chapter edited

8/3/2019 Chapter Edited

1/75

CHAPTER - I

INTRODUCTION

1


2/75

Human psychology is supposed to be a very complex, the study of which is both science and an

art. Consumers being a subset of this human race exhibit the very same complexity. A

psychology of a consumer not only affects organizations profitability but also the economy of

the country. Different geographic consumers exhibit different buying behavior, based on their

culture, traditions, practices, ethics, lifestyle and earnings.

Consumer behavior is the study of when, why, how, and where people do or do not buy a

product. It blends elements frompsychology, sociology, socialanthropology and economics. It

attempts to understand the buyer decision making process, both individually and in groups. It

studies characteristics of individual consumers such as demographics and behavioral variables in

an attempt to understand people's wants. It also tries to assess influences on the consumerfrom

groups such as family, friends, reference groups, and society in general.

Customer behavior study is based on consumer buying behavior, with the customer playing the

three distinct roles of user, payer and buyer.

The study of consumer behavior focuses on how individuals make decisions to spend their

available resources (time, money, effort) on consumption-related items (Schiffman and Kanuk,

1997). The field of consumer behavior covers a lot of ground. According to Solomon (1996),

consumer behavior is a study of the processes involved when individuals or groups select,

purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires.

The official definition of consumer behavior given by Belch (1998) is the process and activities

people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of

products and services so as to satisfy their needs and desires. Behavior occurs either for the

individual, or in the context of a group, or an organization. Consumer behavior involves the use

and disposal of products as well as the study of how they are purchased. Product use is often of

great interest to the marketer, because this may influence how a product is best positioned or

how we can encourage increased consumption.

2
http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Psychologyhttp://en.wikipedia.org/wiki/Sociologyhttp://en.wikipedia.org/wiki/Social_Anthropologyhttp://en.wikipedia.org/wiki/Anthropologyhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Demographichttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Psychologyhttp://en.wikipedia.org/wiki/Sociologyhttp://en.wikipedia.org/wiki/Social_Anthropologyhttp://en.wikipedia.org/wiki/Anthropologyhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Demographichttp://en.wikipedia.org/wiki/Consumer


3/75

Characteristics Affecting Consumer Behavior

1. Cultural Factor

Culture is the fundamental determinant of a persons wants and behavior. The growing childacquires a set of values, perceptions, preferences and the behavior through his or her family and

other key institutions. A child grown in USA is exposed to the following values: achievements

and success, efficiency and practicality, progress, material comfort, individualism, freedom and

youthfulness. What about a child grown in Ghana?

Subculture Each culture consists of smaller group (subculture) of people with shared value

systems based on common life experiences and situations. These subcultures can be ethnic,

religious, racial or regional groups as well as those that form around music groups. Nestle Gh

Ltd (MaggieHomowoCooking contest) Guinness & MTN have been exploiting our festivals to

promote and build their brands and Corporate Image.

Social Class Virtually all human societies exhibit social stratification. It is a relatively

homogeneous and enduring division in a society, which is hierarchically ordered and whose

members share similar values, interests, and behaviors. Social classes reflect not only income but

also other indicators such as occupation, area of residence, education, and wealth. Social classes

show distinct product and brand preferences in many areas, including clothing, home furnishing,

leisure activities, automobiles, and media consumption.

2. Social Factors

Group Membership: Anyone who has ever gone along with the crowd" knows that people act

differently in groups than they do on their own. Since many of the things we buy are consumed

in the presence of others, group behaviors are important to marketers

Primary Groups: A person has continuous /informal interaction including family members,

friends, neighbors, and co-workers with these groups.Reference Group: These are groups that have direct/face-to-face or indirect influence on a

persons attitudes and behaviors. A set of people a consumer wants to please or imitate.

Consumers refer to these groups in evaluating their behavior i.e. what they wear, where they go

and what brands they buy

3


4/75

Secondary Group: A person has formal relations and less continuous interaction including

religious organizations, professional associations, and trade unions with these groups.

Opinion Leader: Is a person who influences others' attitudes or behavior because others

perceive him/ her as possessing expertise about the product. Opinion leaders are often among the

first to buy new products, so they absorb much of the risk, reducing uncertainty for others who

are not as courageous. Marketers try to reach opinion leaders by identifying demographic and

psychographic characteristics associated with them and coaxing them especially the celebrities to

use their products sometimes before they are launched.

The Family: This is probably the most important consumer buying organization in society.

Family members constitute the most influential primary reference group. Marketers are

interested in the roles and relative influence of the husband, wife, and children in the purchase of

a large variety of products and services.

3. Psychological Factors

Psychology helps marketers understand the why and how of consumer behavior. In the

psychological situation, consumer buying behavior is influenced by four factors including:

Motivation, Perception, Learning, and Beliefs & Attitudes.

a. Motivation

Motivation is an inner state that energizes, activates, moves or channels behavior towards certain

goals (Assael). Motivation arises from perceived needs. These can be grouped

into biogenic and psychogenic needs:

Biogenic needs: arise from physiological state of tension e.g. thirst, hunger, discomfort

Psychogenic needs: arise from psychological state of tension such as esteem, belongingness.

Maslows theory of motivation states that needs are satisfied based on importance. He arguesthat a consumer will satisfy the most important need first.

Maslows Hierarchy of Needs

Physiological Needs (water, sleep, food)

4


5/75

Safety Needs (security, shelter, protection)

Social Needs (love, friendship, acceptance by others, belongingness)

Ego Needs (Self-esteem, prestige, status, recognition, accomplishment)

Self- Actualization (self-fulfillment, realization, and enriching experience)

The theory helps marketers understand how various products fit into the plans, goals, and lives of

consumers.

b. Perception

A motivated person is ready to act. How the motivated person actually acts is influenced by his

or her perception of the situation. Perception is the process by which an individual selects,

organizes, and interprets information inputs to create a meaningful image of a situation.

Selective Attention- Listeners select part of the message that interests them. Sexual attraction isused to attract attention.

Selection distortion- here receivers distort the information they receive if the information does

not agree with their existing beliefs, opinions.

Amplification- the receiver adds things to the message that are not there.

Different people in the same motivated and objective situation may act quite differently because

each perceives the situation differently. For example, one person might perceive a fast talking

sales person as aggressive and insincere, another as intelligent and helpful. People can emerge

with different perceptions of the same object because of three perceptual processes: selective

distortion, selective attention, and selective retention. In marketing, people's perception are

important than the reality.

c. Learning

Learning involves changes in an individuals behavior arising from experience. Most human

behavior is learned. Learning theorists believe that learning is produced through:

Drive: Strong internal stimulus that compels a person to act in a particular way (motive) e.g.thirst, hunger, discomfort etc

Response: Action taken as a result of the cue, e.g. purchase of beer, soft drink or air-conditioner

5


6/75

Reinforcement: If experience (from using the beer, soft drink, or air-conditioner) is rewarding

/satisfying, the person will continue to take same action anytime he feels thirsty / uncomfortable.

Habit is then formed which may result in brand loyalty.

d. Beliefs & Attitudes

Through doing and learning, people acquire beliefs and attitudes and these in turn influence

buying behavior. A persons belief is the descriptive thought that he/she holds about something.

His attitude is his/her enduring favorable or unfavorable evaluation, emotional feeling and action

tendencies toward some object (product/service) or idea, e.g. attitudes towards religion, politics,

music which may be positive or negative. Marketers need to decide which part of an attitude is

the most important driver of consumer preferences e.g. (Diet coke/Pepsi in blind/branded

test)

Lifestyle: Is a pattern of living that determines how people choose to spend their time, money,

and energy and that reflects their values, tastes, and preferences Consumers often choose goods,

services and activities that are associated with a certain lifestyle. Analysis of consumer lifestyles

(i.e. psychographics) is important in producing insights into consumer behavior. For instance,

lifestyle analysis is useful in segmenting and targeting consumer markets

Personality: Each person has personality characteristics that influence his or her buying

behavior, by personality; we mean a set of distinguishing human psychological traits that lead to

relatively consistent and enduring responses to environmental stimuli. Personality is often

described in terms of such traits as self-confidence, dominance, autonomy, deference, sociability,

defensiveness, aggression, and compliance.

Personality can be a useful variable in analyzing consumer brand choices. The idea is that brands

also have personalities, and that consumers are likely to choose brands whose personality

matches their own. We define Brand Personality as the specific mix of human traits that may be

attributed to a particular brand.

Self-Concept: Is an individuals self-image that is composed of a mixture of beliefs,

observations, and feelings about personal attributes. Self-image is how a person thinks of himself

or he thinks others think of him.

6


7/75

4. Situational Factors

Some important situational cues are;

The Physical Environment: Marketers are aware that factors such as decor, smells, lighting,

music, crowding, and even temperature can significantly influence many purchases. Manyretailers are focusing on adequate packing, cyber-hangout and in-store display to influence the

consumer decision-making process.

Time: Marketers know that the time of day, the season of the year, and how much time one has

to make a purchase affect decision-making. Time is one of consumers' most limited resources.

The sense of time poverty makes consumers responsive to marketing innovation that allow them

to save time including such services as drive-through lanes at fast food restaurants and ordering

products on the web.

Social Surrounding: Including the other people present when the purchase decision is made,

may affect what is actually purchased. Thus, a playboy who went to a pharmacy to buy condoms

late in the night ended up buying a bottle of tricilicate when he came face to face with an elderly

man he had woken up from sleep.

Purchase Task: Is the reason underlying the consumers decision to buy which may be as a gift

or for the buyers own consumption or consumption by the members of the household

THE CONSUMER DECISION PROCESS

Need identification/Problem awareness

Information gathering

Evaluation of alternative solutions (products)

Selection of an appropriate solution (product)

Post-purchase evaluation of decision

TYPES OF BUYING BEHAVIOR

1. Compulsive buying behavior

2. Impulsive buying Behavior

7


8/75

1. Compulsive buying behavior

Buying usually serves utilitarian needs. For some adults, shopping is also a leisure activity, a

means of managing emotions, or a way to establish and express self-identity. For others, the

inability to control buying urges brings significant adverse consequences. Uncontrolledproblematic buying behavior has been referred to as uncontrolled buying, compulsive buying,

compulsive shopping, addictive buying, excessive buying, and spendaholism.

All the above are characterized by the following behavior - being frequently preoccupied with

buying or subject to irresistible, intrusive, and/or senseless impulses to buy; frequently buying

unneeded items or more than can be afforded; shopping for periods longer than intended; and

experiencing adverse consequences, such as marked distress, impaired social or occupational

functioning, and/or financial problems.

The adverse consequences of the above include guilt or remorse, excessive debt, bankruptcy,

family conflict, divorce etc,

2. Impulsive buying Behavior

Marketing and consumer researchers over the period of forty years have tried to grasp the

concept of impulse buying and defined this terminology in their own perspectives, of which

some research findings are discussed here.

In a research conducted by Cobb and Hoyer (1986), impulse buying was defined as an unplanned

purchase and this definition can also be found in the research of Kollat and Willett (1967).

In another research by Rook (1987) reported that impulse buying usually takes place, when a

consumer feels a forceful motivation that turns into a desire to purchase a commodity instantly.

Beatty and Ferrell (1998) defined impulse buying as instantaneous purchase having no previous

aim or objective to purchase the commodity. Stern (1962) found that products bought on impulse

are usually cheap.

OBJECTIVES OF THE STUDY

To analyze the buying behavior of Mall (Retail Outlet) shopper

To identify the factors that affects the impulsive buying behavior of Mall shopper.

8


9/75

To identify any unique impulsive factor affecting buying behavior.

To study the effect of wider assortment of products on the impulsive buying behavior of a

shopper.

RESEARCH METHODOLOGY

This section deals with the research design to be used, data collection methods used,

Sampling techniques to be used, field work to be carried out, analysis and interpretation

to be done, limitations inherent in the project and finally, coverage (Scope) of the

research work.

Sample Size: A Random convenience sampling was chosen in this study as this

study was carried-out in an area in Hyderabad in two retail outlets namely FOOD

WORLD and RELIANCE FRESH the respondents were already segmented as Retail

outlet visitors.

Source of Data Collection: The proposed study is undertaken with the help of

both primary and secondary data.

Primary Data: A precise structured questionnaire was prepared which containedquestions that were open ended as well as questions with likert ranking between 1 to 5 (1

being least favorable and 5 being extremely favorable). Personal information was also

collected that was used in demographic interpretations.

Secondary Data: Secondary data constitute the published articles on the topic, internet,

and few text books on marketing and consumer behavior.

Interpretation: For the purpose of data analysis, tabulation and simple averages,

percentages have been used and interpretation is done.

SCOPE OF THE STUDY

Sales maximization is the ultimate goal of any organization. To capture a larger

market share and sales volume, the organization is required to consider its customers.

9


10/75

They should analyze their needs, wants, preferences and intentions. For achieving the

goal, the organization should know about customers buying behavior. This study will try

to focus on the buying behavior of Mall shopper in Hyderabad.

Many studies have been carried out in different parts of the world on the everchanging nature of the customer; in line, this study will try to evaluate Mall shoppers in

Hyderabad with the results of already studied factors of impulsive buying behavior.

This study will try to pin point the factors of impulsive buying specific to the

geographic location of Hyderabad so that retail outlets can customize their marketing

programs to suit their local mall shoppers.

LIMITATIONS OF THE STUDY Some of the respondents were unwilling to answer certain questions.

There may be personal bias on the part of the respondents while answering to the

questions.

The conclusions cannot be generalized since the study is carried out only at one outlet of

FoodWorld and RelianceFresh situated next to each other in Mehdipatnam area in

Hyderabad.

CHAPTERISATION

The study is structured into five chapters.

10


11/75

Chapter 1: deals with the basic introduction and the related concepts of the topic such as

consumer behavior, characteristics effecting consumer behavior, consumer decision process,

types of buying behavior, objectives of the study, research methodology, scope of the study and

its limitations.

Chapter 2: reviews the literature on consumer behavior and in particular the impulsive buying

behavior. Literature survey is presented as case studies so that it gives oneself a clear picture of

the past research done on the subject.

Chapter 3: delve into the retailing sector in India. Types of retailing formats, types of retailing

sectors in India, current trends and issues in retailing, Indias major retailers, India as emerging

markets, challenges for Indian retailers, future trends and GAPs.

Chapter 4: Brief profiles of FoodWorld and RelianceFresh, the two companies choosen for the

study.

Chapter 5: is about the analysis and interpretation of data with suitable graphs.

Chapter 6: provides a summary and recommendations.

11


12/75

CHAPTER II

REVIEW OF LITERATURE

Literature Survey

CASE STUDY ONE

12


13/75

According to a study on Estimated Prevalence of Compulsive Buying Behavior in the United

States carried out by Lorrin M. Koran, M.D., Ronald J. Faber, Ph. D., Elias Aboujaoude, M.A.,

M.D., Michael D. Large, Ph.D., Richard T. Serpe, Ph.D. - (Am J Psychiatry 2006; 163:1806

1812)

Compulsive buyers were younger, and a greater proportion reported incomes under $50,000.

They exhibited more maladaptive responses on most consumer behavior measures and were

more than four times less likely to pay off credit card balances in full.

Some studies, for example, have asserted that compulsive buying results from the conditions of

modern life, including the easy availability of credit cards; increased and more effective

advertising; the ease of shopping in malls, through TV, and the Internet; the dilution of family

structure; and a breakdown in the sense of community (2, 1821).

Finally, preliminary evidence suggests that compulsive buyers suffer from abnormally high

levels of depression and anxiety (12) and experience higher rates of comorbid mood and anxiety

disorders than comparison groups (12,25).

CASE STUDY TWO

According to An Empirical Study of Consumer Impulse Buying Behavior in Local Markets

- European Journal of Scientific Research ISSN 1450-216X Vol.28 No.4 (2009), pp.522-532

The major findings of the study demonstrated an overall weak association of the set of

independent variables with the dependent variable but, the in-depth analysis found that pre-

decision stage of consumer purchase behavior is the only variable that resulted into strong

association with the impulse buying behavior.

Its true that young people more often get attracted to products displayed on store shelves and

has greater tendency of impulse buying behavior but results of this paper showed no association

of impulse buying in higher income group of young people having prevalent impulse buying

tendencies. This study reported new evidences in the field of impulse buying behavior of

consumers pertaining to the local markets of the twin cities of Pakistan.

13


14/75

The phenomena of this Impulsive buying behavior can easily be understood with the help of two

principles/forces as a part of psychological review of literature, which interprets impulses as the

consequences of these competing principles/forces. These principles are well presented in the

papers of Freud (1956) and Mai,et al.(2002). These principles are stated below:

First,

a. The pleasure principle

b. Second, the reality principle

The pleasure principle is related to immediate satisfaction felt by consumer whereas the reality

principle is related to delayed gratification. There is always an ongoing competition between

these two forces represented as principles within the buyer when they enter a shopping store withthe intention to buy. As a consequence impulse related behavior overcomes them because

impulses are usually difficult to resist and involve premeditated pleasurable experiences, as of

study of Rook (1987).

CASE STUDY THREE

How Does Shopping With Others Influence Impulsive Purchasing?

Xueming Luo - University of Texas at Arlington

JOURNAL OF CONSUMER PSYCHOLOGY, 15(4), 288294

Stern (1962) argued that impulse buying largely depends on resources such as money, time, and

physical and mental effort. Persons moods could also influence their impulse buying (Rook &

Gardner, 1993). In particular, people who feel happy may be disposed to reward themselves

more generously and to feel as if they have more freedom to act.

Baumeister (2002) suggested that impulsive buying and self-control personality are just two

sides of the same coin; impulsive buying is simply the loss of ones self-control or the surrender

to temptation. Thus, individual-level analyses have dominated research on the nature and

antecedents of impulsive buying.

Rook and Fisher (1995), however, investigated impulsive buying beyond the individual level.

14


15/75

Rook and Fisher distinguished between the impulsive urge to buy (the spontaneous and sudden

desire that is experienced upon encountering an object; Beatty & Ferrell, 1998, p. 172) and the

behavior that results fulfills this urge (Rook, 1987; Rook & Gardner, 1993). Their findings

indicate that when acting on impulse is socially appropriate and rational, consumers tend to have

both a greater impulsive

Urge to buy and a greater likelihood of doing so. The presence of other persons in a purchasing

situation is also likely to influence the decision to make a purchase. In some instances, the mere

presence of others can influence behavior.

Zajonc (1965), for example, suggested that the presence of others is likely to magnify whatever

behavioral disposition exists a priori. This effect could occur regardless of whether the others are

peers or family members. In other instances, however, consumers may believe that othersopinions and behaviors are credible. Alternatively, they may take others buying behavior as a

justification for their own, thus releasing their inhibitions about buying. Finally, they may use

others behavior and their purchases as visible indicators of socially desirable activities. This last

influence is reflected in Fishbein and Ajzens (1975) theory of reasoned action, which assumes

that behavioral intentions are determined not only by attitudes toward the behavior but also by

the motivation to comply with social norms.

The nature of this influence, however, may depend on the norms and values of the group. As

noted earlier, family members (e.g., parents) may foster a sense of responsibility to both the

family and others and consequently may discourage wastefulness and extravagance. To this

extent, they may consider impulsive buying to be undesirable (Abrams, Marques, Bown, &

Henson, 2000; Baumeister, 2002; Heckler, Childers, & Arunachalam, 1989). The presence of

family members may activate this normative value and therefore decrease the urge to purchase.

In contrast, peer group members may encourage spontaneity and the pursuit of hedonic goals

independently of their long-range consequences. Therefore, although the presence of familymembers may decrease the likelihood of individual impulsive purchasing, the presence of peers

may increase it.

The effects of the presence of others are likely to be greater when the group to which they belong

(peers or family) is cohesive than when it is less so. Group cohesiveness (i.e., the attractiveness

15


16/75

of the group to its members; Forsyth, 2000) is likely not only to induce a clearer normative

expectation but also to increase the motivation to comply with it. Thus, if the peer group norms

encourage impulsive buying, then the tendency to engage in this behavior in the presence of

peers should increase with the cohesiveness of the peer group in question. In contrast, if the

familys norms are antagonistic to impulsive purchasing, then the tendency for the presence of

family members to inhibit impulsive purchasing should be greater when the family is cohesive.

Individual differences in susceptibility to influence may further affect the disposition to conform

to normative expectations and, therefore, the impact of these expectations on impulsive

purchasing. Susceptibility to influence is defined as an individuals willingness to accept

information from other people about purchase decisions (Bearden & Etzel, 1982).

The opposing effects of peers presence and family members presence on impulsive purchasing

will be greater when people are susceptible to influence than when they are not. Furthermore,

susceptibility to influence may increase the impact of group cohesiveness on these effects; that

is, peers presence should have its greatest positive effect on individuals impulsive buying when

the peers are cohesive and the individuals are susceptible to influence, whereas the presence of

family members should have its greatest negative effect under these conditions.

CASE STUDY FOUR

Determinants of Planned and Impulse Buying:

The Case of the Philippines

Ben Paul B. Gutierrez*

Asia Pacific Management Review 2004 9(6), 1061-1078

According to Narasimhan et al. [28] bath products are high-impulse products, it is predicted that

purchases in the below six categories would be impulsive.

(1) Hair styling: Gels, mousse, sprays

(2) Hair care: Shampoo, conditioner, treatments and coloring

(3) Facial skin care: cleansers, toners, moisturizers and treatments

16


17/75

(4) Hand and body care: Bar and liquid cleansers, moisturizers, lotion, deodorant, nail polish,

body powder and feminine wash

(5) Perfumes: Alcohol-based fragrances and concentrates

(6) Make-up: Lipstick, foundation, blush-on, eye makeup, eye liner, mascara

In Philippines, Most respondents are very deliberate in their choice of personal care products.

They have already decided on what product category and what brand to buy before going to their

shopping trips. Based on self-reports level of planned purchase is high at 82 percent and most of

the shoppers have decided on a brand to buy beforehand (82.8%). These two variables are

correlated (Pearson r= .605, p < .001, 2-tailed).

The degree of planned versus impulse buying was further analyzed using the Antonides and vanRaaij [3] framework. Responses for product category and the brand purchased were cross

tabulated. It showed that only 76.6 percent of the shoppers have completely planned purchases,

buying the intended product category and the brand decided on before the purchase. The

remaining 23.4 percent are impulsive purchases. The proportion of completely impulse buying

(no intention of buying the category and the brand) is 11.9 percent. Occurrence of impulsive

brand choice, where product category was planned but the brand was unplanned, is 5.3 percent.

Impulsive product choice (18.1%) encompasses unplanned purchase in a product category

regardless of the selected brand. Incidence of impulsive product choice, when the brand chosen

was the usual brand, is 6.2 percent.

The finding on the extent of impulsive purchases is consistent with previous researchers such as

Hausman who obtained between 30 percent to 50 percent of impulse purchases among

consumers. The finding that a majority of the purchases are planned is similar to the results of

Agee and Martin [2].

Most of the shoppers (93%) were previous patrons of the store they visited. Such store

familiarity could make it easier to find the toiletries needed and increase shopping efficiency.

Less than half of the respondents found the beauty consultants helpful (43.4%) or polite and

welcoming (48.2%). Retailers can take these findings to maintain trained beauty consultants and

provide adequate signs whenever some relocation of products took place. The prevalent practice

17


18/75

of hiring temporary salespeople in most department stores is contributing to some of these

problems.

Among the demographic variables, only age appeared to be a factor influencing the

planned/impulse purchases. As predicted in H9, younger people are more likely to becomeimpulsive shoppers (p


19/75

and in many cases it is hard to focus their attention on something they did not intend to buy. On

the other hand, they buy necessities much quicker than women, they do not find pleasure in

searching, choosing and trying, and also they are more suggestible to the pleas of children and

sales promotions (Underhill, 2000, p.101). Sulima (2000, p.177) noted ironically that, (...)

during family shopping, men are used mainly for moving a shopping trolley, and for

authenticating with word or with gesture the consumptive ideas of their wives. Checkout and

door are their most desired places in shops. Women euphoria is usually accompanied by men

worry. Men usually do not engage in habitual shopping for necessities, but are quite skilled at

buying durable goods, like cars, tools, stereos or computers, while women traditionally care

about more temporary things, like cooking a dinner, decorating a cake, proper haircut or makeup.

For women, shopping is a kind of transforming experience, a method of becoming better, more

ideal version of person; it has emotional and psychological factors that hardly exist for men

(Underhill, 2000, p.116). Thus, women have higher tendency to shop in emotional manner, and

also to shop impulsively (Verplanken, Herabadi, 2001; Bellenger, Robertson, Hirschman,

1978; Dittmar, 1992, 1989; Dittmar, Beattie, 1998; Dittmar, Beattie, Friese, 1995, 1996; Dittmar,

Drury, 2000), while men are more impulsive and more prone to act in impulsive way in general.

These differences also suggest that there is yet another mechanism of impulsive buying behavior

for men and women. As previous research showed (Gsiorowska, 2003) the structure of

impulsive buying tendency determinants differ among men and women. For women, this

tendency is of stimulative character, thus it is connected to emotions derived from the process of

shopping or from the possessing new goods. Impulsive buying tendency in this group is

associated with high level of desired stimulation and high level of materialism, and also with

aspects of money attitudes that are anchored both in present and future (Gsiorowska, 2003). For

men, impulsive buying tendency is more of instrumental character. They want to find what they

need with a minimal level of engagement and finish it fast, so impulsive buying for them means

quick decision with not too much thinking, and also the fastest possible consumption of the

purchased goods. In this group, impulsive buying tendency is associated with present temporal

orientation, demand for immediate gratification and focus on utility that is derived from what

they bought. Moreover, for men impulsive buying tendency is more connected with aspects of

money attitudes that are anchored in the present and are connected with current actions

(Gsiorowska, 2003).

19


20/75

CASE STUDY SIX

According to a study on Consumer Behavior for Food Products in India Submitted to

International Food & Agribusiness Management Association For 19th Annual World

Symposium held at Budapest, Hungary it was observed that, Freshness, cleanliness and goodfor health are the three most important parameters for relatively more perishable products like

fruit, vegetable and milk product. It seems that safety from health perspective is the prime

concern while buying these products. For processed food items, apart from cleanliness and

freshness, free from pesticides and clean place of sale are the most important criteria.

But, for food grains-pulses, which generally people buy in large quantity, only two parameters

cleanliness (4.34) and free from pesticides (4.31) have mean rating higher than 4. Value for

money (3.67) is the third important criteria for food grains-pulses.

Unlike for more perishable products, health and freshness are not the major parameters for food

grain-pulses purchasing decisions.

Store quality (good display of products, good ambience, clean place of sale and variety of

products availability at same place) appeared as the most important factor in purchasing

decisions followed by marketing mix (explained the maximum variance in nearby availability,

locally produced, overall quality and advertising) and taste-flavor (taste and flavor).

Respondents agreed that there is definitely some change in the way they purchase food items

now. They strongly feel that they now look for more number of options available for food items.

Both husband and wife take joint decisions about type of food items to be purchased and children

also influence their decision to a great extent. People prefer going and buying food items from

such places where they can get most of the items at one place and where the display of the

product is better. This may be one of the reasons for people preferring to go to organized retail

shops.

Despite several changes people, however, somewhat disagreed that their food purchase decision

is now heavily dependent on advertisement. They also disagreed to the statements like price is

now not an important criterion compared to earlier period or they visit less frequently to local

grocery stores to buy food items.

20


21/75

CASE STUDY SEVEN

In a study presented at 2009 EABR & TLC Conference Prague, Czech Republic on Role of

Children in Family Purchase Decision Making by Blent zsamac, ankaya University,

Turkey and Nurettin Parlt, Gazi University, Turkey; it was noted that

The top reason parents let the kids make choices is because they want to make them happy.

Many parents also let their kids rule the choices simply due to feeling guilty about the time spent

away from them due to formal commitments. Empowering the children, preventing them from

feeling inferior among their peers seems to be other factors in this dilemma.

The main hypothesis of the study analyzed the role children play on family purchasing decisions.

H1 was tested with regression analysis and the result yields p=0,000


22/75


23/75

In researches conducted by Cha (2001); Han et al., (1991); Ko (1993) it is reported that impulse

buying behavior regarding fashion products are associated with patterns like chaste, repeated

emotions as well as fashion-oriented impulse buying behaviors. These facts were also quoted by

Park et al. (2006). The definition of fashion involvement basically relates to apparel associated

with fashionable outfits. The findings of Han et al. (1991) quoted in response to fashion

involvement of consumers, that it might enhance fashion-oriented impulse buying behaviors

among those who habitually wear fashion outfits. Fairhurst et al. (1989) and Seo et al. (2001)

found a direct association among fashion involvement and apparels purchase. Positive emotions

are defined as affects and moods, which determine intensity of consumer decision-making

reported by Watson and Tellegen (1985). Park (2006) found a positive relationship of positive

emotions, fashion involvement and fashion-oriented impulse buying with the overall impulse

buying behavior of the consumers. Ko (1993) reported that positive emotions may result into

fashion related impulse purchase. The researches of Beatty and Ferrell (1998); Husman (2000);

Rook and Gardner (1993); Youn and Faber, (2000) found that emotions strongly influence

buying behaviors, which result into consumer impulse buying. Babin and Babin (2001) found

that in stores consumers purchasing intentions and spending can largely be influenced by

emotions. These emotions may be specific to certain things for example, the features of the

items, customer self interest, consumers gauge of evaluating items and the importance they give

to their purchasing at a store.

Piron (1993) found that the total of nine items, a combination of pre-decision and post-decision

stages indicators, resulted into high significant differences and the values of correlations for

unplanned purchases done by consumers resulted into higher value as compared to purchases

done by consumers on impulse.

23


24/75

24


25/75

CHAPTER - III

INDUSTRY REVIEW

Introduction to Retailing

Retailing is the transaction between the seller and consumer for personal consumption. It does not

include transaction between the manufacturer, corporate purchase, government purchase and other

wholesale purchase. A retailer stocks the goods from the manufacturer and then sells the same to the

end user for a marginal profit. In the supply chain that also consists of manufacturing and distribution,

retailing is the last link before the product reaches the consumer.

The word retailing has its origins in the French verb retailer, which means to cut up, and

refers to one of the fundamental retailing activities which is to buy in larger quantities and sell

in smaller quantities. For example, a convenience store would buy tins of beans in units of two

dozen boxes, but sell in single-tin units. However, a retailer is not the only type of business

entity to 'break bulk'. Wholesalers also buy in larger quantities and sell to their customers in

smaller quantities. It is the type of customer, rather than the activity, that distinguishes a

25


26/75

retailer from other distributive traders; the distinction being that a retailer sells to final

consumers, unlike a wholesaler who sells to a retailer or other business organizations. A

generally accepted definition of a retailer is 'any establishment engaged in selling

merchandise for personal or household consumption and rendering services incidental to the

sale of such goods'.

The term retailing applies not only to the selling of tangible products like loaves of bread or

pairs of shoes, but also to the selling of service products. Companies who provide meals,

haircuts and aromatherapy sessions are all essentially retailers, as they sell to the final

consumer, and yet customers do not take goods away from these retailers in a carrier bag. The

consumption of the service offering coincides with the retailing activity itself.

From a traditional marketing viewpoint, the retailer is one of many possible organizations

through which goods produced by the manufacturer flow on their way to their consumer

destiny. These organizations perform various roles by being a member of a distribution

channel. For example, a chocolate producer like Cadbury's will use a number of distribution

channels for its confectionery, which involves members such as agents, wholesalers,

supermarkets, convenience stores, petrol stations, vending machine operators and so on.

Channel members, or marketing intermediaries as they are sometimes referred to, take onactivities that a manufacturer does not have the resources to perform, such as displaying the

product alongside related or alternative items in a location that is convenient for a consumer to

access during shopping Intermediaries facilitate the distribution process by providing points

where deliveries of merchandise are altered in their physical state (such as being broken down

into smaller quantities, or being repackaged) and are made available to customers in convenient

or cost-effective locations.

Moving away from the role of retailing in the marketing activity of an individual producer,

retailing activity can also be viewed as a significant contributor to the economy in general. In

the last two decades of the twentieth century, the UK and many other developed nations have

seen their economies change from being manufacturing-led to being service-led, in terms of

26


27/75

wealth creation, employment and investment. Around one-third of consumer expenditure takes

place through retail outlets, and the retail industry employs one in nine workers.

The retail price index is a frequently referred to economic indicator. It is a measure that is based

on a 'basket' of products across all retail sectors and compares prices over time in order to reveal

the changes in the cost to households of typical purchase needs. According to ICRIER report, the

retail business in India is estimated to grow at 13% from $322 billion to $590 billion by 2011-12.

In the same time the unorganized retail sector is expected to grow at about 10% per annum with

sales turnover rise from $309 billion in 2006-07 to $496 billion in 2011-12. Retailing is one of

the pillars of economy in India and accounts for 35% of the GDP.

Types of retail formats

Mom-and-pop stores: These are generally family-owned businesses catering to small

sections of society. They are small, individually run and handled retail outlets.

Category killers: Small specialty stores have expanded to offer a range of categories.

They have widened their vision in terms of the number of categories. They are called

category killers as they specialize in their fields, such as electronics (Best Buy) and

sporting goods (Sport Authority).

Department stores: These are the general merchandise retailers offering various kinds of

quality products and services. These do not offer full service category products and some

carry a selective product line. K Raheja's Shoppers Stop is a good example of department

stores. Other examples are Lifestyle and Westside. These stores have further categories,

such as home and dcor, clothing, groceries, toys, etc.

Malls: These are the largest form of retail formats. They provide an ideal shopping

experience by providing a mix of all kinds of products and services, food and

entertainment under one roof. Examples are Sahara Mall, TDI Mall in Delhi.

Specialty Stores: The retail chains, which deal in specific categories and provide deep

assortment in them are specialty stores. Examples are RPG's Music World, Mumbai's

bookstore Crossword, etc.

27


28/75

Discount stores: These are the stores or factory outlets that provide discount on the MRP

items. They focus on mass selling and reaching economies of scale or selling the stock

left after the season is over.

Hypermarkets/ Supermarkets: These are generally large self-service outlets, offering avariety of categories with deep assortments. These stores contribute 30% of all food and

grocery organized retail sales. Example: Big Bazaar.

Convenience stores: They are comparatively smaller stores located near residential

areas. They are open for an extended period of the day and have a limited variety of stock

and convenience products. Prices are slightly higher due to the convenience given to the

customers.

E-tailers: These are retailers that provide online facility of buying and selling products

and services via Internet. They provide a picture and description of the product. A lot of

such retailers are booming in the industry, as this method provides convenience and a

wide variety for customer. But it does not provide a feel of the product and is sometimes

not authentic. Examples are Amazon.com, Ebay.com, etc.

Vending: This kind of retailing is making incursions into the industry. Smaller products

such as beverages, snacks are some the items that can be bought through vending

machines. At present, it is not very common in India.

Retail Sector in India

Retailing in India is driven by the transformation and the modernization of the

consumers. It is important to identify the key drivers of change, which are continuing to affect

the retail environment, and therefore attracting foreign retailers to India.

Hemendra Mathur & Bhavna Surtani, KSA Technopak, explain the Indian consumerschanging needs by stating that:

The Consumer is rising up Maslows need hierarchy and their aspirations are

rising from basic needs to esteem needs. While earlier their needs and aspirations were

basic and simple, they are now becoming more complex and specific. (Images Retail;

28


29/75

Winds ofChange)

Demographically India is one of the youngest nations in the world in terms of the median age

of its general public, which is 24 years. Over 890 million people are below 45 years of age

and some 300 million middle class consumers are likely to increase to over 600 million by2010, making it one of the biggest consumer markets in the world (IMAGES Business of

Fashion, 2006). Since India is one of the youngest countries in the world and also India has

more English speaking people than in the whole of Europe combined together.

Over the years, India has undergone certain fundamental changes in its political,

economic and social structure. Each of these has brought about changes in the mannerby

which consumers perceive, select and finally purchase products. Over the years theIndian

consumer has come of age. Due to the increasing literacy in the country, the exposure todeveloped nations via satellite television and due to many Indians traveling abroad on

holidays or gaining overseas work experiences, the consumer awareness has increased on the

quality and the price of the products/services that is expected. The corporate salaries rose by

an average of 10% in 2003, compared with 7% in China and 3.5% in the US (A.T.

Kearney, 2005). Due to a rise in salaries, Indians have morepersonal disposable income

and people are using credit cards more than ever, hence demonstrating a willingness to spend

more and save less. With the total Consumer Spend growing over 5 percent annually

(Musgrave, 2005), the Indian consumer is in for rapid transformation. Indian consumers are

spending and literally living by the saying of shop till you drop. This is definitely a good

sign for retailers who have mastered the act ofselling. Gradually, more and more consumers

are becoming increasingly demanding on the quality of the products/services that they expect

from the market. This awareness has made the consumer seek more dependable sources for

purchases and hence the logical shift to purchases from the organized retail chains that

has a corporate backdrop and where the accountability is more prominent. The consumers

are value-driven and seeking cheaper options. Younger people particularly are becoming more

fashion conscious andbrand aware.

India has emerged as one of the most dynamic and fast paced industries with a number of

foreign players entering the market. According to Miller, L. (2005), the retail salesreached

about $169.2 billion in 2002, and grew at an average annual rate of 7% between 1999 and29


30/75

2002. According to A.T. Kearneys 2005 Global Retail Development Index, India is

becoming a richer country as the GDP per capita is expected to rise to 4 percent a year for the

next 10 years out of which 10 percent is accounted for its retail industry, making its way to the

next boom industry (A.T. Kearney, 2005). A report by the Mckinsey Quaterly (2005) states

that the retail sales in Indias consumer goods market are expected to grow to $400 billion by

2010, making it one of the worlds fivebiggest.

India is sometimes described as the land of shopkeepers because of the huge numberofretail

activities in the country. There are an astonishing 12 million retail shops in the country,

roughly 78 percent of which are family run businesses says Miller, L. (2005). However

retailing in India is completely unorganized. There is no supply chain management viewpoint.

Kishore Biyani, head of the dynamic Pantaloon Group (the pace setter in food, clothing and

home concepts in India) says: Some 96% of Indian retailers trade off less than 200 sq. ft

(Drapers, p. 39).

Abhay Singh and Subramaniam Sharma explain that:

For the moment, Indians do as much as 97 percent of their shopping in small,

independently owned neighborhood shops. Indians follow the trend ofpurchasing

lentils in one spot, towels in another and sandals in a third. They make their way along

streets crowded with cars, scooters and cycles, and jam into tiny stores ornarrow stalls

packed to the beam, bargaining with the owner to complete theirdaily shopping.

(Singh, A. & Sharma, S., 2006)

But this scenario is changing rapidly as the last few years have seen a huge

transformation by enhancing scalable and profitable retail models across categories.

Specialized retailers in India are coming up increasingly and Indian retailing is enduring a

slow but deep-rooted shift away from total dependence on myriad small family-run stores

towards larger, more modernized retail outlets. The structure of retailing is developing rapidly

with malls becoming increasingly widespread in large cities, and development plans

being projected at 150 new shopping malls by 2008 (Drapers, p.49). Also successful

development of value based concepts as well as development of retail space in smaller cities

and towns shall drive the organized retail into the next levels ofcities.

30


31/75

Although the top ten retailers account for just 2 percent of the total market today,

modern retail is expected to enter a boom phase, with the major players capturing up to 10

percent of the total market share within the next five years (A.T. Kearney, 2005). Mr Arvind

Singhal, Chairman, KSA Technopaksays:

The size of the organized retailing market stood at INR 280 billion (approx. 3.5 billion

pounds) 2004, thereby, making up a mere 3 percent of the total retailing market. Moving

forward, organized retailing is projected to grow at the rate of 25-30 percent p.a. and is

estimated to reach an astounding INR 1000 billion (approx. 11.6 billion pounds) by 2010.

Further, its contribution to total retailing sales is likely to rise to 9% by the end of the

decade. (Images Retail)

The apparel industry is a promising sector, preparing for a growth spurt in India.

According to A.T. Kearney (2005), the industry will grow 4 to 5 percent a year in volume and

13% a year in value. The report goes on to explain that the branded apparel market is the

largest source of growth with luxury brands having already entered the Indian market. Also

the market for mens branded apparel is growing roughly at 22 percent per year, farhigher

than the 6 percent growth rate of the overall menswear segment. The market for womens

branded apparel, which represents 35 percent growth of the total branded apparel

market, is growing at 23 percent a year (A.T. Kearney, 2005).

Images Retail talks about the stocks in the retail sector becoming ever more attractive from an

investors point of view and explains that the quantum of investments is expected to shoot up as

the inherent attractiveness of the segment draws in more and more investors to earn hefty

profits. Investments into the sector are estimated at INR 2025 (approx. 23.82 billion pounds) in

the next 2-3 years and over INR 200 billion (approx12.35 billion pounds) by the end of 2010

(Images Retail, 26/2/2005).

Types of Retail Sectors in India

Post liberalization the Retail sector in India is heralded as one of the sunrise industries. It has

never been better for the retail sector in India. Today within the booming service sector,

31


32/75

retailing is the single biggest contributor in terms of GDP to the National Income. Retailing

itself can be further divided into organized and unorganized sector.

Organized Sector

Organized retailing came into its own in tandem with the retail boom. Indian corporate like

Reliance, ITC and Pantaloon have made foray into this segment along with several foreign

brands changing the landscape of retailing in India. It coincided with the high growth in the

Indian economy, resulting in greater purchasing power amongst the middle class, which in turn

went on a purchasing spree. Other factors like consumer awareness, investments by venture

capitalists and private equity firms have also contributed to the growth of organized retail. The

growth in the organized retailing has resulted in the establishment of departmental stores,

supermarkets, rural retailing, e-retailing and luxury retailing. Each one of these formats has aunique advantage and the scale of operation depends upon factors like average footfalls, sales

per sq ft etc. However the process of acquiring license is still a bottleneck for the development

of Indian retailing.

Unorganized sector

The unorganized sector is still dominant in India, since it has the advantage of low investment

need. Since retailing is the process of connecting the supplier and consumer, pricing of

products is very important in a price conscious market like India. Unorganized retailers play an

important role in this regard and are a vital part of the supply chain. If unorganized retail

segment positions itself correctly, it can carve a niche for itself in India's booming retail sector.

Rural Retailing

India's huge rural market has also attracted retail investments and is seen as a viable

opportunity for growth by corporate India.ITC launched the countries first rural mall "Chaupal

Sagar" with diverse products being offered ranging from FMCG to electronics appliance to

automobiles, with a view to provide farmers a one stop center for all their consumption

requirements. Many more new trends could possibly be tried in rural markets to unearth the

huge potential.

Current Trends and Issues32


33/75

Modern retail has entered India as seen in extensive shopping centers, multi-storeyed

malls and vast complexes offering the customers shopping, entertainment and food all

under one roof. These modern shopping centres or malls is still a new concept in India,

although the pace is quickening; some 220 large malls are due to open in India by 2006

(WGSN, 2004), thats 50 million sq ft of space in more than 50 cities. Another 500 to 600

malls, covering 120m sq ft, are supposedly at various stages of planning with a view to being

operational by 2010 (Drapers). According to RS Roy, retail sales of INR 50,000 Crore

(approx. 5.88 billion pounds) are going to be generated by 2007-08, half of which is

expected to come from the fashion sector (Roy, RS. 2006).

The developers responsible for developing over 375 shopping malls across the

country, pointed out that over 40% of the development still under construction had, in fact,

already been sold out; which is off-course a good sign for the industry. (Roy, RS.2006,

p.29)

Lifestyle Centre, the specialty shopping destination catering to a niche customerbase for

luxury retail, is soon to be launched in the capital, New Delhi in 2006. The

destination retail outlet aims to address only international and Indian luxury brand

outlets, with fashion consisting of nearly 30 percent of the shopping experience. The

shopping centre is spread over 108000 sq ft, with 85000 sq ft of shopping space, a

4500 sq ft central atrium and a 5000 sq ft fine dining area. This will be comparable to

most luxury retail malls around the world. (IMAGES Business of Fashion, 2006,p.55)

An hours drive from central Delhi lays the satellite town of Gurgaon, which has become the

centre for an extraordinary boom in mall development. According to Sunil Bedi, MD, JMD

Group, the entire street in Gurgaon starting from Sikanderpur will be like Londons Oxford

Street (Drapers).

Indias major retailers

1. Pantaloon Retail

The flagship company of Future Group, Pantaloons Retail operates over 16 million square33


34/75

feet of retail space, has over 1000 stores across 73 cities in India and employs over 30,000

people. It can boast of launching the first hypermarket Big Bazaar in India in 2001. The

companies also operates in other retail segments such as - Food & grocery (Big bazaar, Food

bazaar), Home solutions (Hometown, furniture bazaar, collection-i), consumer electronics

(e-zone), shoes (shoe factory), Books: music & gifts (Depot), Health & Beauty care services

(Star, Sitara and Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment

(Bowling co.) The turnover this year was 12500 crores.

2. K Raheja Group

They forayed into retail with Shoppers Stop, Indias first departmental store in 2001. It is

the only retailer from India to become a member of the prestigious Intercontinental Group of

Departmental Stores (IGDS). They have signed a 50:50 joint venture with the Nuance Group

for Airport Retailing. Shoppers Stop has a national presence, with over 2.05 million square

feet area across 39 stores in 17 cities. It has also introduced new formats in the market viz

HomeStop the exclusive home furnishings, dcor as well as furniture store and

HyperCity a premium shopping destination for Foods, Homeware, Home Entertainment,

Hi-Tech Appliances, Furniture, Sports, Toys & Fashion. Other format of the company

includes -- Crossword Book Store, Mothercare & Early Learning Centre (ELC), Estee

Lauder group , Airport Retailing, TimeZone Entertainment. The turnover this year was 1570

crores.

3. Tata group

Established in 1998, Trent - one of the subsidiaries of Tata Group - operates Westside, a

lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of

products at the lowest prices. In 2005, it acquired Landmark, India's largest book and music

retailer. Tatas has also formed a subsidiary named Infiniti retail which consists of Croma, a

consumer electronics chain. Another subsidiary, Titan Industries, owns brands like Titan,

the watch of India and Tanishq, the jewellery brand. Sales turover was 197.13 crore in

December 2010.

4. RPG group

34


35/75

One of the first entrants into organized food & grocery retail with Foodworld stores in 1996

and then formed an alliance with Dairy farm International and launched health & glow

(pharmacy & beauty care) outlets. Now the alliance has dissolved and RPG has Spencers

Hyper, Super, Daily and Express formats and Music World stores across the country.

5. Landmark group

Landmark Group was launched in 1998 in India; currently owning 100 stores across various

retail formats. The retail ventures of Landmark Group includes - Home Centre, Centrepoint,

Babyshop, Splash, Shoe Mart, Lifestyle, Max, Lifestyle Department Stores, SPAR

hypermarkets, Foodmark, Fun City, Fitness First, Citymax India etc. It is a 3.8 billion dollar

company.

6. Bharti-Walmart

Bharti have signed a 50:50 percent joint venture agreement with Walmart in which Wal-

Mart will be taking care of cash & carry and Bharti will do the front-end. Further they plan

to invest US$ 7 bn in creating retail network in the country including 100 hypermarkets and

several hundred small stores.

7. Reliance

The company owns more than 560 Reliance Fresh stores and recently it has also launched

Reliance Mart Hypermart. The company further plans to launch its hypermart in Delhi /

NCR, Hyderabad, Vijaywada, Pune and Ludhiana region. The turnover was 4500 crore for

this year.

8. AV Birla Group's brand portfolio includes brands such as Louis Phillipe, Van Heusen,

Allen Solly, Peter England, Trouser town. Also, Madura garments is subsidiary of Aditya

Birla Nuvo Ltd. The recently acquired food and grocery chain of south, Trineth, has further

increased their number of store to 400 stores in the country. The company also own More

supermarkets and hypermarkets. Currently it runs 600 supermarket and nine hypermarkets

across India. The turnover this year was 1700 crores.

9. Metro

35


36/75

Metro Cash & Carry, the first company to introduce cash and carry business, started its

operations in India in 2003 with two Distribution Centres in Bangalore. Metro offers

assortment of over 18000 articles across food and non food at the best wholesale prices.

Currently Metro operates six cash and carry centres in Banglaore, Hyderabad, Kolkata and

Mumbai.

India as an Emerging Market

According to the management consultancy AT Kearneys 2005 Global Retail

Development Index, India is ranked as the number one emerging market for foreign retailers.

The report outlines that India has progressively risen on the GRDI, with its $330 billion

(2approx 176.55 pounds) retail market growing by 10 percent on average per yearover the

past five years. Its economy is the fourth largest in the world, after US, China and Japan.

Its GDP is $3.1 trillion (11.7 tr), the UKs being 943.4 billion (A.TKEARNEY,

The 2005 Global Retail Development Index).

Over 65 percent of the population (thats 75 million) is below 35 years old; 54 percent

(594 million) is below 25 years old and Abhay Singh and Subrahmanium Sharma (2006)

wrote in the International Herald Tribune that:

The annual income per person has risen 62 percent over the past six years, the

government has estimated it to be 25,778 rupees, or $580(approx 309.43 pounds).

(Singh, B. & Sharma, S. 2006).

The countrys middle class, estimated to include 216 million people, is demanding the

latest in flavored toothpaste and flat-panel televisions and by 2010, there will be 351

million of those middle-income Indians in 65 million households, up from 40 million

households now, the New York-based consulting firm McKinsey predicted (Singh,B. &

Sharma,S. 2006). Spending by Indians on products and services besides education,

housing, health care and transportation rose 5 percent to an estimated $219 billion

(approx 116.83 billion pounds) in 2005. Of that amount, retail chains took in just $8.2billion

(approx.4.37 billion pounds), according to Technopak Advisors, a research firm. Retailers

share of consumer spending may rise to $25 billion (approx 13.33 billion pounds) by

36


37/75

2010, Technopak estimated (Singh,B. & Sharma,S. 2006).

India is clearly a country that is very attractive, said Beth Keck, director of

international corporate affairs at Wal-Mart (Singh,B. & Sharma,S. 2006).

Domestic retailers and foreign entrants are stepping up to gain profits from Indias

shopping spree. The numbers clearly explain the companys enthusiasm. Marks and

Spencer, Lee, Guess, Tommy Hilfiger, Levis, Morgan, Mango, Benetton, Pepe Jeans London

and Lacoste are some of the high street brands that have already entered the Indian

market through franchises.

Meanwhile, industry sources say that a queue to enter India is already in formation, with such

blockbuster global brands as Gap, Zara, Guess and Ikea formulating theirentry strategies

(Kumar, K. (2005).

There is no doubt that India offers a huge retail opportunity. In spite ofIndiaspopulation of

more than one billion, of which more than 30 percent of the population falls below thepoverty

line, its spending power is reflected by the fact that the countrys 300 million middle- class

spenders, which is roughly the size of the total population of the United States, has spent

more than $2.5 billion (approx 1.325 billion pounds) on luxuryproducts in 2005, a figure that

could potentially grow by more than 50%. A report prepared by McKinsey and Co and the

Confederation of Indian Industry has even predicted that the retail trade holds the potential

of becoming a $300-billion-a-year market by 2010, provided the sector is opened

significantly. (Kumar, K. 2005).

But ever since the new FDI laws set by the Indian Government at the beginning of this

year, many more foreign retailers will be entering the Indian market. The United Progressive

Alliance government (February, 2006) permitted foreign direct investment in retail businesses

up to 51% through the Foreign Investment Promotion Board (FIPB). Although easing thecontentious retail FDI loop to some extent, by allowing only single branded foreign retailers

to invest in the country. However, this move is expected to attract greater curiosity from

global brands eager to make an entry into a market that has the fastest growing middle-class

population.

37


38/75

Darshan Mehta, the Indian partner of Tommy Hilfiger states that: Everyone who hadnt

thought of India before because the door was shut will now move India up from the back

burner. (Basu, I. 2006).

Arvind Singhal, chief executive officer of retail consultancy firm KSP Technopaksays: Itis not really creating a ground for additional foreign investments. (Basu, I. 2006).

Andrew Levermore, a South African who has worked as the head of buying for house of

fraser, describes India as: The most exciting place in the world for retailing. Where else can

you plan to build a $1 billion business in five years? The Indian consumers want value for

money and aspire fora better lifestyle. They love browsing and organized retailing provides

a leisure activity. In First World retail, you can expect 60% to 80% conversion of people

in your store,but in India 25% conversion is good. (Drapers, 2005).

Despite Indias stiff regulatory environment, it shines as the star of the year, offeringpotential

similar to that revealed by China 15 years ago. Nothing seems to signify Indias

transformation from a stagnant Third World country into an emerging economic powerhouse

as much as the dazzling new malls. India is gradually lurching its way towards

modernization as the Indian consumers, who once relegated to sorting through mom-and-pop

retailers and roadside markets, are rapidly evolving and accepting modern formats

overwhelmingly, making their way to new malls and hypermarkets.

The message for retailers on India is clear: move now or forego prime locations and

market positions that will become saturated quickly, A.T. Kearneys Vice President

Mike Moriarty said, adding retailers that missed the chance to capture first-mover

benefits in China can make up for it in India, after all international expansion is an important

strategy for fashion retailers (ATKEARNEY, 2005).

Challenges For Indian Retailers

Even though India has well over 5 million retail outlets of different sizes and styles, it

still has a long way to go before it can truly have a retail industry at par with International

standards. This is where Indian companies and International brands have a huge role to play.

38


39/75

Indian retailing is still dominated by the unorganized sector and there is still a lack of

efficient supply chain management. India must concentrate on improving the supply chain

management, which in turn would bring down inventory cost, which can then be passed on to

the consumer in the form of low pricing.

Most of the retail outlets in India have outlets that are less than 500 square feet in area.

This is very small by International Standards.

India's huge size and socio economic and cultural diversity means there is no established

model or consumption pattern throughout the country. Manufacturers and retailers will have to

devise strategies for different sectors and segments which by itself would be challenging.

The drawbacks provide a huge opportunity for the retail industry. The entry of foreign

majors like Benetton, Dairy Farm and Levis underline the opportunity for the industry in India.

Other Challenges facing Indian retail industry being

The tax structure in India favors small retail business

Lack of adequate infrastructure facilities

High cost of real estate

Dissimilarity in consumer groups Restrictions in Foreign Direct Investment

Shortage of retail study options

Shortage of trained manpower

Low retail management skill

Future trends

The retail industry in India is currently growing at a great pace and is expected to go up to US$

833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at

a CAGR of 10%. As the country has got a high growth rates, the consumer spending has also

gone up and is also expected to go up further in the future. In the last four year, the consumer

spending in India climbed up to 75%. As a result, the India retail industry is expected to grow

39


40/75

further in the future days. By the year 2013, the organized sector is also expected to grow at a

CAGR of 40%.

Organized retailing is dominated by large conglomerates like TATA's, ITC, RPG group,

Piramals and Rahejas apart from the various MNC's. This trend is expected to continue in future.

Textile and Garment companies like Raymond, Madura Garments and Arvind Denims

have achieved forward integration by opening their own retail outlets for their branded garments.

This gives them a huge advantage by reducing the role of intermediaries, increase profit margin

and enables them to be close to the end user.

Inflation and the global meltdown have had an effect on the growth of retailing in India.

Experts believe the retail industry should focus on distinction, branding, after sales service,

exploring commoditization, share of purchasing power and innovation to tide over the crisis. The year 2009 is seen as a year of consolidation for Indian retail sector. By ushering in

best practices and restructuring business models, the retail industry in India is expected to adjust

to the changing market conditions and ensure new opportunities for growth.

Filling the Gap in the retail market

Indians are becoming more and more aware of brands, and demand high quality

products at reasonable prices. India is said to be the youngest country in the world,and there is a new interest in fashion, which has led to a spike in the ready to wear

market andbrands. The A.T KEARNEYs report states:

Private labels are also becoming more popular. Along with the international brands,

private labels are a way to fill the value gap between the national brands and customers

demands for a wide spectrum of quality, price, shapes and sizes. (AT KEARNEY,

The 2005 Global Retail Development Index: Destination India)

Arvind Singhal suggests that there is a gap in the market for young- focused

relatively low cost retail brands such as Zara and H&M (Singhal, A. 2004). This gap

is apparent due to the international fashion luxury brands that have been expanding

into India over the past few years as compared to the high street brands. With brands

like Louis Vuitton, Hugo Boss, Chanel, Gucci, Bulgari, Prada and Armani, as well

40


41/75

as the Indian designerwear brands such as Ritu Kumar, Suneet Verma etc, and on the

opposite end there are the unorganised local stores, selling their products in small

family run retail outlets, hence leaving very few fashion brands operating in the middle

end of the market. There are not many options for young people who want fast

fashion at affordable prices. Drapers (2002) had assured that there is no big brand in

womens wear, which may be viewed as an opportunity by foreign retailers. In

absence of strong brands in the womens wear segment, for women who are looking

for stylized garments, be it casual orformal at affordable prices, the current scenario

unbalanced with either the price element or the style element being put to the sword

to integrate the other. Hence there is a need for brands for women, which can balance the

two aspects (mens and womens wear) as the need be. Mango, Morgan, Guess, Esprit and

Tommy Hilfiger are the first comers who have opened stores in India via franchises.

41


42/75

CHAPTER - IV

COMPANY PROFILE

Foodworld

Foodworld, previously known as Spencer's Daily, is a chain of supermarket stores. It was started

in May 1996 as a division of Spencer & Co, a part of the RPG Group. In August 1999 it became

42
http://en.wikipedia.org/wiki/RPG_Grouphttp://en.wikipedia.org/wiki/RPG_Group


43/75

a separate company. Currently it operates 73 stores in Bangalore, Hyderabad,

Coimbatore & Chennai.

Key People

Mr.Henry Neilson CEO

Mr.Venkatesh.P Chief Operation Officer

Mr.Ramakrishnan.N Chief Financial Office

Mr.VachaliHR Director

Mr.Venkata SubbaiahHead of Legal

Mr.Ajith Kumar Singh Senior IT Director

The FoodWorld brand currently operates in four store formats.

Foodworld Supermaket store

Foodworld Gourmet store

Foodworld Superstore

Foodworld Express store

Foodworld Supermaket store

FoodWorld Supermaket store is the Main format store with 3000-5000 sq ft size. It Operates as a

regularsupermarket.

Foodworld Gourmet store

Foodworld Gourmet store is a new concept store with 2,800 sq ft (260 m 2) size in Bangalore,

India. The Store caters to customers seeking a selection ofgourmet products. Available in-store

are produce and a selection of international food and beverage items sourced both from domestic

and international suppliers.

43
http://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Hyderabad,_Indiahttp://en.wikipedia.org/wiki/Coimbatorehttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Supermarkethttp://en.wikipedia.org/wiki/Gourmethttp://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Hyderabad,_Indiahttp://en.wikipedia.org/wiki/Coimbatorehttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Supermarkethttp://en.wikipedia.org/wiki/Gourmet


44/75

Foodworld Superstore

Foodworld Superstore is the company's Large store format. Spanning over 15,000 sq ft

(1,400 m2), currently only one store exists in the city of Hyderabad. Along with the extensive

grocery range and bakery products, the store also offers for sale common household goods andbaby products (including toys and clothes).

Foodworld Express store

Foodworld Express is a convenience store and mini-marts with 1000-1500 sq ft. It carries basic

Fresh range offers, wider ranges in drinks, snacks, bakery, confectionery and impulse products.

Locations and store numbers

The Company has a presence in the following cities.

City Supermarket/Express Gourmet Store Superstore Total

Bangalore 39 1 0 40

Hyderabad 20 0 1 21

Chennai 6 0 1 7

Coimbatore 5 0 0 5

Total 70 1 1 73

Reliance Fresh

44
http://en.wikipedia.org/wiki/Convenience_storehttp://en.wikipedia.org/w/index.php?title=Mini-marts&action=edit&redlink=1http://en.wikipedia.org/wiki/Convenience_storehttp://en.wikipedia.org/w/index.php?title=Mini-marts&action=edit&redlink=1http://en.wikipedia.org/wiki/Bangalorehttp://en.wikipedia.org/wiki/Hyderabad,_Indiahttp://en.wikipedia.org/wiki/Chennai,_Indiahttp://en.wikipedia.org/wiki/Coimbatore,_India


45/75

Reliance Fresh is the convenience store format which forms part of the retail business of

Reliance Industries ofIndia which is headed by Mukesh Ambani. Reliance plans to invest in

excess of Rs 25000 crores in the next 4 years in their retail division. The company already has in

excess of 560 reliance fresh outlets across the country. These stores sell fresh fruits and

vegetables, staples, groceries, fresh juice, bars and dairy products.

A typical Reliance Fresh store is approximately 3000-4000 square feet and caters to a catchment

area of 23 km

Key people

Mukesh D. Ambani - Chairman & Managing Director

Nikhil R. Meswani - Executive Director

Hital R. Meswani - Executive Director

H.S.Kohli - Executive Director

Ramniklal H. Ambani

Mansingh L. Bhakta

Yogendra P. Trivedi

Dr. D. V. Kapur

M. P. Modi

S. Venkitaramanan

Prof. Ashok Misra

Prof. Dipak C Jain

Dr. Raghunath Anant Mashelkar

Growth of Reliance Fresh

45
http://en.wikipedia.org/wiki/Reliance_Industrieshttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Reliance_Industrieshttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Crore


46/75

The first ever a Reliance Fresh store was established in Hyderabad, wherein the company,

mainly focused on the fresh produced vegetables and fruits at comparatively low price alongwith an introduction of farm to fork theory.

This was the idea, which was anticipated by the company was to take the supply direct from the

farmers and then sell straightaway to the consumers removing the middle-men off the beatentrack. Reliance introduced several formats in the marketplace to cater to needs of commonpeople, which includes Reliance Fresh, Reliance Super, Reliance Footprint, Reliance Timeout,

Reliance Jewels, Reliance wellness, Reliance Mart and Reliance Digital, to name a few.

In addition to this, the Reliance Retail also entered into a treaty with Apple, which is a leading

Information Technology company, to set up a series of Apple Specialty Outlets branded asIStore, with its first ever store in Bangalore.

With an idea to produce inclusive prosperity and growth for farmers, consumers, small

shopkeepers and vendor partners, Reliance Retail was set up in order to lead the foray ofReliance Group into an organized retail.

46


47/75

CHAPTER - V

DATA ANALYSIS AND INTERPRETATION

TABLE 5.147


48/75

Gender Wise

Response No. of Respondents % of Respondents

Male

Female

120

80

60%

40%

Total 200 100%

Source : Questionnaire

The table 4.1 reveals the gender analysis of buying behavior. It is evident from the table that

60% of the sample constitute male and 40% of the sample are female. By and large males visit

the shopping malls more frequently than the females. The same is shown in the graph below.

Gender

Male, 120,

60%

Female, 80,

40%

Fig.5.1

TABLE 5.2

Age Wise48


49/75


18-25 Years

26-35 Years

36-45 Years

>=46 Years

33

49

88

30

17%

25%

43%

15%

Total 200 100%


The sample size of 200 was well distributed in terms of age. 18-25 years respondents were 33 in

number which amounts to 17%. 26-35 years respondents were 49 in numbers which amounts to

25%. 36-45 years respondents were 88 in numbers which amounts to 43% and >46 years

respondents were 30 in number which amounts to 30% of the overall respondents. The same is

shown in the graph.

Age

33, 17%

49, 25%

88, 43%

30, 15%

AGE 18 25 Yrs AGE 26 35 Yrs AGE 36 45 Yrs AGE > = 46

Fig.5.2

TABLE 5.3

Qualification Wise

49


50/75


Under Graduate

Graduate

Post Graduate

21

95

84

11%

47%

42%

Total 200 100%


Among the 200 respondents 21 i.e. 11% were Undergraduate, 95 i.e. 47% were Graduate and 84

i.e. 42% Post Graduate. The same is depicted in the graph below.

Qualification

Graduate, 95,

47%

Post graduate,

84, 42%

Undergraduate

21, 11%

QUALIFICATION Undergraduate QUALIFICATION Graduate

QUALIFICATION Post graduate

Fig.5.3

TABLE 5.4

Income Wise


50


51/75

Rs.30,000

32

68

63

37

16%

33%

32%

19%

Total 200 100%


Among the 200 respondents 32 i.e. 16% respondents monthly income was

30,000. It is evident from the above data that a sizeable 65% of the respondents have monthly

income between Rs.10,001 and Rs.30,000. The same is represented the graph below.

Income

32, 16%

68, 33%63, 32%

37, 19%INCOME Rs.30,000

Fig.5.4

TABLE 5.5

Marital Status Wise


Single 30 15%

51


52/75

Married

Divorced

Widowed

154

4

12

77%

2%

6%

Total 200 100%


Among the 200 respondents 30 i.e.15% were Single or Unmarried, 154 i.e. 77% were Married, 4

i.e. 2% were Divorced and 12 i.e. 6% widowed. An alarming 77% of the respondents are

married. The above data is shown in the graph below.

Marital status

30, 15%

154, 77%

4, 2%

12, 6%

Single Married

Divorced Widowed

Fig.5.5

TABLE 5.6

Children Wise


Nil 20 10%

52


53/75

1

2

3

>4

48

69

32

27

24%

36%

16%

14%

Total 200 100%


Among the 200 respondents 20 i.e.10% respondents had no children (here most of the

respondents were unmarried and few were married but had no children), 48 i.e. 24% respondents

were had one child, 69 i.e. 36% respondents had 2 children, 32 i.e. 16% respondents had 3

children and 27 i.e. 14% respondents had > 4 children.

No. of Children

20, 10%

48, 24%

69, 36%

32, 16%

27, 14%

Nil

1

2

3

>4

Fig.5.6

TABLE 5.7

Oc

chapter edited

Documents