The Refers to the article "At a crossroads in retailing" by S R Hallbe (August 3). Though his views on the subject are interesting, there are some basic errors in his arguments. Monopsony power enables the buyer to purchasethe good for less than the price that prevails in a competitive market.
In India, pure monopsony, or evena situation where few buyers are able to exercise some amount of monopsony power, is still a far cry. Today monopsony power seems unlikely in a market like India where supply chains are still evolving. According to recent studies branded goods cater to only about 40 million. In most markets in India, there is a clear elasticity of supply facing buyers. With such elasticity of supply, buyers can exercise very little monopsony power.
From the little that have read in the newspapers about the Crossroad project, it is more on the lines of a mall rather than a large department store.
There are several corporate houses like the Tatas, Rahejas and the Kasliwals which have either already entered this business or are on the verge of doing so. This clearly establsihes the emergence of competition in the arena and negates the emergence of monopsony power, especially in a supply-elastic market like India.
How would these malls use their monopsony pwoer to displace medium, small and khokha shopkeepers? The latter caters to a geographically small clientele, quite different from that of the large retailers or emerging malls. Their product range is designed accordingly andthey are not in true competition with malls like Crossroads or stores like Westside.
Thus, the ability of such malls or large department stores to displace small shopkeepers or khokhas is truly questionable. Department stores have been in existence in large cities for ages, and at no stage has their monopsony power, if any, ever been questioned. Large retailers hae always had some control over pricing and this does not mean that they exercise monopsony power. Socio-economic effects of such phenomena cannot be debated, especially in the large cities in India where basic goods manufacturing in slowly dying out. An alternative economy has to set in and will emerge in one form or the other. Such malls or department stores only add to the economy and do not really cannibalise existing economic structure - E V K Shashikumar, Mumbai
