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Trouble At The Corner

An increasing number of Indian shop-owners are going out of business thanks to the ongoing store wars

Trouble At The Corner
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AND why don’t Indians ever play football?" goes an old English joke. Because every time they find a corner, they put up a shop. That joke is getting dated now, not because more Indians are playing football (some more are) but because the corners are closing shop, for long the livelihood of thousands of Indian families.

Five years ago, London alone boasted 8,000 such shops, 6,900 of them owned by Indians, mostly Patels. "At least 20 per cent of these have been forced to close down now," says Vinod Nakarja, a shopkeeper who set up the Newsagents Action Group (NAG) in a futile attempt to protect them.

The British, so far, had found it easy to live with the success of these stores. A minister speaks politely about the Indian shop that has "brought life to our inner city areas". The Indian shop’s strength was that it opened Sundays and closed late—and was right round the corner. Now the British have come to terms with their Christian conscience to open Sundays, nice and late, and are a quick drive away if not a short walk.

Sainsburys, Tesco, Safeway, ASDA—these giant stores are coming up everywhere. "Every time a supermarket opens, about 20 shops within a radius of a mile go out of business," says Nakarja. Many more further away lose large chunks of business. Sainsburys alone has 364 stores across Britain. Other chains are growing even faster. The Indian corner shop has indeed become the cornered shop.

Such closures have extended to shops across the rest of Britain as well. Often a family business, their decline is providing the greatest blow yet to immigrants who achieved some measure of middle-class status in England through them. The substantial Indian success story here began with these shops and not with the odd Swraj Paul.

The shop-round-the-corner distributing milk and groceries often also doubled as the local newsagent or post office. Today, there are 50,000 to 60,000 people in this business, says C.B. Patel, editor of the daily, Gujarat Samachar. At least half of these will go under, come what may. The future, he says, seems bleak.

But Indian shopkeepers are not sitting quiet. And what best way to raise their voice than by turning this into an election issue. In the buildup to the election next year, protesting shopkeepers are reminded that Margaret Thatcher is the daughter of a small shopkeeper. But not many Patel shopkeepers feel the blessing of a Thatcher. The Conservative government has created stringent laws and stifling taxes that work against small shopkeepers. For Indian corner stores, costs are rising, and profits, shrinking.

The squeeze comes in many ways. Local taxes have doubled over the last five years. A shopkeeper who paid £116 (Rs 6,400) a month five years ago now pays £4,000 (Rs 2.2 lakh) for the year, an almost threefold increase. Greater crime has pushed up security costs and insurance premiums to an average of £3,000-£4,000. Electricity bills for refrigerators and lighting have increased about as much.

Banks are beginning to find small businesses unprofitable to handle. Some charge shopkeepers £1.75 for every £100 banked, with chunky surcharges for overdrafts needed for bulk buys. Those buys have had to get bulkier because manufacturers now pack and price for the supermarket. Money that trickles in from customers is costly—it can cost 75 pence to cash a cheque of just a few pounds. Banks have stopped lending to set up new shops, but those are loans no one asks for any more.

The double squeeze has compressed what was a fairly rewarding business till recently. Traders estimate the turnover of London corner shops at £35 million a week, an average turnover of about £5,000 a week per shop. Margins of around 15 per cent added up to a reasonable middle-class income.

Families which depended on corner shop generated income are devastated. Chandrababu Patel lost both his shop and his house. "My house was bought on mortgage, I put it as security for a loan for the shop," he says. "Now everything is gone." Patel declared bankruptcy and stands every week in the dole queue. He has shifted with his family into two rooms in a government housing estate. Patel lost what he borrowed and also his own investment—£52,000 of ‘goodwill money’ he paid legitimately to the previous owner to take over his name and his customers. That goodwill market has now vanished. It is hard to find a buyer for a shop today. A few shopkeepers are keeping the business going because they cannot find buyers to sell to.

Going by trends, it was time to close shop anyway. A survey conducted by the Gujarat Samachar showed that only 6 per cent children of Indian shopowners wanted to continue in their parents’ business. "My children see me working 130 hours a week for small money, it’s just not worth it," says Nakarja. "I don’t know what a holiday means, but they want to find out." And the second generation is definitely not prepared to stand behind the shop till. University has opened up new horizons for them and their dreams of pursuing higher education in pharmacy, accounting, computing, management etc. are in jeopardy if their parents stop making money.

The end looms near not only through the natural push of market forces but because the chain stores have been flexing muscle, says Nakarja. "They decide prices, delivery, credit, they charge just for putting products on their shelves," he points out. "They can do that because no manufacturer can choose to ignore them," he says. The Sainsburys chain had sales totalling £10,148.1 million (Rs 56,000 crore) last year.

At £35 million a week, the London corner shops sales totalled about a fifth of that last year. But it failed to produce a collective clout that shops across London if not all over the country could have generated. "The Patels can bring London to a halt," Nakarja has been trying to tell them often. There could be much to gain through collective bargaining with manufacturers. But Nakarja’s constant lament is that they fail to see that. Nakarja is resigned now to what he sees as a historical failing. "Our people have never been united, that is our problem," he says. Even moral unity did not help. He tried to gather the Patels against an article published in The Sun that he thought was abusive towards Hindu gods. He told The Sun he would not sell the newspaper. So did some other Patels. "But they were too few," he says. "If everyone had united, it would have been a different story."

Meanwhile, the stores that threatened the corner shop are threatened themselves. American and European stores like Costco, Quicksave and Lido are now giving Sainsburys and the rest a run for their money. Sainsburys recently protested to the government against the advent of these new cheaper stores. "Let Sainsburys suffer now like we suffer from them," says Chanda Shah, a shop owner in Leicester.

Corner shops have been rendered mute spectators in the ongoing store wars. A Lido store next to Tesco recently priced a tin of baked beans at an incredible nine pence a tin. Tesco brought their price down to five pence. Lido went down to three pence, Tesco to two pence, Lido again to one pence. The price, after all, did not matter. The message did. And such messages will continue to pour in from all corners. But it won’t be from Indian businesses. For them, it’s time to pack up and put that sign outside the shop: CLOSED.

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