SINGAPORE – After years of debate, India’s government recently announced that will open the country’s retail sector to foreign investment. The move was met with howls of protest from those who argue that the entry of large hypermarket chains like Carrefour and Walmart will devastate the small shops that currently dominate India’s retail sector. A country-wide strike called by opposition parties on September 20 brought many cities and towns to a halt. So far, Prime Minister Manmohan Singh’s government has not relented, despite the loss of support from a key coalition ally.
The debate around opening the retail sector to foreign investment is currently being framed, on the one hand, by the need to modernize supply chains and, on the other hand, by the desire to protect small shopkeepers’ livelihoods. Those who support the decision argue that India’s supply chains are simply too wasteful, and that only the finance and knowhow of big, international retail chains can upgrade them. Opponents point to how big retailers decimated the traditional retail segment in the West.
But this debate misses a crucial point: the hypermarket model is itself under serious threat everywhere from online shopping. Consumers worldwide are finding that they can access virtually unlimited choice on the Internet – including customized goods and services that big retailers simply cannot deliver.
As a result, large hypermarkets are suddenly finding that their business model is unraveling. They watched in horror as Amazon, en route to becoming the world’s largest online retailer, pushed the bookstore chain Borders into bankruptcy, and have wondered if they will be next. The American discount retailer Walmart, reportedly concerned that it is cannibalizing its own sales, has gone so far as to stop selling Amazon’s Kindle tablets.