The authors while analyzing considered many factors like “Effect on employment that how organized retailing is enhancing the job opportunities and the growth prospectus. This book also gave an idea about Impact on Consumers by bringing in to picture in relation to savings when shopped in organized outlets. The authors of this book even discussed many factors out of which primarily aimed at revenues to the government from both organized and unorganized retailers. Results from consumer surveys are made to understand their savings while shopped in organized outlets and which social class of people is saving more from these outlets.
Conclusion made by the authors included all the particulars mentioned above. CORE GOALS: The Core purpose of the book is to explore the positive effects of the organized retailing by studying the retail market in India. This book also aimed to answer the opposing views on organized retailing to unorganized sector. Authors designed the book in measuring the prices impact on consumer and taxation revenue to the government and overall impact on economical growth of retailing in India.
The book core goal by analyzing all these factors is to understand the effect on smaller retailers in the unorganized sector by organized sector. The authors tried to give details of increase in turn over in unorganized retailing after organized retailers stepped in to the Indian retail market. The other goal is to understand and portrait the unorganized retail outlet formats and how the change in services offered by the traditional retailers to compete with organized sector. The authors also illustrated the response by the unorganized retailers to organized sector to compete. SUPPORT AND DATA:
Many surveys are conducted nationally to understand the employment impact of unorganized retailers. It was understood that unorganized outlets hire family members in average of 1. 5 persons per store. Where they employ hired labor in an average of 1. 1 per outlet (ICRIER report 2008). Interestingly there is a subsidiary improvement in overall employment in these sampled outlets over the existence of organized outlets near by. How ever there has been a general increase in employment in unorganized retail field after the existence of organized retailers which averaged at 21months.
Over all we can identify the employment growth in the traditional retail outlets in India increased by 2. 2 times than earlier (ICRIER Retail by Mathew J, Sanghamitra S, pg83). As it was known organized retailing allowed better employment it also in some way pushed the growth of employment in unorganized sector. This book also showed that there exists a relationship between period of existence of organized outlets and employment effect. It says, if there exist an adverse effect, it carries off with time.
Interestingly from the country wide sample it was shown that south and east part of India has observed an increase in employment (ICRIER report, table 5. 4 and chart 5. 1c, pg84). It is to understand after an average period of 21months there is no adverse effect on unorganized sector and they evenly initiated competing with organized outlets. Impact of turnover of unorganized retailing was keenly observed by the authors. Result with national sample of unorganized outlets turnover. It was understood that there exist a depression of annual turnover in unorganized sector at initial tages. Though there is a downfall in annual turnover, steady increase in the turnover and profit too is observed after an average 21months existence of organized retailers (Table 4. 2a, pg84). According to the survey table 4. 3a, unorganized retailers have indicated a number of steps taken in response to competition from organized retail, such as adding new product lines and brands, better display, renovation of the store, introduction of self service, enhanced home delivery, more credit sales, acceptance of credit cards, etc.
This allowed consumers to consume better service from unorganized outlets. The authors also identified that currently 22% of unorganized retailers installed technological facilities to provide better service and to speedup the competition from organized retailers. Boost in exports and advantages to the urban producers in terms of superior price, strong processing of supply chain by the organized retailers brought new technologies and reduce in consumer price.
The book even investigated the preference of consumers for organized and unorganized outlets. Authors sampled a nationwide data and found that 43% to 46% of organized customers declared that they are spending 30% of their spending on food and grocery in organized outlets. Shoppers at unorganized outlets preferred 61% of their spending in traditional outlets. Authors highlighted a very important fact organized retailers are bringing revenue to the government by paying huge taxes and where unorganized retailers don’t pay any taxes.
IMPLICATIONS: Of all the observations the authors suggested, Simplification of the licensing and permit system for organized retail and move towards a nationwide uniform licensing system in the states to facilitate modern retail. Encourage co-operatives and links of unorganized retailers for direct procurement from suppliers and farmers. The book also suggested ensuring better credit availability to unorganized retailers from banks and micro-credit institutions through innovative banking solutions.
To assist the formation of co-operative retailing of traditional stores, which in turn can undertake direct procurement of products from manufacturers and farmers. They also suggested by eliminating intermediaries, unorganized retail stores can obtain their supplies at lower prices, while farmers get better prices for their produce. CONCLUSION: Up on analyzing and observing the facts it was concluded that unorganized retailers in the vicinity of organized retailers experienced a decline in their volume of business and profit in the initial years after the entry of large organized retailers.
The adverse impact of sales and profit on unorganized sector weakens over time. There were no facts of a decline in overall employment in the unorganized sector as a consequence of the entry of organized retailers. It was identified and concluded that there is a competitive response from traditional retailers through improved business practices and adopting advanced technologies as organized retailers.
With the entry of organized retailers it was observed that overall spending of consumers is increased. It was said that consumers are definitely benefited from organized retailers in multiple benefits. Through the surveys made by ICRIER it was concluded that while all income groups saved through organized retail outlets, lower income groups are the one who benefited. Thus at the end it was concluded that organized retail is relatively more beneficial to the less wealthy consumers.