Sunday, February 24, 2008

Retailing & entry of biggies - Letter to Editor

Some circumspection please

Financial Express February 25th, 2008

Lipstick, lapis lazuli and louki under one roof is perhaps a gem of an idea (‘Open the entry point to foreign players’, Feb 16), though one could set out to buy louki and end up buying all three! Marketing revolves around demand creation and satisfaction. The economic delineation of goods as “necessities”, “comforts” and “luxuries” still persists. People pay for various levels of satisfaction, and business strategies are such that cost advantages do not always accrue to the consumer. Further, in an oligopolistic situation, in a market dominated by big brands, the customer does not have a “none of the above” option. Big retail could mean indigenous products are forced to make way for global merchandise. The soft drinks market is a case in point. Contract farming, likewise, can result in overbearing dominance by a few purchasers. What happens to the free interplay of demand and supply? It recedes. Farmers in Ghana and Thailand only get 5% of the retail realisation, while retailers and distributors garner 40%. The existence and effectiveness of legal measures to check hoarding or predatory pricing will remain doubtful. Land use patterns will certainly begin to change in favour of these biggies. So, before we open the country to such large forces, circumspection is in order.
—Subhashree Kishore New Delhi

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