Tuesday, October 09, 2007

Consumer Greed; Indian Backlash Against Wal-Mart

From today's WSJ article "India's Populists Resist Big Retail":

As India's middle class grows and the shopping expectations of its citizens increase, retailing has become a magnet for Indian conglomerates and for Wal-Mart and other foreign operators.

India's total retail market is about $370 billion a year and will expand more than 55% in the next four years to almost $600 billion. (MP: In contrast, annual U.S. retail sales are about $4.5 trillion, but is growning only about 4% per year). Supermarkets and department stores account for less than 5% of the industry, with millions of small grocers, tobacco stands and tea stalls constituting the rest.

Big issue: Those small Indian retailers with a 95% market share aren't too excited about sharing the expanding market with big retailers like Wal-Mart and its Indian partner Bharti Enterprises.

Just like in the U.S., in India there's a "growing backlash among those seeking to protect the livelihoods of small merchants and squelch the plans of large Indian retailers and foreign giants such as Wal-Mart Stores. The protesters contend that the introduction of large retailers will throw hundreds of thousands of smaller merchants out of work, an issue that has been simmering in the U.S. for decades with the expansion of Wal-Mart and other big retailers."

Clarification: It would be the millions of ("greedy?") Indian consumers who might decide to shop at Wal-Mart for lower prices, better selection and more convenient hours, who would put the small Indian merchants out of business, not Wal-Mart and Bharti.

As I pointed in an article about "consumer greed," Wal-Mart can't force people to shop at its stores; all it can do is offer a low-priced alternative to the high-priced small merchants. "Greedy" consumers do the rest.

In a market economy, it is consumers, not businesses, who ultimately make all of the decisions. When they vote in the marketplace with their dollars, consumers decide which products, businesses, and industries survive—and which ones fail. It is therefore consumers who indirectly but ultimately all of the decisions, not corporations."

Shouldn't the Indian consumer be able to vote with their rupees and shop at Wal-Mart if they want to?


At 10/09/2007 1:15 PM, Anonymous Anonymous said...

4% growth on a $4.5T U.S. retail market equals $180B, roughly half the current size of the Indian retail market.

At 10/14/2007 10:41 AM, Blogger Wayne, "El Guero" said...

Now MP you know better than that.

It is not the 'greed' of the consumer that allows Wal-Mart to force their business partners to give Wal-Mart a favorable cost and while charging their other clients an unfavorable rate to make up for that discount.

It is Wal-Mart's control of the market that allows that.

At 10/17/2007 6:28 PM, Anonymous Anonymous said...

nice story


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