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Sun, Nov 05, 2006 - Page 12 News List

Indian retailers face new foe

Ruthlessly efficient supermarkets are forcing the nation's small stores to fight for survival


The market in Vashi, India, pictured in September. Western-style supermarkets could change the way India's farm produce is ultimately sold.


As dawn peeled open the sky above a wholesale market in Vashi, India, piles of fruits and vegetables destined for the country's fancy new supermarkets were inching toward death.

Lettuce and carrots lay in sludge. In the loading area, traders performed their morning ablutions, rinsing their mouths and spitting on the tarmac. Meters away, men unbuckled to urinate. Insects danced in the puddles.

"Gently! Gently! Gently! Gently!" Ashok Kamble, a buyer for a new Western-style supermarket chain being built by Reliance Industries, barked at a group of delivery men slamming boxes of produce onto the bed of his truck.

Yet as India rushes into the future, its byzantine, wasteful retailing regime is confronting a new foe: the ruthlessly efficient supermarket, with its boulevard aisles, refrigerated trucks and meticulous workers.

No industry entwines all of India -- from its desperate, suicide-prone farmers to its urban consumers -- more than the US$300 billion-a-year retail trade. And no industry has more potential, if transformed, to resolve modern India's most pressing challenge: to enrich the poor.

The spread of supermarkets is already forging new paths between the city and villages, and a recent journey along Reliance's supply chain -- from the farm to the wholesale market to the supermarket -- gave glimpses of real change.

Reliance, the largest Indian company outside government control, entered the supermarket business only in the last few months. It opened its first wholly owned store on Friday in the southern city of Hyderabad.

Western-style supermarkets could change the way India's farm produce is ultimately sold. Fearful that a Reliance or a Carrefour would crush a hereditary caste of traders, clusters of small shops are studying how to combine their operations to emulate the efficiency of big stores.

Simultaneously, major retailers are mimicking elements of the intimate, full-service model that has made small stores nearly indispensable to most Indians.

"This is going to change the face of India," said Vishal Mishra, a Reliance employee, leading a reporter on a tour of Manchar, a sleepy village in western Maharashtra state from which Reliance buys produce.

The promise for more change lies ahead for India's 700 million villagers, if they can be coached to grow better crops at higher yields, economists say.

Indian villagers today farm for survival, just as their forefathers did 500 years ago. Farmers can't save because they grow low-margin crops. They have low margins and low yields because they fail to invest in better seeds and in technologies like drip irrigation. They fail to invest because they have no savings.

Rahul Gulab Pokharkar, a fresh-faced farmer at 20, stood with three generations of family in his carrot fields in Manchar and spoke of breaking that cycle.

For as long as they can remember, the Pokharkars have lived from loan to mouth, with never more than a few rupees on hand. The middlemen gave them seeds and fertilizer on credit, and then took the harvest as repayment.

Two years ago, the family turned to big companies -- first Godrej Industries, an Indian conglomerate with a small chain of high-end supermarkets, then Reliance.

Because the companies cut out middlemen, they pay more than market price. They pay in cash. And with farmers' help, they select, package and transport the produce more vigilantly than in the past.

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