There
are 13 million unorganized retail players in our country. The majority of them
are very small players operating in the shop below 50 square feet in size and
hand carts. These are spread in 5000 cities and 600000 villages. Unorganized
retail provides employment to 18 million people, the largest employment after
agriculture.
Organized
retail works on economics of scale & follows efficient supply chain
practices. It presents threat to the
existence of unorganized retail, which has been working on the theory of
convenience. Organized retail grows at the expense of unorganized retail’s market
share.
Will
this be possible?? Unorganized retail can with stand the storm of organized
retailing. How?? Cooperative retailing is an old concept but it does hold the
answer.
A retailers' cooperative is a type of cooperative which employs economies of scale on behalf of its retailer members. Retailers'
cooperatives use their purchasing power to acquire discounts
from manufacturers and often share marketing expenses.
A cooperative is defined as an autonomous
association of persons united voluntarily to meet their common economic,
social, and cultural needs and aspirations through a jointly-owned and
democratically-controlled enterprise.
It is a business organization owned and operated by a group of
individuals for their mutual benefit.
Supply chain
simplification
If
there are n number of retailers and m number of company distributor there is
need of n*m number of supply links. Fig 1 shows the need of n*2 (as there are
m=2 company distributors). If the n number of retailers form a cooperative
society and if it deals with all available m number of distributors, there is
need of m*1 number of supply links. Fig 2 shows the need of m=2 supply links.
This reduction of links helps in better management of distribution network and
information transfer.
The
cooperative can aggregate the orders of all retailers and purchase total order
from company distributor. Since Order quantity is increased, cooperative can
negotiate for lesser price. This aggregation also reduces the ordering cost. If
large number of retail stores join the cooperative, the truck load can be
bought, thus it reduces a lot on transportation cost. This reduction of cost
will directly increase the profit. If cooperative passes the reduction of cost
directly to customer. Everyday low pricing model can be dealt with.
Unlike
Unorganized retail model, Cooperative retail model follows theory of
convenience and exploit economies of scale.
Unorganized
Retail sector has very low entry barrier so a huge number of Indian young men
learn basic lessons of entrepreneurship in them. It is a source of livelihood
for a large number of families. If organized retail is allowed to eat the
unorganized retail market share, there will be huge unemployment problem. This
will generate the cascade effect and vicious cycle of economics will cause
organized retail to suffer for sure in the end.
These
cooperative retail societies can get loans from public sector and cooperative
banks and increase the size of their operations. They can also venture into the
area of food processing.
The
co-operative retailing can be a promising idea if they are professionally
managed. There is need of specialized cooperative retail based training courses
to be conducted by different B schools.
No
doubt, Cooperative movement was not successful in the past, but it should not
prevent us from trying to make a good idea work. Time calls up on, Let’s give
another new try to this old concept.
DD
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