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Small shops gang up

India's ubiquitous groceries called kirana shops - and in America-speak "mom & pop" stores - are gearing to form a national consortium to take on the likes of Wal-Mart and Carrefour after the government opened up the retail sector to 51% FDI last week. Sachin Dave reports. Jarring notes in the Indian retail opera

business Updated: Nov 27, 2011 23:33 IST
Sachin Dave

You could call it an association of local Davids to take on global Goliaths.

India's ubiquitous groceries called kirana shops - and in America-speak "mom & pop" stores - are gearing to form a national consortium to take on the likes of Wal-Mart and Carrefour after the government opened up the retail sector to 51% foreign direct investment (FDI) last week.

The merchants want to do as a collective what giant supermarket chains do as a company, developing buying muscle and gaining efficiency through shared facilities.

The planned consortium -in all probability a co-operative society - would directly negotiate with consumer goods companies such as Procter & Gamble and Hindustan Unilever to do away with middlemen who erode their price competitiveness.

"We will have common sourcing and logistics and common branding just like the big retailers. This would help our small stores to compete with the bigger retailers at price points and at branding too. It's a question of our survival," Vijay Prakash Jain, secretary-general, Bharti Udyog Vyapar Mandal (BUVM), the biggest small retailer association in the country that has over 20,000 registered members, told Hindustan Times.

Jain said BUVM is already successfully operating a pilot project based on the common sourcing model, with 30 stores in Bangalore and 20 in Kolkata.

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"We will now be opening 5,000 such stores over next 5 years, starting within six months in all metros," added Jain.

"Government had assured us that small retailer would be considered before allowing FDI in retail space. Now it does not seem that way. So now small retailers will have to come together," said Kishor Kharawala, secretary, Federation of Associations of Maharashtra, a retailers group.

Kharawala said their federation was collaborating with BUVM to pool in resources for sourcing of stocks and work out backend supply logistics. Members are expected to contribute funds.

The consortium expects to save money on rentals and score a point over giant retailers as shopkeepers tend to own stores.

Anshul Jain, CEO of consulting firm DTZ India, said usually rentals make up 10% big retail revenues and a lot would depend on how the consortium is managed.

A senior executive at a major retail chain said the consortium looked "interesting" and would certainly help storekeepers cut costs but coordination and daily decisions could be a big pain.

A P&G spokesperson said, "All our retail partners are equally important to us" - signaling a level playing field for the mom and pop stores.