1 INTRODUCTION

The retail industry is divided into organized and unorganized sectors. Organized retailing refers

to Trading activities undertaken by licensed retailers, who are registered for sales tax, income

tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the

privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the

traditional formats of Low-cost retailing, for example, the local Karana shops, owner manned

general stores, pan/beady Shops, convenience stores, hand cart and pavement vendors, etc.

Currently Organized sector Occupies a small percentage of the retail sector with 96% of the total

business being carried out by Traditional unorganized trade outlets. Retailing is a booming sector

of the Indian Economy primarily owing to the opening of FDI in retail sector and coming up of

hypermarkets and retail chains. Organized retailing is pitted to grow at a rate of 35% while the

unorganized retailing only at the rate of 6%. It is expected that organized retailing will have 10-

15% of the industry share by 2010. Thus faced by a stiff competition, the small traditional trade

outlets need to enhance competitiveness of the unorganized retail sector of India, so that they can

not only deal with the challenges faced by the coming up of multinationals and hypermarkets,

but also capitalize from this retail boom.

“Retail” originates from the French word retailer, which means to cut the piece off or to

Break bulk. Retailer is someone who cuts off or sheds a small piece from something. Retailing is

the set of activities that market the products or services to final consumer’s fro their personal or

household use. It does this by organizing their availability on a relatively large scale and

supplying them to customers on a relatively small scale. Retailer is a person Or Agent or Agency

or company or organization who is instrumental in reaching the goods or Services to the End

User or Merchandise or Services to the End User or Ultimate Consumer.

Retailing

Retailing is buying in large quantity from a whole seller or directly from a manufacturer and

selling the goods/services to consumer for personal consumption. Retailing is defined as a

conclusive set of activities or steps used to sell products or services to consumers.

1

Unorganized Stores- Kiranas(mom and pop shops) found in neighborhood markets.

Organized Stores- Small stores like Reliance Fresh and Subhiksha in large neighborhood

Markets and Hypermarkets like Big Bazaar in larger markets and shopping malls.

In occasional shopping only Apparels has been focused on in the paper as it is the most

significant

contributor to occasional shopping in retail and its stores comprise of the following types:

Unorganized stores- Variety Shops selling a wide range of apparels and shops

specializing in

Specific garments like Saris etc. Such shops are generally found in large markets, like

Sarojani

Nagar in New Delhi.

Organized stores- Large retail chains like Shoppers stop and Westside found generally in

Malls and markets like Connaught Place and small franchise outlets, for example Reebok

or Levis

Found in the same markets as well as markets like Sarojani or Lajpat Nagar in New

Delhi.

Taking inputs from the designed questionnaires and parameters in related papers like

Batt, 2008

(5) and, Mahua Dutta, 2008 (6) a pilot survey was conducted and the following eight

factors are

Identified that cover most of the Retail Purchase Factors (RPF) affecting the choice of

retail stores.

An analysis on each of these factors is given:

Proximity (The reach ability of the retail store)- In case of grocery it was observed that

importance of proximity was same across profiles while it is not an important factor in

case of

Apparel.

Product Assortment (The variety and quality of product) - Product Assortment is equally

Important for grocery and apparel. But product assortment elements differed for apparel

and

Grocery.

2

Infrastructure (The layout, amenities and appearance) - This factor was perceived

differently

By people shopping in different shopping formats.

Price (The prices and offers provided by retailer) - Price is equally important for both

grocery

and apparel however while price is the most important factor for grocery, it is not the

most

Important factor in case of apparel.

Communication (Marketing) - Difference in perception is observed across grocery and

Apparel.

Service (Response time, Home Delivery, Payment Options, Auxiliary Services etc) -

Similar

Difference in perception is observed across grocery and apparel.

Relationship (Customer loyalty, establishment etc) - Relationship is an important factor

for

purchase decisions in both grocery and apparel but not as important as product

assortment and

Price.

External Environment (Parking facilities, Location etc) - Factors like parking etc were

important in case of grocery stores while location and ambience was an important factor

for

Apparel shopping.

LITERATURE REVIEW

The retail industry in India has undergone a rapid growth in the organized sector since the Year

2000. The organized retail sales volume in 2004-2005 had just about 2% share of the total retail

sale. In present competitive scenario it’s very important to compete with the competitors and

sustain ahead, all companies are analyzing and doing research to know and understand the

consumer buying behavior for the same. The share of retail trade in the country’s gross domestic

product (GDP) was 22% in the year 2013.

3

Indian Retail Industry

The Indian retail market is the fifth largest retail destination globally. Modern retail is increasing

its share in the total retail market to 22% in 2010. India has one of the largest numbers of outlets

in the world. Of the 12 million retail outlets present in the country, nearly 5 million sell food and

related products. Though the market has been dominated by unorganized players, the entry of

domestic and international organized players is set to change the scenario. Around 7% of the

population in India is engaged in retailing. In India the retail sector is divided in two broad

sectors Unorganized Retailing and Organized Retailing.

Unorganized Retailing

Unorganized Retailing, refers to the traditional formats of low-cost retailing, for example the

Local kirana shops, owner manned general stores, pan/beedi shops, convenience stores. Indian

retail is dominated by a large number of small retailers consisting of the local kirana Shops,

owner-manned general stores, chemists, footwear shops, apparel shops, pan and beedi Shops and

hand-cart hawkers etc. which together make up the so called “unorganized retail” Or traditional

retail.

Organized Retailing

Unorganized Retailing refers to trading activities undertaken by licensed retailers, that is, those

who are registered for sales tax, income tax, etc. These include the corporate-backed

hypermarkets and retail chains, and also the privately owned large retail businesses.

Growth Drivers of the Retail Sector

The Indian retailing sector is at an inflexion point where the growth of organized retailing and

consumption by the Indian population is going to take a higher growth trajectory. The Indian

Population is observing a noteworthy demographics change. An increasing young working

Population under age of 24 years, sharp rise in the per capita income, an increase of dual income

Nuclear families in the urban areas, along with increasing working women population, internet

Revolution and emerging opportunities in the services sector are going to be the key growth

drivers of the organized retail sector in India. The whole model of shopping has altered In terms

4

of format and consumer shopping behavior pattern, which ultimately could lead to a Shopping

revolution in India.

Organized VS Unorganized Retailing

Criteria Organized Retailing Unorganized Retailing

Ownership Corporate business house Household business

Size of operation Comparatively large Small store

Selling price Less than MRP MRP

Nature of employment Hared members Generally family members

Store ambience Excellent Poor

Location Distantly located Located round the corner

Product availability Wide range of branded and non

branded products

Selective range of brandedand non branded products

Promotions Joint promotions Company Promotions only

Tax payments Greater enforcement of taxation

mechanism

Evasions of taxes

Market experience Short term Long term

Supply Chain Efficient Inefficient

Range Wide range of products Limited products

5

Impact of Organized Retailing on Unorganized sector

According to the Indian Council for Research in International Economic Relations (ICRIER),

there would be no long term impact due to the entry of organized retail chains on the

neighborhood kirana shops in the country. In clear terms the impact of organized retailing on

unorganized sector are as follows:

The adverse impact on sales and profit weakens overtime. There is some decline in employment

which however also weakens over time. The rate of closure of unorganized retail shops in gross

terms is found to be 4.2% per Annum which is much lower than the international rate of closure

of small businesses. The rate of closure on account of competition from organized retail is lower

still at 1.7% per annum. The kirana stores and pan shops are seen part of community life and

hence unorganized retail will stay but ICRIER observes that if organized retail does not grow,

the unorganized sector will not able to handle the surging demand. Being unorganized retailing is

a serious step; there are still challenges for organized retailing in India. Traditional retailing has

been established in India for some centuries. It has a low cost structure, mostly owner operated,

has negligible real estate and labour costs and little or no taxes to pay. Consumer’s familiarity

that runs from generation to generation is one big advantage for the traditional retailing sector. In

contrast, players in the organized sector have big expenses to meet, and yet have to keep prices

low enough to be able to compete with the traditional sector. Moreover, organized retailing also

has to cope with the middle class psychology that the bigger and brighter sales outlets are, the

more expensive it will be.

6

Available Literature

The literature review of the related papers provided with the existing models in the area.

Linda Silva teal provided an insight of optimizing shelf space specifically for small retail stores.

This paper building on the works of other authors who have worked on supermarkets develops a

model for small retail shops. Though a rigorous mathematical solution to the problem cannot be

given as the application of such a solution will not be viable in a small retail store owing to its

complexity, thus a heuristic model based on the existing models is developed by the authors for

selecting products and allocating them shelf space. Several alternate methods have been provided

to allocate and arrange products. Corstjens & Doyle, 1981 (9) introduced the idea of cross

elasticity that measures the effect of demand of one product over others, for example, the effect

of demand of soaps over face wash or effect of demand of t-shirt over shirts. Though this factor

did help in optimizing the profit further but on the level of a small store the increment in overall

profit (that is the objective statement in all optimizing models) is not significant when compared

to the amount of complexity involved. Moreover the study also suggested that the factor used for

sorting products (profitability, demand, size etc) were not as important as compared to a sorted

arrangement itself as these different factors optimized the profit almost to the same value over

the existing values. 5.2 Proposed model for Unorganized Retail Formats Problem Statement- A

small Kirana shop wants to optimally select the quantity of each product in its catalogue over its

already existing average forecasted demands for each product. The retailer expects that by

effectively placing products that have a potential for greater demand owing to their greater cross

elasticity, it can earn more profit. The mathematical model captures the retailer’s problem and

tries to find an optimum mathematical solution, followed by a more generalized methodology

(thumb rule) for selecting and placing products in a retail store.

7

2 GLOBAL SCENARIO

China - The total sales from retail market in China reached US$755 billion in 2005. However

organized retailing in China accounts for only 20% of it. Also the fragmentation of China's retail

market is so high that top 100 retailers make up for only 10.5% of the total market. The

registered sales of department stores grew by 25.7% and that of convenience stores grew by

36.5% in 2005. The Chinese retail market is expected to reach new highs as the population of

strong middle class is expected to double by 2020 and mergers and acquisitions among retailers

are3 going in great guns. The WTO restrictions are also expected to have a favorable impact on

its retail sector. Key Players Analyzed This section covers the key facts about players currently

operating in the China retail industry including Shanghai Bailian Group, Beijing Gome Electric,

Carrefour, Wal-Mart Stores, Wuhan Zhongbai Group, and China Paradise Electronics Retail.

Japan - Total annual sales for the Japanese retail industry for 2003 amounted to JPY 133,273

billion. Japan had 1.2 million retail establishments in June 2004 and there were 42,738 specialty

superstores. The year 2002 to 2004 the annual sales per store increased by 3.8%. The growth was

mainly driven by the grocery superstores but the number of superstores specializing in clothes

gradually came down. The organized retail sector in Japan couldn't perform at its full efficiency

because of collapse of the 'bubble economy' in the early 90s

Spain - Spain Energy Industry Spain energy consumption is estimated to have reached 165

Million Tons of Oil Equivalent in 2006. Fossil fuels are the major sources for energy in Spain

especially Oil (49.5%) & Natural Gas (19.9%). With the Spanish objective of energy security &

diversity, and clean energy sources, renewable sources are expected to grow at rapid pace. Key

Findings § Spain is a net energy importer, with imports accounting for 99% of its total annual oil

and natural gas consumption and 50% of its coal consumption key players in Spain energy such

as Gas Natural Group, CEPS Group, Repsol YPF, Endesa S.A. and Ga

8

World Trade Organization

United State - Retail is the second-largest industry in the U.S.by number of businesses and

number of employees. Retail sales in the U.S. (total retail sales include the categories of

gasoline, automobiles, and food service) were up about 3.8% in 2007, to $4.49 trillion (Plunkett

Research estimate).

9

US Retailing Format

The 2007 growth was driven partly by higher gasoline costs as well as by deep price discounting

during the Christmas season by mass merchandisers and year-long discounting by automobile

dealers.

Brazil - Emerging as one of the world's largest retail markets. The sales in the industry have

been growing strongly since 2003 and are expected to continue at this momentum only over the

next few years as constantly declining inflation rate allows for continued expansion of real

incomes (increasing demand for non durable consumer goods) and credit conditions ease

(sustaining demand for durable goods). A process of consolidation of the retail industry has been

underway but overall, the market remains relatively fragmented, indicating substantial scope for

the larger players to grow their market share in future. The top five supermarket chains account

for approximately 40% of total sales.. All the market values have been converted to US$ at May

2007 exchange rate where, 1 Brazil Real (BRL) = US$ 0.494 (Approx).

10

Penetration of Retail

11

OBJECTIVES & ROLE OF RETAIL INDUSTRY

Retail is clearly the sector that is poised to show the highest growth in the next five years. The

sector is set for a revolution, as both the present players and new entrants are gearing up to

explore the market. This sector contributes 10% of India's GDP and the current growth rate is

8.5%. The present size of the organized retailing sector is approximately 3% and is expected to

grow to 25-30% by the year 2010. There are about 300 new malls, 1500 supermarkets and 325

departmental stores currently under construction. Many players are coming up with huge

investments, due to which the present 12 million mom-and-pop shops and Kiranas stores fear

losing their business. Most predictions say that the sector might reach to US$ 400-600 billion by

the year 2010 The retail sector has played a phenomenal role throughout the world in increasing

productivity of consumer goods and services. It is the second largest industry in the United States

of America in terms of numbers of employees and establishments. Wal-Mart, the largest retailer

in the United States is also the largest employer in the United States with annual sales over $ 284

Billion.There is no denying the fact that most of the developed economies are very much relying

on their retail sector as a locomotive of growth. Analysts, CEOs, and others are using consumer

spending and consumer confidence data originating from the retail sector as an indicator to gauge

the status of the economy.

Outline:

The study will first trace the existing literature in the store choice, and then trace the research

that has been done in the Family decision-making. It will then try to connect how the different

factors internal to the family (as size, composition etc.) and those external (as situational factors)

affect the store choice.

12

Literature survey

Store choice:

The study of consumer store-choice or patronage behavior has been an important area of research

in retailing for many decades. The decision on the choice of store has been modeled in different

ways in the literature. Some of the studies have taken the household as a rational decision

making unit, (Becker, 1965; Goldman and Johansson, 1978; Bawa and Ghosh, 1999). Similarly,

Bell, Ho and Tang, (1998) in their work on store choice found evidence that each shopper is

more likely to visit the store with the lowest total shopping cost.

However, the research has also revealed that customers also care also about other store attributes

in making their patronization decision. Some of the researchers (Bell, Ho and Tang, 2001) have

worked on the shoppers perceived utility and the store image in making the store choice.

Research also exists on how store environment cues influence consumers' store choice decision

criteria, such as perceived merchandise value and shopping experience (Baker, Parasuraman,

Grewal, and Voss, 2002). Store choice has also been seen in the context of the risk reduction

strategies of the shoppers (Mitchel and McGoldrick, 1996; Mitchell and Harris, 2005). In

addition work on store choice has also been done on the role of situational factors (Wu,

Petroshius, and Newell, 2004) and the task-store attribute relationship (Kenhove, Wule, and

Waterschoot, 1999). It has also been found to be dependent on the timing of shopping trips, with

consumers visiting smaller local store for short "fill-in' trips and larger store for regular shopping

trips (Kahn and Schmittlein, 1989).

Most of the studies in store choice have however pointed out the primacy of store location

(Arnold, Oum and Tigert, 1983; Freymann, 2002) and price (Bell, Ho and Tang, 2001;

Freymann, 2002; Arnold, Oum and Tigert, 1983) as the key drivers of store choice. Lastly Bell

and Lattin (1998) found a systematic relationship between a household's shopping behavior and

store preference, especially in the context of choice of a format (EDLP/Hilo).

13

Family Decision Making:

The research in Family decision-making is drawn from various areas such as economics (Becker,

1976), social conflict (Spray, 1979) and family sex roles (Canzone, 1977). The research in this

field basically deals with the interaction and the role of the couple (parents) and the children. The

importance of husband-wife decision-making has been well recognized (Davis and Rigaux,

1974; Coffman, 1991). The research by Davis and Rigout (1974) one of the earliest, has

classified family purchases into four decision influence categories: husband dominant; wife

dominant; autonomic (separate) and syncretism (joint). Mainly, three major theoretical beliefs

resource theory, Sex Role Orientation (SRO) theory, and involvement have been developed to

explain relative influence in decision-making (Webster, 1995). The resource theory professes

that the influence of the partner depends on the resource that he/she contributes (Blood and

Wolfe, 1960). Researchers have studied the same across different resource contributing contexts

such as education (Rosen and François, 1983), job status (Rosen and François, 1983; Wollaston,

1958), social class (Rigaux-Briemont 1978), and income (Davis, 1976; Green and Cunningham,

1975; Wollaston, 1958).

The second belief, SRO, says that sex role preferences are indicative of culturally determined

attitudes (traditionalism/modernity) toward the role of wife/husband in the household (Qualls,

1987). Various household decision practices have been shown to be affected by sex roles such as

the buying process (Cunningham and Green 1975, Qualls 1981), household task allocation

(Eriksen, Yancy, and Eriksen, 1979), and marital behavior (Scanzoni, 1975). The studies have

also found a significant relationship between SRO and relative influence in decision-making

(Green and Cunningham, 1975; Rosen and Granbois, 1983; Qualls, 1987).

The third concept, the concept of involvement suggests that the relative influence in a purchase

decision is higher for the spouse who is more involved in the purchase and desires than the

partner (Corfman and Lehmann 1987; Qualls 1987). This concept explains the relative influence

across product classes and explains the husband’s domination for such product categories as

homes or housing (Cunningham and Green, 1974; Davis and Rigaux, 1974) insurance (Davis and

Rigaux, 1974; Green et al., 1983), and automobiles (Burns and Granbois, 1977; Green et al.,

1983; Wolgast, 1958). At the same time the wives have a dominant position in the purchase

14

decisions for products associated with their homemaker role, such as appliances (Green et al.,

1983; Wolgast, 1958), groceries (Davis and Rigaux 1974; Green et al., 1983) clothing, children’s

toys and cosmetics (Ganes, 1997).

Researchers (Davis and Rigaux, 1974) have found evidence for relative influence at various

stages in the purchase decision process. They found that wives were more dominant during the

problem recognition and information search stages for household furnishings while husbands

were more dominant at the information search stage for autos and to a lesser degree, at the

problem recognition and final decision stages. Other studies (Belch, Belch and Ceresino, 1985;

Belch and Willis, 2002), also found different relative influences across different stages.

Considerable research has also been carried out on young children’s influence (Berey and Pollay,

1968; Szybillo and Sosanie, 1977; Atkin, 1978; Swinyard and Sim 1987;). Theories like social

power (Flurry and Burns, 2005) have been used to explain the roles and the influence of the

children in the decision-making. It has been found (Palan and Wilkes, 1997) that the children and

adolescents use various strategies like bargaining, persuasion or emotional strategies to get their

wishes entertained. More recently studies have investigated and reflected changes in the

decision-making process, suggesting a movement toward more joint decision-making. There is

evidence of significant changes occurring in the influence of members in the household.

Family and the Store Choice:

As discussed above, it can be seen that, the areas of store choice and family decision making

have been studied quite extensively. However, as discussed earlier, little literature is there on

how families/households choose the stores. We now develop a framework for exploring the

relationship between the various internal and external factors involved in purchase for the family

and the store choice. The literature survey, gives a basic idea on some of the variables affecting

store choice by the families. We will discuss them one by one to establish the relationship with

the store choice. As a first step we will first establish the relationship between the shopping

basket, the choice of retail format and the choice of retail store.

15

Relationship between shopping basket, choice of retail format and retail store:

Consumers typically shop for multiple items on a given trip rather than a single item; and these

items from the shopping basket for the shopper. Shopping basket has been defined as

‘comprising the collection of categories that consumers purchase on a specific shopping trip’

(Manchanda, Ansari and Gupta, 1999). Shopping basket will affect the store choice in various

ways such as

The size itself will affect the store choice, as shoppers are prepared to go farther to shop

for a larger basket than a smaller basket (Bawa and Ghosh, 1999).

The contents of the shopping basket will restrict the choice across formats and stores

(Leszczyc and Timmermans, 1997).

The contents of the basket will affect the shopper’s perspective of the store and affect the

ongoing store choice (Desai and Talukdar, 2003).

Overall preference for the store might shift as a function of the composition of the

shopping basket (Leszczyc and Timmermans, 1997).

In the literature pertaining to store choice the consumers evaluate a group of stores on a set of

attributes and then, depending upon their individual preferences, patronize the best store. It has

generally been seen that all the stores in the choice set are in the same formats (Bhatnagara and

Ratchford, 2004). This indicates that the first choice for the shopper is that of the format. Since

not all the products/services are available in all retail formats, this means that the shopping

basket will narrow the scope of the store choice to particular formats. However, since some

formats offer overlapping products or services, the choice is also between various formats. Bell

and Lattin, (1998), demonstrated how the size of the basket determines the choice of store

between EDLP/Hilo formats. These indicate that the first choice for the shopper is that of the

format, which depends to a large extent on the shopping basket, but will also depend, on the

other format attributes that the shopper would derive from the format.

It is then proposed that family attributes, as family composition, occupation status etc. will

decide the shopping basket. The choice of the shopping basket will, then play a major role in

deciding first the format and then the store. The final store will be chosen keeping in mind the

store attributes such as location, store image, price image, ambience etc. In certain exceptional

16

circumstances, such as strong loyalty to a store, a particular type of ambience or location,

considering the composition of the basket and the availability in the store of the merchandise, the

choice might be made directly for the store instead of going through the process of basket-

format-store.

Family size and composition:

Family size and composition implies the total number of members in a family and the

distribution between adults and children. Larger families will have higher levels of consumption

and will buy larger quantities of products/services to satisfy the consumption. They will also

require a wider variety of products, and therefore are likely to get stocked out more frequently

than smaller families (Bawa and Ghosh, 1999). It is thus likely that larger families will have

larger basket sizes and larger number of shopping trips. The existing research supports that

household size has a positive effect on the likelihood of a shopping trip (Leszczyc, Sinha, and

Timmermans, 2000). Similarly Bawa and Ghosh, (1999), found that the size of the family was

positively associated with the frequency of shopping trips and the basket size.

The household composition, will also affect the shopping basket, it has been suggested that for a

given household size, the presence of children in the household is likely to lower expenditures

relative to an all-adult household due to differences in consumption rates for children and adults

(Prais and Houthakker, 1971; Benus, Kmenta and Shapiro, 1976; McClements, 1977; Muelbauer,

1980). In addition, the presence of children is likely to result in a more diverse basket size, with

higher chances of stock outs and greater impulse purchases. Thus the presence of children will

induce baskets, with larger baskets in terms of categories, but smaller baskets in terms of

size.The composition (presence of children) will also spark of the need for particular (high

service) formats and for stores with a particular ambience.

Employment Status of the family members :

The number of working members in the family is expected to be related to the income of the

family, the consumption levels and thus the size of the basket. The increase in the number of

working adults will increase consumption in two ways. Firstly it will have a positive effect on

the income and the consumption; secondly it might result in higher demand for services and

products as a result of the time constraint of the adults and the opportunity cost of For the

families with higher number of adult members working, the opportunity cost of time is high, and

17

tends to reduce the frequency of shopping trips and at the same time increase the basket size.

Bawa and Ghosh, (1999) and Leszczyc and Timmermans (1997) support that households having

working adults have a lower frequency of shopping trips as compared to households in which

adults are not working. It also found that households with two working adults shopped less than

households with one working adult.

The number of working adults affects the time constraints and has effect on store choice in terms

of greater salience of location and familiarity of the store. It has also been found that store

loyalty is cultivated when the female and the male are working (Leszczyc and Timmermans,

1997). A high opportunity cost for time will force the shoppers to economize on their search

costs and breed store loyalty. Also because of time constraints, households may combine their

shopping trip with a work or an entertainment trip and engage in a multi-stop, multipurpose trip

behavior (Leszczyc and Timmermans, 1997).

Income Level of the family:High family income levels, may lead to higher consumption levels, which would imply larger

aggregate shopping. Previous research (Prais and Houthakker 1971; Houthakker and Taylor

1970) supports the view that a household’s income has a major effect on its consumption. In

addition the higher income will result in a shopping basket comprising of goods of better quality

(Bawa and Ghosh, 1999) and is also expected to have a wider variety of assortment in the

consumption. Thus the aggregate shopping is expected to grow with the income levels and also

diversify in terms of the objects of consumption. With a higher income level, the impulse

shopping will be less drain on the resources and is also expected to increase.

In addition high-income households will have a higher opportunity cost for time and should be

less willing to spend time on shopping trips for utilitarian consumption. Thus the frequency of

shopping trips is expected to be negatively related to household income (Bawa and Ghosh,

1999). This would however, be moderated by increase in consumption and inducing need for

hedonic shopping (in addition to utilitarian) and impulse purchases on non-shopping trips. Bawa

and Ghosh, (1999) found that higher income households tend to shop more frequently, similar

result was also found by Leszczyc and Timmermans (1997).

18

An increase in the income will increase the need for experiential shopping thus affecting the

format choice. The store choice will also get affected by moderating the affect of location, as

higher income might reduce the cost and increase the ease of transportation. It has also been

observed that high-income households are more likely to display a store switching behaviour

(Leszczyc and Timmermans, 1997).

Stage in life-cycle:

The stage in the life cycle of the family will also affect the shopping behaviour in a number of

ways. Primarily it will have an effect on the size and the composition of the basket by affecting

the consumption of the family members. A young family, with small or no children and a mature

family with grown up children will have different needs to save, needs to spend and different

consumption patterns. The life stage of the family will also affect the size and the consumption

of the family thus affecting the consumption pattern and the shopping basket.

The stage of the family life cycle is also reflected in the age of the head of the household and

may affect the household’s consumption and shopping pattern. Fareed and Riggs, (1982)

proposed that older consumers might have lesser number of shopping trips since the family size

is small, and also the income is lower. On the other side, Bawa and Ghosh, (1999) argued that for

older people, the opportunity cost of time is low and hence might induce larger number of visits

and also found empirical support for the same. The frequency of shopping trips inversely affects

the basket size and furthers the choice of store format and the retail store.

In addition, the age factor also has important repercussions in terms of how far the shopper

would visit for the shopping, and liking for a particular store format and a particular store. It has

been shown that (Lumpkin, Greenberg, and Goldstucker, 1985) that, shoppers of different age

groups have different sensitivities to fixed and variable utility. Similarly tendency for multi-store

shopping has also been found to be strongly dependent on the life cycle stage of families (Prasad,

1972).

19

Task:

Every shopping occasion will have tasks associated with it. For a family the situation becomes

much more complex as they might approach the same store with a variety of tasks, while the

shopping might be a chore for the mother it might be a means of enjoyment for the child. The

task definition comprises the set of goals a consumer forms to resolve needs deriving from a

specific situation (Marshall, 1993). It has also been defined as ‘the reasons that occasion the need

for consumers to buy or consume a product or service’ (Belk, 1975). Task definitions is

applicable to both purchase as well as usage situations, while the purchase situation refers to the

circumstances of the purchase a usage situation refers to the circumstances of the usage of the

product or service (Kenhove, Wule, and Waterschoot, 1999).

It has been found (Mattson, 1982) that store-attribute saliencies differ, depending upon whether

the shopper was looking for a gift for another person or for personal needs. Research also

suggests that at the time of shopping the retrieval of different store attributes will depend upon

the task in hand (Simonson and Tversky, 1992; Green and Krieger, 1995). Also Kenhove, Wule,

and Waterschoot, (1999) found evidence for the fact that Store choice is differentiated by task

definitions. Thus even for the same shopping basket, changing the task will result in change in

format or store choice. When the family approaches the shopping, it is highly likely that the

different members approach, shopping with different tasks, in such a situation the multiplicity of

the tasks of the individual members will result in a very complex choice decision for the store.

Influence of family members:

The literature review on the family decision-making indicates that, different members in the

family have different influences across the stage of decision-making, the product or service

being considered. The factors already discussed, also affect the influence of the different

family members, as when the wife is working, the balance of power shifts towards her (Rosen

and Granbois, 1983; Wolgast, 1958). Similarly in families where oth the parents are working

children will have a greater influence (Geuens et al., 2003). The involvement theory suggests

that the members who use a product or are more involved with it have more influence in the

purchase decision. Foxman and Tanshuaj (1988) found that children had more influence for

child products than for family products.

20

When it comes to store choice in the case of a goal oriented shopping, it is expected that the

influence and the conflicts should be less than that for a product choice, as the utilities might

be satisfied from the product itself. However, when the nature of the shopping is more

experiential the format choice and the store choice are expected to be more difficult. What

complicates the situation is that; individuals within a household may have different preferences

for particular stores (Leszczyc and Timmermans, 1997). Also as discussed in the previous

section different members might approach the same shopping situation with different tasks in

mind. One way in which the situation can be simplified is that, if the shopping basket is

dominated by a particular product class or task with which a particularly family member

identifies, that member will have the dominant influence in the store choice. However, the

family member actually going to do the purchasing on behalf of the family will have still

greater influence in the actual choice.

Conceptual model:

The diagram in figure 1 represents the conceptual model of the retail store choice by the family,

as developed above. This model presents the basic framework, and establishes the basic relations

between some common variables, which might affect the format and store choice for the family.

21

Conceptual model of Retail Store Choice by families

22

IMPACT OF RETAIL INDUSTRY IN GLOBAL WORLD

Organized retailing is spreading and making its presence felt in different parts of the Country.

The trend in grocery retailing however, has been slightly different with a Growth concentration

in the South. Though there was traditional family owned retail Chains in South India such as

Nilgiri’s as early as 1905, the retail revolution happened With the RPG group starting the Food

world chain of food retail outlets in South India With focus on Chennai, Hyderabad and

Bangalore markets, preliminarily. The Experiment has reaped rich dividends and the group is

now foraying into other Territories as well as. Owing to the success of Food world model of

RPG group, several new models such as Trinethra, Subhiksha, Margin Free and others have

made their foray into this sector albeit at regional levels. Today the food retail sector in India is

about Rupees Ten Lakh Crores (USD 200 billions) of which the organized food retail segment is

about 1 per cent and increasing at a pace of over 20% year to year.

To be successful in food retailing in India essentially means to draw away shoppers from, the

roadside hawkers and Kiranas stores to supermarkets. This transition can be achieved to some

extent through pricing, so the success of a food retailer depends on how best he understands and

squeezes his supply chain. The other major factor is that of Convenience shopping which the

supermarket has the edge over the traditionalKiranas Stores. On an average a supermarket stocks

up to 5000 SKU’s against few hundreds stocked at an average Kiranas stores. Though with

excellent potential, India poses a complex situation for a retailer, as this is a Country where each

State is a mini-Country by itself. The demography’s of a region Vary quite distinctly from

others. In order to appeal to all classes of the society, retail Stores would have to identify with

different lifestyles. Hence we may find more of Regional players and it would take enormously

long time before nation wide successful Retail chains emerge. This is the main reason as to why

the successful retail chains in the Countries today operate at regional segments only and are not

aiming at nationwide Presence, at least for the time being. In the organized retail industry, the

gestation periods are long, institutional funding is Difficult, and there is none or little

Government support. But the belief among top Retailer chains in the country is that the industry

will see large investments coming once. The current ban on foreign direct investment is lifted.

But that could be two-three years Away. Food and grocery retailing is a tough business in India

with margins being very Low and consumers not dissatisfied with existing shops where they buy.

23

For example, the next-door grocery shopkeeper is smart and delivers good customer service,

though not value.

As of now, while Chennai has about five organized food and grocery retail chains, other big

cities such as Delhi, Bangalore, and Mumbai average only two-three such chains. Almost all

food retail players have been region specific as far as geographical presence is concerned in the

country. To illustrate with examples, the RPG Group's Food World, Nilgiri’s, Margin Free,

Giant, Varkey's and Subhiksha, all of which are more or less spread in the Southernregion; Sabka

Bazaar has a presence only in and around Delhi; names such as Haiko and Radhakrishna Food-

land are Mumbai-centric; while Adani is Ahmedabad-centric. Industry topography in India is

such that spreading presence across cities is a tough call. As pointed out by many experts,

organized food and grocery retailing chains going national requires significant investments.

Retailing within this sector is not just about the front-end, but involves complex supply chain and

logistics issues as well.

The trend and mindset of the present retailer chains in India can be best understood by studying

Food-World as an example, which came in first in the food and grocery retailing sector. The

chain has no plans to venture beyond the Southern region just yet. Current plans are to focus on

the Southern markets and achieve saturation. The intention is that by 2005, they could look at the

other regions. Subhiksha, a Chennai based discount chain, too wants to be the principal store of

purchase for at least 40 per cent of all consumers living within 500-750 meters of the store, that

is, within walking distance. This makes the point very clear that the strategy among most

existing retail chains of various formats is to completely saturate the markets where they are

already established players and then move on to virtually untouched areas where the challenge of

sourcing resources and extending their supply chain model to best suit the size and expanse of

the market would be a challenging task.

Meanwhile, the RPG group plans to take its new formats such as Giant Hypermarkets national

over the next three years. Grocery is a large component of this format, but not the only one. To

elaborate on the hurdles of going pan- Indian, fundamentally, the way a basic grocery retailing

model works is that the high set-up costs in terms of setting up buying/ distribution infrastructure

is gradually amortized over a larger number of stores. The back-end costs without distribution

24

centre costs, or what in retail jargon is called retail administration costs, should stabilize at

around 2.5 per cent to 3 per cent of sales.

25

Major Player

Amazon

For leaving its competitors in the dust If Amazon was only pushing free two-day deliveries

with its Prime membership—which grew by millions in 2013—it’d still have a leg up on the

retail industry. But of course, it couldn’t stop there: Its grocery-delivery service, AmazonFresh, a

Trojan Horse for hooking customers on same-day delivery habits, expanded to Los Angeles and

San Francisco, while its partnership with the U.S. Postal Service brought—gasp!—orders to your

doorstep on Sundays. Sizable profits for Amazon might be as far away as its promise of 30-

minute drone delivery, but one thing is certain: Its competitors have miles to go if they hope to

catch up.

J.Crew

For meticulously cultivating its brand to become the world’s iconic American clothier

J.Crew’s quintessentially American aesthetic—which flawlessly melds runway-worthy design

with middle-class value—went east last year, with the company opening its first stores outside

the United States. Its overseas march began with a 17,000-sqaure-foot location on historic

Regent Street in London, and the outfitter reportedly has its eyes set on Hong Kong, Japan, and

Australia. The global expansion comes on the heels of a 10% revenue increase in 2013, which

many would credit to the revered partnership of CEO Mickey Drexler and Jenna Lyons,

president and creative director.

Walmart

For deploying smart mobile solutions to aid its customers. According to Walmart, its app-

wielding customers make twice the shopping trips per month and spend 40% more than non-app

users. That’s a clear sign that the retail giant’s efforts to use mobile to improve its business in the

digital age is working. Just a couple of innovations from its WalmartLabs include the ability to

guide customers (via GPS) directly to products in its cavernous stores, and even let them skip the

checkout line and scan and pay for items with their smartphones. Its stores aren’t Amazon-proof

yet, but they’re getting there.

26

EBay

For expanding its business model to become retailers’ best friend. In keeping pace with the

revved-up world of e-commerce, eBay’s ambitious hyperlocal push has allowed it (and its retail

partners) to remain plausible shopping options for consumers spoiled on convenience. Its one-

hour delivery program, eBay Now, expanded to metropolises like New York, Chicago, and

Dallas, while the company looked abroad (and even to the cosmos) for growth. It recently

teamed with U.K.-based store Argos to let users pick up online purchases in stores, and last

summer it announced PayPal Galactic, its plan to allow people to buy things from space.

Burberry

For upholding its legacy of impeccable design while catering to the digital millennial While

the style of Burberry’s classic trench won’t change, the people wearing it have—and the London

fashion house has dedicated itself to changing with them. Its retail stores put the brand’s tech-

friendliness on display with mirrors that interact with products via RFID chips. And when

Burberry wanted to shoot a runway show with a set of not-yet-released iPhone 5s, Apple—at the

time, Burberry CEO Angela Ahrendts’s soon-to-be employer—readily handed them over.

Besides bridging the gap between classic fashion and innovative retail, Burberry has also found

new life in Asia, as revenue soared 14% in the region (thanks, in part, to a newly constructed

outpost in China).

Zady

For selling radical transparency as the new black. Soraya Darabi and Maxine Bédat scour

trade shows to populate Zady, which tells shoppers where in the world their clothes are made,

along with background information on who makes them. The company, launched in August

2013, highlights and sells items from smaller brands, such as fine leather goods from Detroit-

based Karmo Studio, to larger ones, such as New York–based clothier Steven Alan. Each item

featured on Zady is ethically sourced and manufactured, and almost all of the respective

companies call the United States home.

27

Farfetch

For creating a one-stop shop for browsing high-end boutiques around the globe Far fetch’s

site is almost like a retail portal to the rest of the world: Customers can shop the streets of Milan

or New York, all from the comfort of their own home. The London-based site, which offers

products from more than 300 boutiques in 24 countries, nabbed a $20 million boost in funding

last year—led by fashion-bible publisher Condé Nast—to further expand its reach in 2014.

Macy's

For mainstreaming the notion of everywhere retail In what it preached as "omnichannel"

retail, Macy’s spent the better part of 2013 completely transforming its supply chain—making an

impressive 500 stores perform double duty as fulfillment centers—to ensure customers could

order and receive products from any store location, in any variety, and, when possible, on the

same day. At last count, 10% of online sales are fulfilled from Macy’s stores

28

3 INDIAN SCENARIO

Retailing in India

A textile retail store in India A fish retail store in West Bengal, India

A fish retail store in West Bengal, India

A food staple retail shop in Pushkar, India

29

INDIAN SCENARIO OF RETAIL INDUSTRY

The present value of the Indian retail market is estimated by the India Retail Report to be around

Rs. 12, 00,000 core ($270 billion) and the annual growth rate is 5.7 percent. Retail market for

food and grocery with a worth of Rs. 7,43,900 crore is the largest of the different types of retail

industries present in India. Furthermore around 15 million retail outlets help India win the crown

of having the highest retail outlet density in the world. The contribution of retail sector to GDP

has been manifested below:

Country Retail Sector’s Share in GDP (in %)

India 10

USA 10

China 8

Brazil 6

Continuation to GDP

As can be clearly seen, retailing in India is superior to those of its contenders. Retail sector is a

sunrise industry in India and the prospect for growth is simply huge. There are many factors that

have stimulated the rise of the shopping centers and multiplex-malls in a jiffy. Some of them can

be listed as follows:

1. Rise in the purchasing power of Indians - the rise in the per capita income in the last few

years has been magnificent. This has led to the generation of insatiable wants of the upper and

middle class. The demand of new as well assecond hand durables has risen throughout the

country thus providing the incentive for taking up retailing.

30

2. Favorable to farmers -retailing has helped in removing the middlemen and has thus

enhanced the remuneration to farmers. This is a new revolution in the agricultural sector in India

and will go a long way in amending the condition of agriculture, a major concern among policy

makers.

3. Use of credit - a typical Indian is most conversant with using credit cards than carrying

money. This is led to shift of the consumer base towards supermarkets and make the payments in

the form of credit.

4. Comfortable Atmosphere - a visit to a retail store appears to be more soothing for the

generation-Y. People and kids prefer to shop in an air conditioned. The retail industry is the

second largest employer in India. It currently employs about 7 percent of the total labor force in

India. Finance Minister P. Chidambaram's recent statement “salaries ought not to be

legislated” is a welcome move as most of the organized retail is in private hands. Only 4.6% of

the total retail trade is into organized sector. It generates about Rs.55, 000 cores ($12.4 billion).

The major and minor players desperately need to work hard in this direction so that next time the

figures look more decent.

31

PRESENT INDIAN SCENARIO

Unorganized market: Rs. 583,000 cores

Organized market: Rs.5, 000 cores

5X growth in organized retailing between 2000-2005

Over 4,000 new modern Outlets in the last 3 years

Over 5,000,000 sq. ft. of mall space under development

the top 3 modern retailers control over 750,000 sq. ft. of retail space

Over 400,000 shoppers walk through their doors every week

47 global fortune companies & 25 of Asia's top 200 companies are retailers

Biggest player in India is Pantaloon Retail India Limited

Growth in organized retailing on par with expectations and rejections of the last 5 Years:

on course to touch Rs. 35,000 corers (US$ 7 Billion) or more by 2005-06

32

Total Retail Sales

Retailing in India

Retailing in India is one of the businesses of its economy and accounts for 14 to 15% of its GDP.

The Indian retail market is estimated to be 40 billion and one of the top five retail markets in the

world. India is one of the fastest growing retail markets in world. India’s retailing industry is

essentially owner manned small shops account for more than 90%. In 2014 larger format

convenience stores and supermarkets accounted for about 4% of industry and these were present

only in large urban centers.

2008 2010 20150

100200300400500600700

300

427

637

INDIAN RETAIL MARKET

US $ Billion

Indian Retail Market

The analysts foresee bright future of the retail sector. A huge number of shopping malls, nearly

100, have come up in the recent past, generating 20mn sq ft. retail space, extending more space

of about 12mn sq ft to it. Nearly 60malls are on the verge of completion and may be operational

by the end of current financial year. A forecasted number of nearly 200 malls, in a move to make

additional 50mn sq ft of retail space, will be completed within the next two-years. Indian retail

industry is expanding itself most aggressively, as a result a great demand for real estate is being

created. Indian retailers preferred means of expansion is to expand to other regions and to

33

increase the number of their outlets in a city. It is expected that by 2010, India may have 600

new shopping centers.

In the Indian retailing industry, food is the most dominating sector and is growing at a rate of 9%

annually. The branded food industry is trying to enter the India retail industry and convert Indian

consumers to branded food. Since at present 60% of the Indian grocery basket consists of non-

branded items.

The global retail giants like Wal-Mart, Gap, Tesco, Versace, KMart/ SEARS, Carrefour, ZARA,

FCUK, Fendi, NEXT, Mother Care, lKEA, Trussardi, DKNY and Debenhams have made plans

to march in the Indian market.

ESPRIT, GUESS, Chanel, Mango and many other global marked their presence in India by

implementing licensing and franchisee agreements. The global retailers on the line of control,

awaiting the green signal from Govt. to enter Indian retail market. However, the current scenario

has encouraged Indian players to speed up retail expansion and fresh retail ventures. Companies

like Shoppers Stop, Trent, Reliance, Lifestyle, Pantaloons Tanishq, Crossroads, Akbarallys' and

Tanishq already have planned to invest over Rs 5,000cr. Trent is on the edge to take both its

brands 'Star India Bazaar' and 'Westside' to new cities, meanwhile Shoppers' Stop has recently

geared up for expansion of present ones and to add 11 new stores including two hypermarkets.

Also, Pantaloon has planned to add eight 'Big Bazaar' malls within the next 6 to 8 months.

After partition, Reliance Industries Ltd (RIL) is substantially getting ready to enter in field of

retailing. RIL is poised to emerge as the single largest player in this sector. On the other hand,

Tosco’s, Wal-Marts or Safeway does ultimately enter in the country. So finally, Shoppers' Stops,

Westside, Pantaloons and West sides in coming years have will face stiff competition.

34

Modern retailing in India

Punjab Uttar Pradesh West Bengal

Telangana Karnataka Tamil Nadu

Madhya PradeshGujarat

Maharashtra

Delhi Kerala Haryana

Retailing in India is one of the pillars of its economy and accounts for 14 to 15 percent of its

GDP. The Indian retail market is estimated to be US$ 500 billion and one of the top five retail

markets in the world by economic value. India is one of the fastest growing retail markets in the

world, with 1.2 billion people.

35

As of 2013, India's retailing industry was essentially owner manned small shops. In 2010, larger

format convenience stores and supermarkets accounted for about 4 percent of the industry, and

these were present only in large urban centers. India's retail and logistics industry employs about

40 million Indians (3.3% of Indian population).

Until 2011, Indian central government denied foreign direct investment (FDI) in multi-brand

retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any

retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process.

In November 2011, India's central government announced retail reforms for both multi-brand

stores and single-brand stores. These market reforms paved the way for retail innovation and

competition with multi-brand retailers such as Walmart, Carrefour and Tesco, as well single

brand majors such as IKEA, Nike, and Apple. The announcement sparked intense activism, both

in opposition and in support of the reforms. In December 2011, under pressure from the

opposition, Indian government placed the retail reforms on hold till it reaches a consensus.

In January 2012, India approved reforms for single-brand stores welcoming anyone in the world

to innovate in Indian retail market with 100% ownership, but imposed the requirement that the

single brand retailer source 30 percent of its goods from India. Indian government continues the

hold on retail reforms for multi-brand stores.

In June 2012, IKEA announced it had applied for permission to invest $1.9 billion in India and

set up 25 retail stores.] An analyst from Fitch Group stated that the 30 percent requirement was

likely to significantly delay if not prevent most single brand majors from Europe, USA and Japan

from opening stores and creating associated jobs in India.

On 14 September 2012, the government of India announced the opening of FDI in multi-brand

retail, subject to approvals by individual states. This decision was welcomed by economists and

the markets, but caused protests and an upheaval in India's central government's political

coalition structure. On 20 September 2012, the Government of India formally notified the FDI

reforms for single and multi brand retail, thereby making it effective under Indian law.

36

On 7 December 2012, the Federal Government of India allowed 51% FDI in multi-brand retail in

India. The government managed to get the approval of multi-brand retail in the parliament

despite heavy uproar from the opposition. Some states will allow foreign supermarkets like

Walmart, Tesco and Carrefour to open while other states will not.

Major Players

Pantaloon Retail

The flagship company of Future Group, Pantaloons Retail operates over 16 million square 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, Sitar and

Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment (Bowling co.) The

turnover this year was 12500 cores. 

2. K Raheja Group

They forayed into retail with Shopper’s Stop, India’s 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, décor 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

37

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. Tata’s 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

One of the first entrants into organised 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 Spencer’s 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

38

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

Reliance Mart Hyper mart. The company further plans to launch its hyper mart in Delhi / NCR,

Hyderabad, Vijayawada, Pune and Ludhiana region. The turnover was 4500 core for this year.

8. AV Birla Group's

Brand portfolio includes brands such as Louis Philippe, Van Heusen, Allen Solly, Peter

England, Trouser town. Also, Madura garments are subsidiary of Aditya Birla Novo Ltd. The

recently acquired food and grocery chain of south, Trinity, 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 cores.

9. Metro

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.

10. Viveks Ltd

Vivek Limited is the largest consumer electronics and home appliances retail chain in India, with

44 stores in south, covering a retail space area of over 1, 75, 000 sq. ft and a turnover of over Rs.

400 crore. Its brand, Viveks, is now a household name. The company plans to set up 50 more

showrooms in South India.  

Growth

39

An organized retail store in Ahmedabad (ca. 2009)

Customers inside a retail store in Kolkata (ca. 2011)

Growth of emerging areas in retail sector

40

Apparel & Fashion 19.5%

Fashion & Lifestyle 25%

Food & Beverages 35%

Food & Beverages 15%

Types of Retail Outlet

By Products By Marketing Strategy

Food Products Departmental Stores

Hard Goods Discount Stores

Soft Goods Specialty Stores

- General Stores

- Convenience Store

- Hypermarket

- Supermarket

- Malls

The unorganized sector is growing about 10% per annum with sales rising from 309 billion in

2006-2007 to 496 billion in 2012-2014

Year Growth

2006-2012 309 Billion

2012-2014 496 Billion

Growth over 1997-2010

India in 1997 allowed foreign direct investment (FDI) in cash and carry wholesale. Then, it

required government approval. The approval requirement was relaxed, and automatic permission

was granted in 2006. Between 2000to2010 Indian retail attracted about $1.8 billion in foreign

direct investment, representing a very small 1.5% of total investment flow into India

Single brand retailing attracted 94 proposals between 2006 and 2010, of which 57 were approved

and implemented. For a country of 1.2 billion people, this is a very small number. Some claim

41

one of the primary restraints inhibiting better participation was that India required single brand

retailers to limit their ownership in Indian outlets to 51%. China in contrast allows 100%

ownership by foreign companies in both single brand and multi-brand retail presence.

Indian retail has experienced limited growth, and its spoilage of food harvest is amongst the

highest in the world, because of very limited integrated cold-chain and other infrastructure. India

has only 5386 stand-alone cold storages, having a total capacity of 23.6 million metric tons.

However, 80 percent of this storage is used only for potatoes. The remaining infrastructure

capacity is less than 1% of the annual farm output of India, and grossly inadequate during peak

harvest seasons. This leads to about 30% losses in certain perishable agricultural output in India,

on average, every year.

Indian laws already allow foreign direct investment in cold-chain infrastructure to the extent of

100 percent. There has been no interest in foreign direct investment in cold storage infrastructure

build out. Experts claim that cold storage infrastructure will become economically viable only

when there is strong and contractually binding demand from organized retail. The risk of cold

storing perishable food, without an assured way to move and sell it, puts the economic viability

of expensive cold storage in doubt. In the absence of organized retail competition and with a ban

on foreign direct investment in multi-brand retailers, foreign direct investments are unlikely to

begin in cold storage and farm logistics infrastructure.

Until 2010, intermediaries and middlemen in India have dominated the value chain. Due to a

number of intermediaries involved in the traditional Indian retail chain, norms are flouted and

pricing lacks transparency. Small Indian farmers realize only 1/3rd of the total price paid by the

final Indian consumer, as against 2/3rd by farmers in nations with a higher share of organized

retail.[20] The 60%+ margins for middlemen and traditional retail shops have limited growth and

prevented innovation in Indian retail industry.

India has had years of debate and discussions on the risks and prudence of allowing innovation

and competition within its retail industry. Numerous economists repeatedly recommended to the

Government of India that legal restrictions on organized retail must be removed, and the retail

42

industry in India must be opened to competition. For example, in an invited address to the Indian

parliament in December 2010, Jagdish Bhagwati, Professor of Economics and Law at the

Columbia University analysed the relationship between growth and poverty reduction, then

urged the Indian parliament to extend economic reforms by freeing up of the retail sector, further

liberalization of trade in all sectors, and introducing labor market reforms. Such reforms

Professor Bhagwati argued will accelerate economic growth and make a sustainable difference in

the life of India's poorest.

A 2007 report noted that an increasing number of people in India are turning to the services

sector for employment due to the relative low compensation offered by the traditional agriculture

and manufacturing sectors. The organized retail market is growing at 35 percent annually while

growth of unorganized retail sector is pegged at 6 percent.

The Retail Business in India is currently at the point of inflection. As of 2008, rapid change with

investments to the tune of US$25 billion was being planned by several Indian and multinational

companies in the next 5 years. It is a huge industry in terms of size and according to India Brand

Equity Foundation (IBEF), it is valued at about US$395.96 billion. Organized retail is expected

to garner about 16-18 percent of the total retail market (US$65–75 billion) in the next 5 years.

India has topped the A.T. Kearney’s annual Global Retail Development Index (GRDI) for the

third consecutive year, maintaining its position as the most attractive market for retail

investment. The Indian economy has registered a growth of 8% for 2007. The predictions for

2008 are 7.9%. The enormous growth of the retail industry has created a huge demand for real

estate. Property developers are creating retail real estate at an aggressive pace and by 2010, 300

malls are estimated to be operational in the country.

Growth after 2011

Before 2011, India had prevented innovation and organized competition in its consumer retail

industry. Several studies claim that the lack of infrastructure and competitive retail industry is a

43

key cause of India's persistently high inflation. Furthermore, because of unorganized retail, in a

nation where malnutrition remains a serious problem, food waste is rife. Well over 30% of food

staples and perishable goods produced in India spoil because poor infrastructure and small retail

outlets prevent hygienic storage and movement of the goods from the farmer to the consumer.

One report estimates the 2011 Indian retail market as generating sales of about $470 billion a

year, of which a minuscule $27 billion comes from organized retail such as supermarkets, chain

stores with centralized operations and shops in malls. The opening of retail industry to free

market competition, some claim will enable rapid growth in retail sector of Indian economy.

Others believe the growth of Indian retail industry will take time, with organized retail possibly

needing a decade to grow to a 25% share. A 25% market share, given the expected growth of

Indian retail industry through 2021, is estimated to be over $250 billion a year: revenue equal to

the 2009 revenue share from Japan for the world's 250 largest retailers.

The Economist forecasts that Indian retail will nearly double in economic value, expanding by

about $400 billion by 2020. The projected increase alone is equivalent to the current retail market

size of France.

In 2011, food accounted for 70% of Indian retail, but was under-represented by organized retail.

A.T. Kearney estimates India's organized retail had a 31% share in clothing and apparel, while

the home supplies retail was growing between 20% to30percent per year. These data correspond

to retail prospects prior to November announcement of the retail reform.

It might be true that India has the largest number of shops per inhabitant. However there are

detailed figures for Belgium, the Netherlands and Luxemburg. In Belgium, the number of outlets

is approximately 8 per 1,000 and in the Netherlands it is 6. So the Indian number must be far

higher.

The Indian retail market

44

A spice market

Checkout lanes, organized retail in Malad, Mumbai

CountryModern Retail

(in 2011, % of total)

India 7%

China 20%

Thailand 40%

United States 85%

45

Indian market has high complexities in terms of a wide geographic spread and distinct consumer

preferences varying by each region necessitating a need for localization even within the

geographic zones. India has highest number of outlets per person (7 per thousand) Indian retail

space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian retail density of 6

percent is highest in the world. 1.8 million Households in India have an annual income of over

4.5 million (US$72,900.00).

While India presents a large market opportunity given the number and increasing purchasing

power of consumers, there are significant challenges as well given that over 90% of trade is

conducted through independent local stores. Challenges include: Geographically dispersed

population, small ticket sizes, complex distribution network, little use of IT systems, limitations

of mass media and existence of counterfeit goods.

A number of merger and acquisitions have begun in Indian retail market. PWC estimates the

multi-brand retail market to grow to $220 billion by 2020.

46

Indian retailers

A 2012 PWC report states that modern retailing has a 5% market share in India with about $27

billion in sales, and is growing at 15 to 20% per year. There are many modern retail format and

mall companies in India. Some examples are in the following table.

Indian Retail Group Market Reach in 2011 and Notes

Pantaloon Retail65 stores and 21 factory outlets in 35 cities, 2 million square

feet space

Shoppers Stop 51 stores in 23 cities, 3.2 million square feet space

Spencers Retail 200 stores in 45 cities, 1 million square feet space

Reliance Retail

708 mart and supermarkets, 20 wholesale stores in 15 cities,

508 fashion and lifestyle

1206 crore (US$200 million) per month sales in 2013

Bharti Retail74 Easyday stores, plans to add 10 million square feet by

2017

Birla More 575 stores nationwide

Tata Trent 59 Westside mall stores, 13 hypermarkets

Lifestyle Retail 15 lifestyle stores, 8 home centers

Future Group

193 stores in 3 cities,] one of three largest supermarkets

retailer in India by sales

916 crore (US$150 million) per month sales in 2013

47

Government Policies of India

year Changes in govt policy during the year 1995 to 2011

1995 World trade organizations general agreement on trade in services which

Include both wholesale and retailing services came into effect.

1997 FDI in cash and carry with 100% rights allowed under government

Approval route.

2006 FDI in cash and carry brought under automatic route

2011 100% FDI in single brand retail permitted.

Challenges

McKinsey study claims retail productivity in India is very low compared to international peer

measures. For example, the labor productivity in Indian retail was just 6% of the labor

productivity in United States in 2010. India's labor productivity in food retailing is about 5%

compared to Brazil's 14%; while India's labor productivity in non-food retailing is about 8%

compared to Poland's 25%.

Total retail employment in India, both organized and unorganized, account for about 6% of

Indian labor work force currently - most of which is unorganized.This about a third of levels in

United States and Europe; and about half of levels in other emerging economies. A complete

expansion of retail sector to levels and productivity similar to other emerging economies and

developed economies such as the United States would create over 50 million jobs in India.

Training and development of labor and management for higher retail productivity is expected to

be a challenge.

In November 2011, the Indian government announced relaxation of some rules and the opening

of retail market to competition.

48

Organized Retail Market in INDIA (Rs. Cr.)

Organized Retail Market

This localized nature of the industry is Changing as retailers face lower growth rates and

threatened profitability in home Markets. New geographies help them sustain top line growth in

Addition toenabling global sourcing and encasing on global advantages of getting the best

products at optimum prices.

There has been a boom in retail trade in India owing to a gradual increase in the disposable

incomes of the middle class households, as a result of good performance of IT, Service and

Infrastructure sectors. More and more players are entering the retail business in India to

introduce new formats like malls, supermarkets, discount stores, department stores and even

changing the traditional looks of bookstores, chemist shops, and furnishing stores.

49

2008 2015

Organized retail formats prevalent globally

Supermarkets: Self-service 4000-20000 sq ft stores with shopping carts typically

focused on regular groceries, household goods and personal care.

Hypermarkets: Huge stores over 40000 sq ft situated outside the town with ample

parking space aimed for bulk purchases stocking electronics, furniture and clothing.

Carrefour is the global major in this format.

Mass merchandisers: Large destination stores that sell everything at competitive prices.

They have cross-country chain operations with centralized sourcing and a hub-and-spoke

distribution. Macro and Sam's Club are leading players in this format.

Discounters: Aimed at bargain buyers offering less choice but deep discount on bulk

sourcing deals through controlled inventory. Alde is the world leader in this format.

Convenience Stores: Small stores located at convenient points like petrol stations

working round the clock.

Unorganized Retail Sector

The unorganized retail sector basically includes the local Kiranas, hand cart, the vendors on the

pavement etc. This sector constitutes about 98% of the total retail trade. As 70% of the

employment is generated in Agriculture sector, hence this form of retailing is widely seen in

those areas and of course to some parts of the urban. There is a lot of hue and cry in the sector

for opening of sector for direct investment from the foreign players, but government cannot

neglect the interests of small players. One of main reason of not opening this sector to FDI is it

may shrink the employment in the unorganized sector and expand that in the organized.

50

RETAILING FORMATS IN INDIA

Malls:

The largest form of organized retailing today .Located mainly in metro cities, in

proximity to urban outskirts Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They

lend an ideal shopping experience with an amalgamation of product, service and

entertainment, all under a common roof. Examples include Shoppers Stop, Pyramid, and

Pantaloon

Specialty Stores:

Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword,

RPG's Music World and the Times Group's music chain Planet M, are focusing on specific

market segments and have established themselves strongly in their sectors.

Discount Stores:

As the name suggests, discount stores or factory outlets, offer discounts on the MRP

through selling in bulk reaching economies of scale or excess stock left over at the

season. The product category can range from a variety of perishable/ non perishable

goods

Department Stores:

Departmental Stores are expected to take over the apparel business from exclusive

brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which

started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across

India and even has its own in store brand for clothes called Stop.

Hyper marts/Supermarkets:

Large self service outlets, catering to varied shopper needs are termed as

Supermarkets. These are located in or near residential high streets. These stores today

contribute to 30% of all food & grocery organized retail sales. Super Markets can further

be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large

supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food &

grocery and personal sales.

51

Convenience Stores:

These are relatively small stores 400-2,000 sq. feet located near residential areas.

They stock a limited range of high-turnover convenience products and are usually open

for extended periods during the day, seven days a week. Prices are slightly higher due to

the convenience premium.

Mob's :

Multi Brand outlets, also known as Category Killers, offer several brands across a

single product category. These usually do well in busy market places and Metros.

52

Growing Format in India

53

RETAILING MAP IN INDIA

54

EVALUTION OF RETAILING

Retailing, one of the largest sectors in the global economy, is going through a transition phase in

India. For a long time, the corner grocery store was the only choice available to the consumer,

especially in the urban areas. This is slowly giving way to international formats of retailing. The

traditional food and grocery segment has seen the emergence of supermarkets/grocery chains,

convenience stores and fast-food chains.

The traditional grocers, by introducing self-service formats as well as value-added services such

as credit and home delivery, have tried to redefine themselves. However, the boom in retailing

has been confined primarily to the urban markets in the country. Even there, large chunks are yet

to feel the impact of organized retailing. There are two primary reasons for this. First, the

modern retailer is yet to feel the saturation' effect in the urban market and has, therefore,

probably not looked at the other markets as seriously. Second, the modern retailing trend, despite

its cost-effectiveness, has come to be identified with lifestyles.

In order to appeal to all classes of the society, retail stores would have to identify with different

lifestyles. In a sense, this trend is already visible with the emergence of stores with an essentially

`value for money' image. The attractiveness of the other stores actually appeals to the existing

affluent class asWell as those who aspire to be part of this class. Hence, one can assume that the

retailing revolution is emerging along the lines of the economic evolution of society.

55

Journey of Organized Retail

It was only in the year 2000 that the economists put a figure to it: Rs. 400,000 crore which is

expected develop to around Rs. 800,000 crore by the year 2005 – an annual increase of 20 per

cent. Retailing in India is unorganized with poor supply chain management perspective.

According to a recent survey by some of the retail consulting bodies, an overwhelming

proportion of the Rs. 400,000 crore retail markets are UNORGANISED. In fact, only a Rs.

20,000 crore segment of the market is organized. As much as 96 per cent of the 5 million-plus

outlets are smaller than 500 square feet area. This means that India per capita retailing space is

about 2 square feet in comparison to 16 square feet in the United States. India's per capita

retailing space is thus the lowest in the world.

56

Latest News of Retail Market in India

Israeli Giants Enter Indian Retail Sector

Israeli mall giants, owners of retail-linked realty assets across the world, are buying

into India’s money minting retail sector. Tel Aviv-based mall giant Gazit Globe has tied

up with one of the HDFC funds to pump in $150 million into developing assets, including

supermarket anchored retail play. Big Shopping Group, of Israel’s biggies has teamed up

with Lehman Brothers Real Estate Private equity to set up ‘open malls’ in tier I and tier II

cities.

Israeli tycoons and families, which raked in money from core real estate

developments in the US, have turned their attention to retail assets from Sao Paulo to

Macedonia, as mall ownership and management provides attractive 20% plus annualized

returns in developing markets. Billionaire echoism Katz man, at the helm of Gait Globe,

is no exception as he went on acquiring shopping centers from market to market

Us Retail Major Kroger Plans Entry into Indian Real Estate

The $66-billion US based grocery giant, Kroger is all set to enter into Real Estate

India. According to reports, the company representatives have already met 3-4 prominent

real estate companies of India for joint ventures. Some prominent sources said that

Kroger is primarily interested in jointly developing new FDI-compliant commercial

projects or buying into existing ones. Interestingly, America No. 3 general retailer behind

Wal-Mart and The Home Depot runs all its nearly 2,500 supermarket stores in the US

Reliance Retail plans to turn ARdani outlets into specialty Stores

Reliance Retail will be changing the format of its recently purchased Adani Retail

stores into specialty stores for jewelry, medicines, eyeglasses, home furnishings, telecom

and consumer electrical stores. The company has also taken in some of the executives

onto its own team. According to a senior executive, the stores cannot be converted to

Reliance Fresh stores as they are too small, ranging from 2,000-3,000 sq ft, while most

Reliance Fresh stores are around 4,000 sq ft in size.

57

4 SWOT ANALYSIS FOR RETAIL

Strengths

The first step in doing a SWOT analysis for retail entails identifying certain strengths. One

possible strength may be the retailer's financial backing, meaning it has plenty of capital and

access to bank loans. Another strength may be the retailer's cheaper wholesale prices.

Additionally, the retail company may offer unique products compared to other retailers. For

example, a clothing store may sell high quality but slightly defective clothing at a low price.

Whatever the case, a retailer should make a list of all its strengths vs. key competitors.

Weaknesses

When reporting weaknesses,the retail store or company should start with its most palpable

weaknesses. For example, through market research, the retailer may have discovered it has a

weak brand image versus key competitors. The retailer may also lack an identity. For instance,

the store may sell cheap and expensive brands. It may also be lacking in customer service.

Essentially, the store has no competitive advantage that sets it apart from other retailers. Retailers

should list all weaknesses, and then make improvements as needed.

Opportunities

Another step in a retail SWOT analysis is identifying key opportunities in the market. There are

a myriad of opportunities a retailer may discover through both its sales force and market

research. Opportunities can include an unfilled consumer need, according to quickmba.com, an

online business reference site. For example, a small web design company may see an opportunity

to add consulting services, if it has customers that desire it. Or a retail company may have the

opportunity to purchase a smaller retailer to increase market share.

58

Threats

A retailer can identify certain threats through a SWOT analysis. Threats can include a decrease

in consumer demand, a recession, price wars among key competitors, or even an increase in

competition. Even a change in shopping habits can be a major threat to a retailer.For example,

when people starting migrating to the suburbs in the 1950s and 1960s, downtown retailers, which

represented the traditional way of shopping, were affected.

Using SWOT

Retailers should not just identify their strengths, weakness, opportunities and threats, they must

also use their lists to develop various marketing strategies. This is best accomplished by

matching an internal variable, like strengths, to an external variable, like opportunities. For

example, the owner of a chain of gift shops may have a strong marketing team--a strength--so

she may see the opportunity to increase sales and profits through the

59

5 PORTER’S FIVE FORCE

Bargaining Power of suppliers

Bargaining power of suppliers is the ability of a supplier to control the cost and supply of the

inputs in the market

• The supplier power of an industry can be altered in many ways, which can includeI.

Differentiation of inputs.II.Switching costs for transferring to other suppliers. Bargaining power

of suppliers

• The number of buyers and the existence of a few dominant suppliers influence the bargaining

power of suppliers.

• Brand manufacturers can set up their own retail outlets which can be seen as a threat.

• The suppliers to the retail sector are the companies who actually provide the finished products

that can be sold in a retail store 29. Power of suppliers: Retail industry

• The bargaining power of suppliers varies from product to product, however, at an overall level

one can say that the bargaining power of suppliers in India is low because there are a large

number of potential suppliers in the market.

• Supplier can exert power by threatening to raise prices or reduce the quality of purchased goods

• Large no of suppliers and product differentiation is low 30. Power of Suppliers: Retail Industry

• Varies depending upon the target segment, the format followed, and products on offer.

• The unorganised sector has a dominant position, still contributing 95% of the total retail market

• There are few players who have a slight edge over others on account of being established

players and enjoying brand distinction.

• Since it is a capital intensive industry, access to capital also plays an important part for

expansion in the space.

60

The power of the buyer is

Bargaining Power of Customers In general, when the impact that the customers has on a

producing industry. Buyer’s power is strong; the relationship to the producing industry is near to

under suchmarket in which there are many suppliers and only one buyer. In reality there are

few such markets Conditions the buyer sets the price. However the Indian retail sectors are

characterized by high buyer-to- supplier ratio with highest density of retail outlets in the world,

making India a The Retail sector can be broadly divided into two segments supplier’s market.

Value Retailing- which is typically a low margin-high volume business Lifestyle Retailing-

which is a high margin-low volume

Factors determining the bargaining power of customers

Number of firms supplying the Their size of their orders Number of Customers The cost of

switching The threat of integrating backward product

Threat new entrants

• Growth opportunities for foreign retailers. Particularly, for supermarket and hypermarket.Mom-

n-pop/kirana grocery stores - force to reckon with for new foreign entrants.Liberalization-

phased and calibrated. Time for potential foreign entrants to make earnest start with strategizing

locations.• Luxury brands like Marks & Spencer, Louis Vuitton or Versace - to open more stores

in the country.

The threat of substitute product

Can be evaluated in the terms of the availability and performance of substitutes, switching cost

incurred by the customers and propensity of the consumer to consume There is a high threat of

substitution the Indian retail market due its unique market structure. Indian consumers have an

array of options to choose, including small unorganized retailers and large organized retailers for

domestic and foreign brands. Availability of close complement a perfect complement is a good

other examples include: that has to be consumed with another good. Computer hardware and

DVD players and DVDs Printers and ink cartridges Car and petrol Torch and battery computer

software

61

Substitutes and Complements• Although the five-forces analysis does not directly consider

demand, it considers two important factors that influence demand- substitutes and complements.•

Substitutes erode profits in the same way as entrants by stealing business and intensifying

competition.• Complements boost the demand for the product in question, thereby enhancing

profit opportunities for the industry.

Examples• Products/services facing a strong threat of substitution Washing powder A dozen of

brands sitting on the shelves and waiting for consumers to pick them up. Consumer will often

pick up the one that is on special on shopping day• Retail Outlets. Don’t like Dmart . Shop at Big

Bazaar• Products/services facing a weak threat of substitution• Oil. Although alternative forms of

energy are being studied and introduced, most engines today run on gasoline. Gasoline cannot be

replaced that quickly on a large scale.

Internal Rivalry•

Rivalry refers to number of companies competing in the same markets.• If there is intense

rivalry in an industry, it will encourage businesses to engage in:1) Price wars (competitive price

reductions),2) Investment in innovation & new products Intensive promotion (sales promotion

and higher spending on advertising)• All these activities are likely to increase costs and lower

profits.

•external Rivalry,

, foreign retailers and domestic organized and unorganized retail , creates diversity in

competition.• Foreign and domesic retailers in organized sector are competing on large size ,

broad assortment ,self service format and pleasant store environment.

62

6 7 P ANALYSIS

1. Product 

Providing value for money by adding value to the product or service being offered.

Providing multiple payment options to the customer by spreading the price of the product

into multiple installments.

To look at the product offering from the customers point of view.

To develop an area of superiority in the product offering by adding some extra value to it.

To keep analyzing if the market for the product offering is increasing or decreasing and

developing strategies for the growth of the product.

2. Price

A product is only worth what a customer is prepared to pay for it.

The price needs to be competitive, but not necessarily the cheapest.

Be open to the possibility that the current pricing structure may not be ideal for the

current market.

Be open to the need to revise your prices, if necessary, to remain competitive, to survive

and thrive in a fast-changing marketplace.

If you think the price you sell at, as a cost to the customer, it will help you keep things in

the right perspective.

3. Place

This can be Direct selling, mail order, telemarketing or in retail stores.

63

This is where the customers can buy the product, and is the means to get the product to

the customer

The product must be available at the right place (Product category), at the right time (time

you sell your product), and in the right quantity (enough stock).

The place in which your business operates can be the deciding factor in the success or

failure of the business.

To provide facilities like free parking to ensure the ease of accessing the store.

Once you have a good location, it becomes difficult to replicate the same and it become

your competitive strength.

4. Promotion

This is the way in which you communicate to your potential customers about your

product.

This can be done in a number of ways, which includes your brand image, advertising,

special offers.

Small changes in the way the products are promoted and sold can lead to dramatic

changes in results. 

Experiment with different ways of advertising, promoting, and selling the products and

services.

A sales or marketing method might stop working after sometime and it become essential

to continually look for new improved ways to promote and market the product in front of

the customer.

To develop new sales, marketing and advertising approaches, offerings, and strategies.

64

5. Physical Evidence

This is the intangible part of the business mostly concerned with services as they cannot

be seen.

Intangible is often used to describe services as they cannot be touched like a product can

be.

This important because, fundamentally you are selling a product, but in order for you to

be able to price your goods at the right the level, you will also be selling the service the

buyer will receive.

6. People

The reputation of the brand rests in the people’s hands. You must therefore ensure that all

your people are appropriately trained, well motivated and have the right attitude.

People does not only include the people in your business , but also the people that you

use for your business.

The ability to select, recruit, hire and retain the proper people, with the skills and abilities

to do the job you need to have done, is more important than everything else put together.

Many customers are unable to separate the products they buy from the person who sells it

to them. This goes to show the importance of your people in relation to customer’s

perception.

The level of after sales support and advice provided by the retailer is one way of adding

value to what is sold , and will give a competitive advantage over others sellers of similar

product. Many of the best business plans ever developed do not see the light of the day as

the people who created them could not find the key people who could execute those plans

7. Process

65

The process that you go through and the behavior of those who deliver the products are

crucial to customer satisfaction.

Issues such as waiting times, the information passed onto customers are vital factors

when trying to maintain 100% satisfaction.

Processes must help the customers get what they want.

E.g. What payment methods are in place that makes it easier or quicker for parents to pay

for your service?

Always keep customers informed. This can be done at the store or through faxes and

emails.

By keeping in contact with the customers the retailer can avoid problems of negative

feedback etc.

This also does the world of good for your brand image.

Customers will view this as an extra value added service.

7 STP AND BLUE PRINTING

STP

Segmentation

Segmentation is the breaking down of large markets into sub markets or segments of consumers

that are similar in terms of needs wants ad buying habits. The first method of segmenting a

66

market is demographic segmentation. In demographic segmentation factors like age, gender,

income, education, occupation, marital status family cycle and ownership of durables are used

for determining consumer segments.

Segmentation may also be on a geographic basis, by considering criteria like area type, area

density, neighborhood type and region. Geographic segmentation may be done within a country,

for a region state, province or neighborhood. The usage patterns of the consumers can also be use

to segment the markets. Here, consumers and be classified as heavy users, non-users brand loyal

users and switchers or variety seekers

The target Market

After having divided the market into various segments, the retailer now needs to decide on whom

he is going to cater to. The consumer segment that he decides to cater to is known as the target

market. While selecting a target market he needs to look at the ability of the retail organization to

meet the needs of the segment, the size and the future growth potential of the segment the kind of

investment that would be required and the kind of profits that could be earned.

Positioning

Now that the target market /s have been finalized a positioning platform needs to be created.

Positioning starts with a product a piece of merchandise a service, a company an institution or

even person. Positioning is not what is done to the product but what is done to the mind of the

prospect. That is, you position the product in the mind of the prospect

The concept of positioning needs to be looked at from the perspective of the environment that it

operates in. It is how your product is perceived in themarketplace relative to the competitor. In

retail the environments are constantly changing thus the context of the positioning is bound to

change. The overall strategy of the firm largely affects the positioning strategy adopted by the

retailer. The four main areas that affect the retail positioning strategy:

1) Merchandising strategy

2) the trading style / format strategy

67

3) Customer service strategy

4) Customer communications strategy

Retailers have to understand the various influences that influence consumer buying behavior. In

order to correctly segment the population and thereafter to create a marketing strategy a retailer

will have to take in data in various forms and types like demographic and psychographic data,

data collected from a survey of household panels, in-store audits and interviews done of

customers buying from the store and alternatively not buying form the store. A retailer mat also

use data from syndicated studies like a study of the consumers, wardrobe etc.

Blue Printing

68

8 CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

69

The Retail industry has made a paradigm shift in strategy from being product centric to

consumer centric in the past decade. Also, there is a rapid adoption of Internet technologies. A

major challenge that service providers face is to establish a robust Customer Relationship

Management (CRM) process that accurately collates related customer information for their

organization. The current generation of shoppers is getting savvier in its options. To compete

successfully in the present dynamic environment predictive sales, revenue forecasting, greater

staff productivity, sifting and organizing unstructured data and automating and streamlining

processes are the key requirements in any CRM solution offering.

Retail CRM is one solution that every retailer relies on because it is directly linked to the

customer and in turn results in better sales and Return on Investment (ROI). The ROI depends on

how retailers manage their customer relationship which in turn is based on their ability to

aggregate, analyze, and apply a range of data sources such as Point of Sales (POS), social media

sites, in-house customer information, and loyalty programs. The six major business processes for

retail CRM are loyalty program management, campaign management, in-store CRM, customer

analytics, master data management, and a collection of customer information at POS.

In the Retail CRM space, Cybage has extensive experience of working on multiple global

products. Some of the key areas where Cybage can provide end-to-end Retail CRM services are

as follows:

Customer data management

Campaigns and promotions management and Campaign tracking

Loyalty programs and Rewards management

Customer analytics

Customer support and Helpdesk

9 GAP ANALYSIS

70

Market Deficiencies."Gap" analysis involves analyzing current market offering to assess the

extent to which they meet customer demands. Demand side gaps involve a market situation

where consumers are not satisfied buying what is available—usually either because the level of

service provided is not adequate or because the offering is too expensive. Supply side gaps, in

contrast, involve firms that provide services that are needed, but ones that can be met elsewhere

at lower prices.

Demand Side Gaps. Customer satisfaction abounds, and many consumers would like to replace

their current suppliers. This can happen either generally—there is a widespread dissatisfaction

with banks among consumers, and many would switch if they found one that they thought to

provide better service—or the gap can be with one segment that is not being well served. As an

example of the latter, consider parents who, if they had not had children, would have been

perfectly satisfied with an ordinary Internet service provider but are now worried that their

children can be exposed to inappropriate material online. Therefore, the PAX Network, which

features family-oriented television programming, stepped in to offer a service that claims to

block out most objectionable sites. Further, one auto parts store owned by a woman ran an

advertising campaign aimed at women, acknowledging that women were often being asked by

their husbands and boyfriends to be "parts runners." The ad then went on to talk about the

cleanliness of the store and non-condescending attitudes of the sales people.

Note that although a gap may exist in the sense that existing firms are not offering what

consumers may ideally want, there is a limit to what buyers would be willing to pay for. For

example, before starting their ice-cream business, Ben and Jerry considered going into business

delivering the New York Times to people’s doors on Sunday mornings along with fresh baked

bagels. A problem here, however, could have been the cost of this service. Sometimes, a firm

may be able to come in and fill a gap, but may need to compromise on exactly how far to go.

There are usually some struggles between what would be nice to have and what customers are

wiling to pay for.  For example, many computer buyers would like to have someone come and

set up the computer, the peripherals, and the Internet connection, but might balk at paying $150

for this service.  Many consumers would like to have their dry cleaning picked up and delivered,

but when push comes to shove, they would not be willing to pay for the extra service.

71

In the early 1990s, a firm owning several supermarket chains decided start Tiangues, a chain

aimed at Hispanic consumers in Southern California.  Employees were screened to be fluent in

both Spanish and English, and foods that would appeal especially to different Hispanic groups

were emphasized.  The chain was very popular when it first opened, but it soon lost market share

as it was found that with time, what mattered most to customers was low prices.

Wheel of Retailing An interesting phenomenon that has been consistently observed in the retail

world is the tendency of stores to progressively add to their services. Many stores have started

out as discount facilities but have gradually added services that customers have desired. For

example, the main purpose of shopping at establishments like Costco and Sam’s Club is to get

low prices. These stores have, however, added a tremendous number of services—e.g., eye

examinations, eye glass prescription services, tire installation, insurance services, upscale coffee,

and vaccinations. To the extent these services can be added in a cost effective manner, that is a

good thing. Ironically, however, what frequently happens is that "room" now opens up for a

"bare bones" chain to come in and fill the void that the original store was supposed to have

filled! New stores can now come in and offer lower prices before additional, costly services

"creep" in.  Note that upscaling over time may be an appropriate strategy and that the owner of

the "rising" chain may itself want to start another, lower-service division (e.g., Ralph’s may want

to own another chain such as Food 4 Less).

Supply Side Gaps Supply side gaps come about when a business finds that the services that it

has traditionally offered to customers in the past are now too expensive to justify the value they

provide. For example, in the "old days" (i.e., until the early 1990s), travel agents provided a

valuable service—they would "match" travelers and airlines, finding a reasonable fare and travel

time and issuing the ticket to the customer who, then, did not have to call all the airlines for a

fare and then visit the airport or an airline office. However, nowadays, it is much more

convenient for consumers to carry e-tickets, and it is frequently easier to go online to compare

fares and travel time at one’s convenience. Therefore, travel agents, to command their

commissions, will often need to provide something extra that the online services cannot. The

problem is that, for most consumers, there just isn’t much that the travel agent can offer other

than fancy coffee or donuts, which you can get more conveniently elsewhere anywhere. Maybe

they can take passport photos or arrange bus transportation to a cruise ship, but is that enough to

72

justify people coming to them? Online services are starting to offer package deals—air fare,

hotel, and car rental—anyway.

Finding opportunities Again, it is important to emphasize the need for market balance.

Frequently, there will be room for higher cost services for one segment, and perhaps a

diametrically opposed service for the lower cost service.

Gaps, costs, and performance Generally, we find that gaps do not exist when cost and service

are "in line" with customer expectations. Thus, for example, Nordstrom serves a segment that

desires high service. Nordstrom incurs a great deal of costs in this, which are ultimately passed

on to the consumer, but Nordstrom’s customers are willing to pay for this. Similarly, Wal-Mart

provides some, but less, service and does so at a very low cost. Thus, another segment’s

preferences are served. Thus, service output demand is matched with supply. On the other hand,

many auto repair facilities provide less service than is expected and do not adequately make up

for this by low prices. Therefore, an opportunity might exist for someone to offer better service

at a not much higher cost. On the other hand, nowadays people may not be willing to pay the

extra cost for going to a butcher shop and pay significantly more if what they get is only a little

better than what is available in the supermarket meat section.

Closing gaps Firms may be able to close, or reduce, their gaps by reconsidering their offerings.

A gasoline station that offers an "average" level of service at prices higher than those of self-

service stations might either target the low cost segment, lowering prices and cutting costs, or

targeting a premium service and "beefing up" service. Similarly, a firm that faces a segmented

market might "branch off" into different units that offer different levels of service to different

customers. For example, Toyota started the Lexus division for consumers who demanded more

service than would have been cost effective to offer to its traditional customers. On the supply

side, closing gaps mostly involves improving efficiency and/or reducing costs in other ways.

Alternatively, existing channels may be reassessed—e.g., airlines have deemphasized travel

agents.

10 VALUE CHAIN ANALYSIS

73

Introduction

Michael Porter introduced the value chain analysis concept in his 1985 book ‘ The Competitive

Advantage’ . Porter suggested that activities within an organisation add value to the service and

products that the organisation produces, and all these activities should be run at optimum level if

the organisation is to gain any real competitive advantage. If they are run efficiently the value

obtained should exceed the costs of running them i.e. customers should return to the organisation

and transact freely and willingly. Michael Porter suggested that the organisation is split into

‘primary activities’ and ‘support activities’.

Primary Activities

74

Inbound logistics: Refers to goods being obtained from the organization’s suppliers and to be

used for producing the end product.

Operations: Raw materials and goods are manufactured into the final product. Value is added to

the product at this stage as it moves through the production line.

Outbound logistics: Once the products have been manufactured they are ready to be distributed

to distribution centers, wholesalers, retailers or customers. Distribution of finished goods is

known as outbound logistics.

Marketing and Sales: Marketing must make sure that the product is targeted towards the correct

customer group. The marketing mix is used to establish an effective strategy; any competitive

advantage is clearly communicated to the target group through the promotional mix.

Services: After the product/service has been sold what support services does the organisation

offer customers? This may come in the form of after sales training, guarantees and

warranties.With the above activities, any or a combination of them are essential if the firm are to

develop the "competitive advantage" which Porter talks about in his book.

Support Activities: Support activities assist the primary activities in helping the organisation

achieve its competitive advantage. They include:

Procurement: This department must source raw materials for the business and obtain the best

price for doing so. The challenge for procurement is to obtain the best possible quality available

(on the market) for their budget.

Technology development: The use of technology to obtain a competitive advantage is very

important in today’s technological driven environment. Technology can be used in many ways

including production to reduce cost thus add value, research and development to develop new

products and the internet so customers have 24/7 access to the firm.

Human resource management: The organisation will have to recruit, train and develop the

correct people for the organisation to be successful. Staff will have to be motivated and paid the

‘market rate’ if they are to stay with the organisation and add value. Within the service sector

75

such as the airline industry, employees are the competitive advantage as customers are

purchasing a service, which is provided by employees; there isn't a product for the customer to

take away with them.

Firm infrastructure: Every organisations needs to ensure that their finances, legal structure and

management structure work efficiently and helps drive the organisation forward. Inefficient

infrastructures waste resources, could affect the firm's reputation and even leave it open to fines

and sanctions.

11 FINDINGS

76

(1) The Retail Sector in India can be split up into two, the organized and the unorganized. The

organized sector whose size is expected to triple by 2013 can be further split up into

departmental stores, supermarkets, shopping malls.

(2) In terms of value the size of the retail sector in India is $300 billion. The organized sector

contributes about 4.6% to the total trade.

(3) The retail sector in India contributes 10% to the Gross Domestic Product and 8% to the

employment of the country.

(4) In terms of growth the FMCG retail sector is the fastest growing unit and the retail relating to

household care, confectionery etc, have lagged behind.

(5) The foreign retail giants were initially restricted from making investments in India. But now

FDI of 51% is permitted in India only through single branded retail outlets. Multi brand outlets

are still beyond their reach. Again they can only enter the market through franchisees,. This was

how Wal-Mart had entered joining hands with Bharti Enterprises.

(6) On line retailing is still to leave a mark on the customers due to lacunae that we have already

mentioned.

(7) Cultural and regional differences in India are the biggest challenges in front of retailers. This

Factor deters the retailers in India from adopting a single retail format.

(8) Hypermarket is emerging as the most favorable format for the time being in India

77

12CONCLUSION

Direct procurement of produce from the farmer by organized retail is a recent phenomenon.

Organized retailers maintain that this helps in being able to procure quality produce and offer

fresher produce to the consumer. They also state that by procuring directly from the farmer, they

are able to bypass intermediaries, thereby decreasing transaction costs. This results in not only

reducing prices for the consumer considerably but also increasing the farmers’ profitability.

While whatever has been mentioned above does hold true for the farmer, the biggest advantage

that the farmer has is the option of another marketing channel for his produce. For many years,

the farmer’s only choice of marketing channel has been the mandi, which lacks transparency.

The farmer also does not have any bargaining power. Business is based only on trust and the

farmer is under constant threat of being deceived by the commission agent. While the survey

results showed that price and volume of sale is usually decided in advance through a verbal

contract, it also showed that there are a number of farmers who receive a price lower than what

was promised. Even though the APMC Act clearly states that commissions are not to be taken

from the farmer, in actual fact this does not seem to be the case. The farmers cannot risk

exposing the commission agents as he does not have an alternative channel through which he

could sell his produce.

The mandi was expected to be an alternative channel through which the farmer could sell his

produce. Unfortunately the mandi is boycotted by most farmers and wholesalers, which leaves

the farmer with the city mandi once again as the only option. Hence the entry of organized retail

provides the farmer the option to sell his produce through another channel. With many organized

retailers beginning to procure produce directly, the farmer’s selling options also increases. When

the farmer has the option of selling through any of the channels, it increases his bargaining

power. While it is important for farmers to have multiple channels to choose from, it is equally

important to have both private and government players.

The survey results also indicated that there are some farmers, who sold to organized retail, also

reported having received a price lower than what was promised. The mode of business with

organized retailers is through verbal contracts and is again based on trust. The solution therefore

does not lie in doing away with the mandi completely. It lies in making the mandi more efficient

78

and in enforcing laws that are already in place to protect the farmer’s interests. The mandi

facility has excellent infrastructure but is underutilized. The mandi model can be adopted for all

APMC mandis.

This Report recommends the modernization of the APMC mandis by providing better

infrastructure in terms of closed spaces for trading, better access roads and in also devising a

suitable and effective waste disposal mechanism to improve the hygiene in and around the

mandi. Allowing only private players to exist is at the risk of collusion between all organized

retailers. Such a situation again leaves the farmer with no alternative choice or bargaining power.

However, if private players and the mandi were to co-exist, the farmer stands no risk of deceit.

This will ensure transparency and efficiency. And most importantly, the farmer will get an

enhanced profit.

BIBLIOGRAPHY

79

http://www.retailspice.com

http://www.researchandmarkets.com/reports/323895

http://timesofindia.indiatimes.com/articleshow

http://www.indianretalling.com

http://www.pantaloon.com

http://www.financialexpress.com

http://www.thehindubusinessline.com

80