The Significance of Micro, Small and Medium Enterprise Retailing in India

-Taken from the book, Retail Beyond Detail by Gibson G. Vedamani

In India, the Micro, Small and Medium Enterprises (MSME), also known as ‘town and village enterprises’ in the manufacturing and service sectors, have been considered to be quite significant in their contribution to the GDP growth of the country. The Micro, Small and Medium Enterprises Development Act (MSMED Act) was enacted in India in 2006, and it facilitates the promotion of MSMEs in India. The act embraces any commercial activity permissible under law, that is, any type of manufacturing, processing or industrial activity or trading or allied operations to fall under the MSME category. Besides manufacturing, a plethora of service activities such as medical/legal transcription activities, call centres, event development and animation, video, filmmaking, marketing consultancy, equipment rental and leasing, laundry, X-rays/pathology, tailoring, studios and cable TV network get due benefits consequent to the categorization as MSME in India.

Banks offer assistance to the growth of MSME in India. Further, banks came up with specific policies to fund and facilitate MSME through single window dispensation, a quick decision with least turnaround time through specially constituted MSME cells and, above all, banks prioritized cluster-based schemes for funding MSME with better service. When it comes to the retail sector, micro, small and medium retailers have not been mentioned in the Act in specific. But it is assumed that the same parameters as applicable for MSME mentioned in the foregoing table under services are applicable for retailers also. It’s time retailers organized themselves as MSME retailers to gain from the consumer revolution that is happening currently. The small- and medium-sized retailers in India must look at the burgeoning internal consumption that is taking place in India. The growing middle class of consumers with enlightened awareness levels can form a captive customer base for all our retail stores in India. The awareness created by media, which has proliferated into the smallest households in India, has augmented the Indian consumers’ knowledge and awareness levels. New lifestyles have been a part of the lives of average Indians of late. The increase in the number of working women has been significant and this is causing a good deal of demand for packaged and ready-to-eat foods in India. Even in the smallest villages and towns of India, we see great infrastructure developments that can accommodate multiple shop premises in a market cluster. Infrastructure developments such as the expressways and highways have helped in faster transportation of goods and services across the country in shorter cycle times. Supply chain improvements have taken place as our country is now well-networked by roads, railways and airways. Cold chains are being set up with government subsidies in each state and this actually helps control the wastage of food and grains. The market in India is huge with its consuming population and this is the right time to see that retail businesses grow. Small and medium traditional retailers need not vanish if proper steps are taken to strengthen the business.

The thought that the small retail business could see its end with the father’s generation should be erased completely from the minds of the present younger generation. One has to think about organizing the business in every possible way to make it attractive for the son’s/daughter’s generation to take over and proudly run the business. All these days, the small and medium retailers of India have been the channel and medium vehicle responsible for the promotion of many multinational and domestic FMCG brands. They have even traded off their own store namespaces pushing them into insignificance in order to give way for large signages of the brands that they have been selling. One has to think about organizing the business in every possible way to make it attractive for the owner’s next generation to take over and proudly run the business.

James Gulliver, the son of a grocer in Campbeltown, Scotland, became the chairman of Argyll group, one of Britain’s most popular food retailing businesses. Earlier Gulliver joined Fine Fare, a supermarket chain in Britain in 1965 in customer relations, and he soon worked his way to become its managing director. He spared no pains to turn the company around into a profitable one between 1967 and 1972. The key learning, according to him, that resulted in profits was the sheer attention to every detail of the business and then he coined the popular retail adage, ‘Retail is Detail’. Yes, every detail in retailing is important—details relating to the entire environment retail operates in.

Details of every aspect pertaining to customers are: who the store’s customers are, where they come from, what they want, when they need what, how they buy, etc. Likewise, the details of space relate to how much space is rent paid for, what is the rent per square foot, how much is the retailing space/staff movement space/storage area, how is the utilization of space with reference to stock per square foot, how much is the sales per square foot in a month and how much shelving space is created and used, etc. The details of stock refer to what stocks in what quantities, in what mix and assortment, in what time periods, in what margins and prices and from which sources. The staff details are: how many sales and delivery people should be employed to serve how many customers and how much is the sales value per person per day, etc.

All these details ought to be looked into without fail to achieve store profitability. A small and medium retail store cannot look at all these details with the help of a shop manual or by dint of only practical experience, but it may have to look into the actual details by ensuring the application of proper systems as the business grows.

The small- and medium-sized retailers whose sales turnover is less than ₹2 million per annum do not have to register under GST in India. Items that are sold in retail stores in lose as commodities are also spared from the GST net. This helps small retailers focus on their sales and customers. Though these exemptions would favour small retailers, it is an astonishing fact that many of them do not have bank accounts yet. The Government of India is focused on bringing about growth in the MSME sector, and in its 2018–2019 fiscal budget, the finance minister announced a reduction in corporate tax to 25 per cent from 30 per cent for companies with a turnover up to ₹2.5 billion. Such changes amounting to savings would undoubtedly help retailers in this sector grow and prosper.


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