In America there is a saying that the most chilling words you can ever hear are "I'm from the government and I'm here to help you."  After spending much of the past four months trawling shopping centers, traditional markets and other retailing venues in six booming Asian countries, I returned to Australia earlier this week to find that it is still in the depths of a retail recession.  And the government - or at least a government - is trying to help out.

In this instance it's the Victorian government, which is now incrementally fooling with the rules governing so-called "bulky goods" centers.  The rules are being relaxed to enable a slightly expanded dribble of retail categories to operate out of these centers.  The minimum store size threshold is also being lowered.

Since I'm pro-consumer and pro-market, I like the idea of competition, so it beats me why there are bulky goods zones and bulky goods centers in the first place.  Why not just zone for retail and allow all retailers and shopping center types to compete on an equal footing everywhere?  This works fine in the US where supercenters, powers centers, regional centers and everything else compete head to head without any special rights, protections or restrictions on what you can sell and who can sell it.

Interestingly, of the six Asian countries I've worked in recently, the one with the retail sector that is serving its consumers worst is India.  As in Australia, part of the reason is government interference that restricts competition by limiting the types of retail that can operate.

India uses foreign direct investment (FDI) laws to prevent certain kinds of retailers - specifically, foreign ones - from setting up there.  Multi-brand foreign retailers are not allowed at all.  Single-brand retailers can operate but may only have 51% equity unless they source 30% of their merchandise from local SME suppliers.

The FDI rules have survived because of strong support by the politically powerful small shopkeepers, of which there are approximately 20 million in India.

While recognizing the concerns of the domestic shopkeepers, increased competition in the Indian market engendered by FDI reform would have a number of positive impacts, including:

  • Provide a larger tenant pool for shopping centre operators of all kinds
  • Provide a more diverse pool of tenants and tenant categories
  • Raise the quality of retailing
  • Force all retailers and shopping centers to compete
  • Make supply chains more efficient
  • Lower prices
  • Raise health, safety and environmental standards
Note how the first four of these and possibly the sixth as well would also be outcomes of the elimination of archaic zoning practices in Australia: 

India's shopping centers are generally of poor quality, partly as a result of its FDI laws.  Analogously, Australia's shopping centers are not as good as they could be as a result of its planning regs.  But maybe it will take a much bigger retail recession than the one Australia has now to get a more rational planning environment.



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