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Mom & Pops take battle to Big Retail

MUMBAI: Sixty years after Operation Flood helped Gujarat’s milk farmers quell private and foreign dominance by forming co-operatives, a similar revolution in the retail business is threatening to take on retail biggies like Reliance Retail and Big Bazaar.

Bhartiya Udyog Vyapar Mandal (BUVM), the biggest national-level association of mom and pop stores (kirana stores) that comprises 17,000 state- and district-level associations across 27 states, is planning to form co-operatives throughout India helping its members benefit from a common sourcing and shared infrastructure (logistics, storage and billing) platform. The association will negotiate directly with manufacturers such as Unilever and P&G and do away with any middlemen who eat into their margins.

The move will immensely benefit neighbourhood stores, which are already hit by retail biggies that are luring away the consumer with considerably low price tags.

BUVM secretary general Vijay Prakash Jain told ET, “We are on the verge of finalising plans to set up state-level co-operative societies. To begin with, these societies would be jointly owned by around 2,000 small retailers in each state.”

The association already has a co-operative society named Care Co-operative Society, which is mainly into housing. Increasing the scope of Care Co-operative Society is also being seen as an option. The co-operative society would start with members who own provision stores, but may soon include other retailers into its gamut.

“The final decision on whether to register a new co-operative society or continue with Care would be decided at a meeting of the members on Friday. But all the small retailers throughout India would come together and pose a challenge for the big players in the retail industry,” added Mr Jain.

If the proposal goes through, state level co-operative societies would not only boost the purchasing power of the members, but also improve their goodwill. The co-operative society would go for collective buying, following the Wal-Mart model, say the members. The middlemen would be removed, directly boosting the profitability of the members.

Secretary for Federation of Association of Maharashtra (FAM), Kishore Kharawala, said: “The step is being taken following fear that big retailers would wipe out the small shopkeepers who operate on wafer-thin margins. The co-operative would be purchasing goods directly from the manufacturers and farmers, thereby adopting the same model as the big retailers.”

The shopkeepers would get together and calculate the total monthly goods that all of them require. After this, they would be approaching manufacturers like P&G and Unilever through the co-operative society, with the total demand, which could be on a par, and sometimes even exceeding, what the malls require per month. The co-operative society aims at getting the best part of the bargain through this. The co-operative society would also tie up with logistics companies.

In suburban Mumbai, around 3,000 shopkeepers had come together about a month ago for a pilot project. “A consortium, which is like a pilot study, has already started in the suburbs by an association called Kutchi Vyapari Association. Now many shopkeepers are willing to follow the model and more shopkeepers are interested in the co-operative society concept,” said Chandrakant Gala of Bombay Suburban Grain Dealers Association.

Earlier, BUVM and FAM were opposing the government’s move to open up the retail sector to foreign direct investment (FDI). For some time now the shopkeepers have been facing huge loss of business to the big organised players.

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NEW DELHI: The railways may soon offer around 4,800 hectares of land to retailers and logistics companies to set up retail outlets, agri-retail infrastructure and warehouses. Firms interested in railway land are Reliance, ITC, the Tatas and GE Logistics.

“Companies would have to provide minimum traffic guarantee to the railways in a quid pro quo for real estate. We are in talks with Reliance, Future Group, ITC, the Tatas, AV Birla Group and GE Logistics for the same,” an official from the Rail Bhawan said. Around 3,000 sites have identified by the railways across the country for the purpose.

The railways would also give them preferential treatment in terms of lower freight rates compared with other customers. It is understood that the proposal has been mooted in a recent meeting between the railways and retailers. The retail policy being finalised by the railways also proposes to provide ideal remunerative price for farmers’ produce that rots at times due to lack of proper storage facilities and transportation.

According to experts, the agri-retail chain is a win-win formula for all three parties — the railways, retailers and farmers.

The railways are also considering retailers’ proposal to create a refrigerated rail link between agri hubs to transport perishable agri commodities. The hubs would be created in non-metro stations, facilitating transportation of agri products using the rail network and provide for their sale at the local level. For every hub, retailers would enter into a joint venture with the railways. The railways would have land as their equity in JVs.

India produces nearly 13% of the world’s vegetables and 10% of fruits. However, nearly 25% of the produce is wasted due to lack of proper storage. In the past, the railways had attempted to run refrigerated rakes in the eastern region, but the project did not have many takers. Senior officers said that one possible reason for this failure could be the fact that no study was conducted to assess the demand for such rakes.

The Rail Vikas Nigam has been entrusted with the task of floating the tender inviting expression of interest from corporate houses and co-operative institutions. The Indian Railways has a total of 4.23-lakh hectares of surplus land. Of which, 43,000 hectares are vacant.