Mukesh Ambani, chairman of Reliance Industries (RIL), one of India’s two largest business groups, wants to realise a dream.
He has launched a $5 billion country-wide chain of supermarkets five months ago. So far about 140 Reliance Fresh neighborhood stores covering a total of more than 370,000 square ft have been opened in 17 cities, directly linked with farms for the supply of fruit and vegetables.
This has especially upset middlemen who have traditionally handled the produce between farms and shops. Street vendors, who sell fresh produce from barrows, are also affected but Reliance allows them to buy direct from its depots in order to offset their protests.
India has a strong culture of labour unions that protect the rights of the smaller retailers and the big boys are not able to have an easy ride. In a country so vast and diverse with widespread poverty especially in the rural areas, such action is necessary to avoid the battle-tested capitalists from wiping out the small retailers to claim their market space.
Foreign investors such as companies like Coca-Cola (KO), Kentucky Fried Chicken and Walmart have discovered the power of street demonstrations in India.
Some consumer rights groups and local politicians are fighting the entry of big retail giants like Reliance Fresh. They say Reliance is going to be a monopoly.
According to Rediff, Reliance's 10 newly opened shops were shut down in Lucknow on Thursday, August 23 -- and Mukesh Ambani's retail chain has encountered stiff opposition in Tamil Nadu.
It will interesting to see how this case gets played out in the court.
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2 comments:
Hi Hilmy,
I read an article on this issue on forbes.com and I too am concerned in finding out how things would eventually settle down.
It is true that middlemen as agents may be negatively impacted which in turn affect their dependents/families. Forbes article suggested that shoppers found that prices at Reliance Fresh outlets were cheaper than local groceries; if it is so, consumers as families, are likely to save money or reduce their cost of living, implying an improved quality of life; a positive impact on families, though on a different side of the spectrum.
Though you seem to hint, I must admit that I am yet unsure, if Reliance’s circumstances may turn out anywhere near to what foreign entities such as Coca-Cola, Kentucky Fried Chicken and Walmart may have experienced; foreign companies come into a market to make money from a market and to repatriate them, local companies aid the multiplier and support the economy in numerous ways.
Could the court favour the middlemen and prevent consumers enjoying a lower pricing? Could the court treat a local company as they do to a foreign company? The outcome will, no doubt, depend on how the issue is tackled.
Hi Yasir
Thanks for your comment.
I think the primary motive of all business entities- corporate companies is to first increase profits to their shareholders. If they can't do that they don't survive.
Since they operate in communities it is in their long term business interest to operate in a socially responsible manner. Therefore many of them help their societies in various social aspects.
Coca-Cola, KFC, Walmart and Reliance will all make their profit and also contribute to society in different ways.
Since India has adopted a socialist policy for so long and perhaps because of the fear of the colonial hangover, there is a certain reluctance to fully open up to foreign competition.
Since India wants to be a global player, it has to open up its markets to foreign competition. At the same time it needs to protect the interests of small businessman and retailers whose livelihood will be affected by this wave of economic globalisation.
I am curious to know on whose side the courts will come down and how the different political factions handle this.
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