Here's why you should support local & small businesses
Local businesses have been the lifeline of the Indian economy. Businesses in India take place at diverse scales, via diverse mediums and modes.
We had our neighbourhood apparel store owners naming some never-heard-before brand name and quoting - "Madam, this is a branded item. It comes with a guarantee. If anything goes wrong, I am sitting right here."
Our local grocery store owner would add the extra 20 or 50 grams on the weighing scale and still charge us for 1 kg.
We even answered doorbells at wee hours in the afternoon for people carrying apparel, upholsteries, and eatables on their back for a door-to-door sale.
And, not to forget the annual flea markets popularly known as fairs that saw traders from all over the country come together. These were the much-awaited annual events that brought a mix of good food, entertainment, activities, and shopping opportunities.
That was how the traditional retail segment looked like a couple of decades back. And it is still as alive and vibrant as ever. Even in the early stage of organised retail in India in 2006, India had the highest shop density of 11 shops for every 1000 people, a statistic that was way ahead of America at four shops for every 1000 people. At that time, there were several debates on the possible impact of organised retail and international brands on traditional businesses and retail outlets that were then referred to as the mom-and-pop shops. However, the past decade has testified to the potency, adaptability, and tenacity of these mom-and-pop shops that have not only co-existed but also continued to grow with equal zeal and fervor despite the entry of some of the best known international brands and the retail overhaul that the country went through.
It is indeed inspiring to track that growth trajectory and how beautifully the entire business segment ceaselessly evolved and upgraded themselves to meet the technical, administrative, and global transformational requirements. And the way these businesses responded to the Covid-19 crisis was commendable, to say the least. So, here's an attempt to see what keeps local businesses in India relevant in the era of transformation and why we should support them.
Potential of local businesses
Every local retail shop caters to customers residing within a 5-6 kilometres radius and employs 4-5 people and above, depending on its size and operations. The product of a local brand always costs 20-40% less than that of a global brand simply because they don't have to spend a lot of money on branding their products. Most local businesses thrive and grow through word of mouth publicity.
A local manufacturing unit is capable of employing people within a 30-35 km radius. India has the advantage of a young and educated population. Our Prime Minister's Make in India is also geared to make India a global manufacturing hub. The current FDI in retail also encourages global brands in India to get their merchandise locally manufactured from India. All these factors are conducive enough to help local businesses to prosper and support the economy in return.
1. Save brain drain
One of the major problems plaguing India is that the industries are perpetually crying for not having an adequate skilled workforce, while the well-educated Indian youth always look for opportunities to sneak out to other more developed countries for jobs. Supporting local businesses and creating more earning avenues will help mitigate this problem.
2. Promoting Ecological balance
One of my favourite fitness influencers and celebrity nutritionist, Rujuta Diwekar emphasises eating locally produced fruits and vegetables. She explains, the farther our food travels to reach your plate, the farther your naval moves away from your spinal cord. As it is pertinent to choose seasonal and locally produced food to maintain a healthy, lean, and energetic body, local businesses are equally important for the health and wellbeing of the country's economy.
3. Supports the Multi-lingual and Multi-cultural Indian landscape
India is a land of several cultures, religions, races, and languages. At every 400-500 kilometres, the entire lifestyle, practices, and language changes. Local businesses and local brands can cater perfectly to the taste and preferences of the customers of that area because they know them very well. That is precisely the reason why global brands such as Dominos and Levis have chosen to expand their presence through franchise collaborations rather than having company-owned outlets.
4. Supports Mutual Growth Among Businesses
A local business with limited employee strength and capacity outsource work from other local businesses in the area. It makes sense for an entrepreneur to google 'local businesses near me' to find the product or service that he needs to outsource for his business. For example, a small scale fashion house in India outsources from at least 10-15 small suppliers for embroidery, dying, and printing purposes. Thus it helps develop a shared business ecosystem where local businesses complement and support each other. The money gets rolled within the community. Even large corporations outsource work from these small businesses that they do not do in-house.
5. Promotes Specialisation
A small business with limited employee strength usually focuses on one particular product development. It guarantees a quest to achieve excellence in what they do. So they bring the local essence and specialty of the area they belong to along with adept skill and profoundness in their deliverables.
Impetus for Growth
So, what keeps the local businesses relevant in the era of digitisation and technological boom? Let’s find out.
1. The shift in Customers' faith in Local brands
When we purchase a product or service, what do we pay for? Do we pay for just the product? Or, does the cost include the story behind the manufacturing of the product, our shopping experience, the customer service, and everything else associated with it? Fortunately, the customers know exactly what they pay for and why?
There was a time when people preferred paying a little extra for qualitative excellence. But the latest brand-building practices have altered the customer's behaviour to a large extent. Now is the time for 'you must be seen if you want to be sold.' But then, what happens to products that are good in terms of quality, but can pay enough to 'be seen.' They have made their space in the organised retail scenario as private labels. They share the shelf-space with well-known brands at multi-brand outlets, supermarkets, and hypermarkets. These brands are priced lower than the established brands. These products are sourced from local businesses. According to a KPMG market report, private labels leverage better value-for-money and have a higher profit margin compared to the established brands. The estimated growth potential of these brands between 2019-22 is claimed to be 1.3 to 1.6 times faster with a 1.8 to 2 times higher profit margin as compared to external brands.
2. Government Initiative
The Government of India's 'Make in India' initiative has provided major growth impetus and support system for entrepreneurial ventures in the country. Several financial, technological, and infrastructural aids and assistance are being provided to facilitate ease of doing business. have been introduced to support local small business. Augmenting the share of Foreign Direct Investment in infrastructural, defence, medical, insurance, and construction, setting up on the Investor Facilitation Cell, eBiz portal, and Sram Suvidha Portal are some of the noteworthy support that the 'Make in India' initiative is bringing to the table to help the growth of local businesses. Thanks to this initiative, FDI in retail also makes sure that the merchandise is produced locally in Indian manufacturing units.
3. Online aggregation
The rise of eCommerce platforms growing exponentially at 29.8% has also fuelled the growth of local businesses to a large extent. As per the KPMG market report, the eCommerce segment attributes for 2.3% of the overall retail segment and 21% of organised retail in 2019. It is expected to reach 28% by 2022. Going by the same report, the category-focused eCommerce platforms have 25-40% of the sales contribution from private labels as compared to the multi-category platforms with 5-10% of their sales contributed by private labels. Online private labels have proved to be more efficient in customer retention and have registered more repeat purchases.
The share of private labels in offline retail is also encouraging with a whopping 90% of the fashion segment, 15-20 percent in food, and 8-10% in general merchandise.
4. Promoting Local Businesses on Ad Campaigns
Remember Cannon's Diwali TVC - 'Amma ki Diwali?' And that of Cadbury's as well? It had custom made the advertisement to feature local retail shops for each city to help the customers connect with local retailers. And we remember these ads because they emphasised supporting local businesses. Support local business hashtag is the new rage in social media as well. Several social media platforms have business groups promoting local businesses.
Many years ago, the Indian economy was comprised of local business communities made up of individual service providers such as the weavers, the goldsmiths, the blacksmiths, etc. It might sound primitive, yet, that was the time that is referred to as the golden era. And these individual weavers and blacksmiths were the proud makers of the shopkeepers' nation that India was at that time. Today, after receiving so much education and global exposure, as the country is stepping ahead from the year of survival (2020) to the year of revival in 2021, once again, local businesses have proved to be the torchbearers.
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