The corner shop

Small clothes shops in India have been a part of long family tradition. Arora and Sons, a small sari shop in Rishikesh, India, has had its customers for over 35 years since it was founded. "When I was a child, my father brought me here to buy me my first set of clothes for school," says Kamini, who also went to Arora’s for her wedding trousseau.

This kind of business model may belong to the past if the Indian government’s goes ahead with its much debated plan to allow foreign investment in the retail sector. Large superstores could soon wipe such small but profitable businesses.For the time being New Delhi has merely suspended its decision to introduce supermarkets offering a wide choice of goods from different brands, such as Tesco’s and Walmart.

But according to Praveen Jha, professor at New Delhi’s Jawaharlal Nehru University, the biggest argument against foreign investment in the retail sector is that it will affect the livelihoods of small traders who constitute a sizeable portion of the Indian economy. Economist Jha believes that although improvement in the retail infrastructure may be a key issue, there are not too many studies that have been conducted on the ground to give an exact assessment of the issue.

He points out that the impact of such retail investment on employment has been minimal. "Wherever you look at the employment generation issues, we have a rapid growth in output, but almost zero employment generation. If you look at the past five years, there is no addition in employment and this has been a period of fastest economic growth for India."

So, if one looks at Germany, which has gone through the transition from corner shops to superstores in the last few decades, is his pessimism justified?

Tough times for the corner shop

Angela, the owner of a small shop in Bonn, remembers the time when her mother opened her little shop in a small marketplace in Bonn. 22 years ago, "Der kleine Laden," or literally, the small shop, was her mother’s dream. Two decades later, Angela has taken over the business of selling clothes for small children and pregnant mothers. "It’s business as usual," she says.

Selling clothes to a generation used to readymade and disposable clothes is a tough job at a time when clothing giants are sweeping the market with cheap goods. This is exactly the attitude which sets Der kleine Laden or "the small shop" apart from mass clothing outlets. Angela says, "There was a time when clothes had more value. It was not a use and throw culture." Her customers have a wide range of choice, from eco-friendly clothes to baby wear and handcrafted toys.

She agrees that shopping giants like H&M and Zara, both big brands in Germany, are tough competitors when it comes to fashionable clothes for kids, but her customers are faithful. Several expecting mothers come to her before they have their baby and like she says, "it is almost like you accompany them through a very important phase in their lives." Her strategy is all about seeking out a market niche and keeping it.

Finding a niche

Small traders like Gatto in Bonn have developed their own ingenious ways of thwarting competition from bigger supermarkets. Gatto and his Southeast Asian wife have their shop in a tiny room packed with oils, herbs, wines and spices from Italy, Thailand, Indonesia and the Philippines. "We offer goods which big supermarkets do not. If they do, they are classified as ‘delicacies’ and are much more expensive than what you would find here." Gatto and his wife also offer fruits and vegetables and household goods such as special espresso coffee makers and rice cookers for customers who want it. "One needs to stay in the game," he says. A principle which has helped him keep his head above water.

Gatto may be one of the lucky ones to not have to think about a grim future, unlike small shop owners on Bonn’s outskirts. Huge discounter stores have sprung up in shopping malls. They given customers like Stephanie very little option. She would also like to have a shop around the corner for quick supplies rather than having to lug back huge bags of supplies from the nearest supermarket.

The ‘discount’ culture

These supermarkets are make life tough for small vendors, like Rustum Akkos, who runs a vegetable shop close to Hit, a discounter with a huge array of food, vegetables, electrical goods, clothes, shoes and furniture. The discounter also offers free parking and food freebies at the entrance. "My vegetables are cheaper," says Rustum, although he admits the only edge he has are his extremely good potatoes which he offers at a very low price. "One cannot have a plan with fruits and vegetables," he complains, adding that they have a very short shelf life and harvests determine the quality and price of the produce.

Supporters of foreign investment in India’s retail sector use a similar argument. According to a report by the financial analysis company, KPMG, "There has been a lack of investment in the logistics of the retail chain, leading to an inefficient market mechanism." The report adds that nearly 25-30 percent of fruit and vegetables in India are wasted due to poor supply processes, a problem which foreign investment and supermarket giants could help tackle.

A ray of hope?

The future of his shop is also slowly becoming an issue for the vegetable seller Rustum Akkos, who is angry that he has to pay too much rent for his shop while the supermarket has no such problems. Supermarket chains usually have enough credit to rent out shopping space over a long period of time. "All of us small shop owners cannot pay our rent. I have heard that they haven’t paid money for over two years," he says, pointing towards an optician’s store, which is suffering a severe cutback in sales after customers began ordering spectacle frames online and buying cheap optical goods from the discounters. He and his neighbours might have to soon close their businesses.

Book shops like the "Goethe und Hafis" are also squirming under pressure, as Hit offers the latest bestsellers at rock bottom prices. "We are suffering," says the owner, admitting that her business may not have a future at all. But her shop has a good stock of antique books and she has begun offering online services, where users can simply click on their website and order books from home. The online giant Amazon is of course making the situation in the book trade very difficult for the small book stores as well.

Gatto’s business is also reeling under the impact of big discounters such as Aldi and Netto as they begin to offer more variety in terms of cuisine from all over the world. But he vehemently defends his business by saying that food from discounters is often not of a very good quality. His additional service, he adds, is special attention to customer’s needs. They often let him know if they need something specific and if he feels the demand is good enough to generate profits, he places an order with his supplier. Parents often stop by Gatto’s while picking up their kids from the neighboring school and while they shop for their daily needs, the children get free candy if they behave well.

So the bottom line in Germany is that the megastores have put a lot of corner shops out of business. But those that develop a good strategy and demonstrate a willingess to look after their customers can survive, but only just.

Author: Manasi Gopalakrishnan
Editor: Grahame Lucas