In a rather poignant scene in Zoya Akhtar's Zindagi Na Milegi Dobara, the character played by Farhan Akhtar is sitting face-to-face with his biological father, played by Naseeruddin Shah (in a brilliant cameo). As the story goes, Shah had abandoned Akhtar's mother (played by Deepti Naval) after getting her pregnant and moved on to becoming a famous painter in Europe. Akhtar finally calls up Shah, when, on a holiday in Spain, he and his two friends get involved in a drunken brawl and land up in jail. Shah comes and bails them out. After this, Akhtar asks Shah for the true reason behind abandoning his mother. To which Shah replies Sach hota kya hai. . . sach ka har ek ka apna apna version hota hai! (What is truth? Everybody has their own version of it). This line written by Farhan Akhtar is at the heart of the current debate on allowing foreign direct investment (FDI) in multi-brand retailing. Those in favour of the decision have their own version of truth. And those against it have another version. Those in favour of the decision believe that allowing foreign investment will create jobs, build supply chains and overall help economic growth. Those against it firmly believe that it will destroy the neighbourhood kirana shop, as you, I and everybody else hop onto Wal-Mart to buy stuff. I have my own version of truth which is somewhere between the two extremes. The kirana store will survive: A lot of hue and cry has been made on this. Nitish Kumar, Chief Minister of Bihar, believes that the aam aadmi will suffer because of FDI in retail and hence he won't allow it in Bihar. The fact of the matter is that it is not easy to compete with the neigbourhood kirana store. My kirana guy even goes to the extent of delivering things that he does not sell, like eggs and medicine, to ensure that I keep giving him business. As Rajiv Lal, a professor at Harvard Business School, told me in an interview I did for Daily News and Analysis (DNA): Kirana stores have a lot of benefits that established retailers don't have. First of all location. What rents do they pay versus what established companies have to pay? Employees, same story. On the consumer side, they can deliver services, in terms of somebody calls them and asks can you deliver six eggs? The guy runs and delivers six eggs. That's not something that the big established firms can provide. (You can read the complete interview here). No homogeneity across India: An important factor for big retail to be successful is the homogeneity of the population in consumption behaviour. This gives them economies of scale. As marketing guru V Kumar told me another recent interview I did for DNA: Does the country as a whole consume common things or there are regional biases? In a country like Brazil people eat similar foods that every retailer can sell. In India, clearly things are different. In India between South, East, West and the North, there is so much heterogeneity that you need localised catering and marketing. So consumption behaviour varies, therefore, unless you are willing to carry heterogeneous products in each of the locations, it is tough, said Kumar. (You can read the complete interview here). This is a challenge that foreign retailers will have to deal with. The real estate conundrum: A typical Wal-Mart in the United States is situated outside the city, where rents are low. But such a strategy may not work in India. It's not easy to open a 1,50,000 square feet store in India. That kind of space is not available. They can't open these stores 50 miles away from where the population lives. People in India don't have the conveyance to go and buy bulk goods, bring it and store it. They don't have the conveyance and they don't have the big houses. So it doesn't work, explained Lal. This is something that Kumar agreed with. Even if Wal-Mart is there in every place, the way they are located is typically outside city limits. So only people with time, motivation and a vehicle will be able to go and buy things. And the combination of these three things is very rare. The kirana stores also provide goods on interest-free credit to their customers - something that no big retailer can afford to do. The fear of Wal-Mart and others of its ilk is overdone: It is widely believed that wherever Wal-Mart goes it destroys the local business. As Anthony Bianco writes in The Bully of Bentonville - How the High Cost of Wal-Mart's Everyday Low Prices is Hurting America: It (Wal-Mart) grows by wrestling businesses away from other retailers large and small. In hundreds of towns and cities, Wal-Mart's entry put ailing ...shopping districts into intensive care and then ripped out the life-support-system.
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