Yesterday night I was watching some English news channel and a quite aggressive debate was going on FDI in retails. I know everybody has his own opinion and they are entitled to have it. But justifying it with wrong answer is not correct.
Let’s check out the major argument against FDI in retail sector. The first argument is it will kill the kirana shop in the neighborhood, they will monopolize the retail and it will affect our economy. But nobody noticed the increasing size of online retailers. I will give you a small example, I used to go to my neighbor shop for mobile recharge but now I do it online myself because I can recharge my mobile and also I get the free discount coupon of same amount of various Brand like Mcd, pizza hut etc.
There are distinct advantages to couch shopping – and forget about the kirana shop, even the largest brick-and-mortar retailers are affected. “You don’t have to camp out in front of the stores itself only to be trampled upon the minute the gates open by eager shoppers who like you are trying to get the best bang for their bucks. Worse, you run the risk of being pepper-sprayed by a ‘competitive shopper’, just like what happened at a branch of Walmart in Los Angeles.
Second, no long lines at check-out counters no matter how many items you buy. All you have to do is click, click, click. Third, you save on gas and on precious time,” says News Veteran.
None of the discussions that one has heard and seen on TV or read in newspapers, magazines and websites has debated or discussed the increasingly important role that e-commerce is playing in India.
The Internet and e-commerce has already made the traditional ‘mom-and-pop’ travel agency redundant in India – and they’re making others redundant as well.
“Ecommerce portal FlipKart.com has said that the website’s consumer electronics products are expected to contribute as much as 50 percent of the company’s revenue run rate of Rs 500 crore for financial year 2011-12. The company also expects electronics and appliances to contribute around 30 percent of its total revenues in the next two quarters,” says Alootechie.
That’s Rs 500 crores of revenue which, hitherto, went to mom-and-pop and Indian (organised retailing) corporates with brick-and-mortar bookshops, appliances shops, electronics shops and so on.
And that’s just one company, Flipkart. “According to the study titled Indian Digital Consumer Industry by financial services firm Avendus, the number of people transacting online is expected to touch 39 million by 2015. The estimated online transaction will further boost the Indian e-commerce market which is estimated to grow to $24 billion by 2015 from the current $6.3 billion. Currently 8-10 million people in India transact online, which is about 11 percent of the 80 million internet users in the country, which represents a penetration of 7 percent of the population and 17 percent of the urban population,” reports Jagran.
All this business (the majority, admittedly, from travel) has moved away from traditional retailers. The major factors that spur the growth are the price, the convenience of shopping from the comfort of your home or office and convenience of delivery.
So what will retail FDI opponents do about this phenomenon? Ban e-commerce in India? Reserve e-retailing for Indian companies only?
Why haven’t they done so already? Any Indian can be shopping on 100 percent foreign owned sites such as amazon.com, to name but one site, legally and there’s nobody asking for a ban on amazon.
Why not? Perhaps because there’s no political dividend?