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CHAPTER-1

INTRODUCTION

1.1 Conceptual Framework of Retailing

Retailing is the magic wand which can give anything, anywhere, at any

time. Retailer is the ‘Genie’ of the present day to offer the consumers the right

product, in the right quantity, at the right price, at the right place and at the right

time. The last link which connects the consumer and manufacturers in the

distribution channel is the retailer who facilitates the movement of products

from point of production to point of purchase.

“Breaking the bulk” has become the successful business concept. The

‘retallier’ of the French is omnipresent in the entire world to do the distribution

and selling of goods and services to customers for their personal, family or

household use. The term “retailing” is derived from the French word “retallier”

which means “a piece off” or “to break the bulk”. This implies the breaking of

bulk function of the retailer. The retailer breaks the bulk of the manufacturer or

wholesaler and makes it in to pieces of required quantity and delivers it to the

customer.

Retailer offers variety of products of best quality in required quantity at

convenient location for reasonable price. They sell in small quantities and offer

selection-an assortment of merchandise. According to Philip Kotler, ‘Retailing

includes all the activities involved in selling goods or services to the final

consumers for personal, non business use.

A retailer or retail store is any business enterprise whose sales volume

comes primarily from retailing. Any organization selling to final consumers

whether it is a manufacturer, wholesaler or retailer-is doing retailing. The major

functions performed by retailer are breaking the bulk, holding stock, creating

time and place utility, providing assortment, creating new demand for

merchandise.

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1.2 History of Retailing

The origins of retail are as old as the trade itself. Barter was the oldest

form of trade. For centuries, most merchandise was sold in market place or by

peddlers. Medieval markets were dependent on local sources for supplies of

perishable food because Journey was far too slow to allow for long distance

transportation. However, customer did travel considerable distance for specialty

items. The peddler, who provided people with the basic goods and necessities

that they could not be self sufficient in, followed one of the earliest forms of

retail trade.

Even in prehistoric time, the peddler traveled long distances to bring

products to locations which were in short supply. Later retailers opened small

shops, stocking them with such produce. As towns and cities grew, these retail

stores began stocking a mix of convenience merchandise, enabling the formation

of high-street bazaars that become the hub retail activity in every city.

1.3 Evolution of Organized Retail in India

While barter would be considered to be the oldest form of retail trade,

since Independence, retail in India has evolved to support the unique needs of

our country, given its size and complexity. Haats, mandis and melas have been a

part of India landscape. They will continue to be present in most part of the

country and form an essential part of life and trade in various areas. Retailing in

its initial period was witnessed at the weekly Haats or Gathering in a market

place where vendors put on displays their produce.

Of course, this practice is still prevalent in many towns and cities in

India: then the market saw the emergence of the Local banias and his

neighborhood Kirana shop. In fact these were the common local mom-pop

multipurpose departmental store located in the residential areas such shops

stocked goods and multipurpose utility and were with the vision of providing

convenience at the door step of the consumer.

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Chart 1.1 Phases of evolution of organized retailing in India

The emergence of Kirana stores and mom-and-pop stores is the origin of

retail business in India. Later with the help of Khadi&Village Industries

commission by government indigenous franchise stores came up. After 1980 the

economy began to open up and it was the reason for the changes in retailing

sector. Textile was the first sector to come up in retailing with Bombay Dyeing,

S Kumar's, Raymonds, etc. New retail formats such as exclusive brand outlets,

hypermarkets and supermarkets, department stores and shopping malls have

evolved as the retail industry started to grow rapidly.

1.3.1 Major Retail Players in India

The organised retail market in the country is poised for an enviable

growth across all sectors which not only excite the foreign retail majors to invest

but also some of the major corporate houses in India. Tatas, Ambanis, Birlas,

Rahejas all are already there with significant investments into some of the major

retail categories. In the past few years, Indian Retail sector has seen tremendous

growth in the organised segment. Major domestic players have stepped into the

retail arena with long term, ambitious plans to expand their business across

verticals, cities and formats. Companies like Tata, Reliance, and Bharti have

been investing considerably in the booming Indian Retail market. Along with

these giant retailers, a number of transnational brands have also entered into the

market to set up retail chains in close association with bigger Indian companies.

Source of

Entertainment

and Commercial

Exchange

Neighborhood

Convenience,

Traditional/

Pervasive

Approach

Government

Supported,

Availability / Low-

cost Distribution

Modern Formats

/ Shopping

Experience

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Given the industry’s changing landscape and emerging challenges, the

focus of industry players too is changing; with a strong emphasis on profitable

growth in the current scenario. Hence, retail companies are increasingly

concentrating on strengthening existing operations and assessing options for

growth through consolidation, while continuing to innovate.

Online retail business is the next gen format which has high potential for

growth in the near future. After conquering physical stores, retailers are now

foraying into the domain of e-retailing. The retail industry is all set to test waters

over the online medium, by selling products through websites. The following

table discusses the activities of major players in the Indian retail terrain:

Table 1.1 Major Retail Players in India

Future Group

Big Bazaar - Hypermarket chain

17 million square feet of

retail space

102 Cities across the

Country

300 million customers

Mega Food Park at

Tumkur Karnataka

Food Bazaar - Supermarket chain

Ezone - Electronics superstore

HomeTown - Home improvement and building

materials store

Foodhall - a premium lifestyle food destination

Planet Sports - Sportswear retailer

Central - Seamless department store

Aadhaar - Rural retail chain

KB’s Conveniently Yours - An urban convenience

store with exotic range of food products.

Futurebazaar.com - Shopping portal

all - The plus size store

I Am In - caters to the enthusiastic Gen Next crowd

Brand Factory - India's largest fashion discount

store chain

Nilgiris.-Supermarket chain

Reliance Retail Limited

Reliance Fresh - Retail outlets of fruits, vegetables

& groceries

2000 retail stores(as of

October 2014)

9 million square feet

across 155 cities

Turnover of Rs.

168 billion in the

financial year 2013-14.

Quarterly profit of Rs.

189 Crore (for July -

September 2014)

Reliance Digital - Consumer Electronics

Reliance Jewels – Jewellery

Reliance Trends, Reliance Footprint and Reliance

Living - Apparel and Clothing.

Reliance Time Out - Lifestyle store of Books,

Music, Movies, Toys, Gaming, Fragrances, and

Stationery.

Reliance Market, - Cash n Carry

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Compiled from online sources

1.3.2 Sector wise contribution

The sector can be broadly divided into two segments: Value retailing,

which is typically a low margin-high volume business (primarily food and

groceries) and Lifestyle retailing, a high margin-low volume business (apparel,

footwear, etc). The sector is further divided into various categories, depending

on the types of products offered. Food dominates market consumption with 60%

Bharti Retail

Easyday- standard neighborhood stores

currently operates in 13

states over 110 towns and cities

The number of stores functional

is 228 across three different

formats[

76,000 customers everyday

Easyday Market- compact hypermarkets

Easyday Hyper- large hypermarket style

stores

Aditya Birla group

Aditya Birla Retail Limited

more- supermarket

494 supermarkets and 16

hypermarkets around the country

more.MEGASTORE- Hypermarket

Pantaloons Fashion &

Retail Limited- lifestyle apparel

company

(Pantaloon Retail, was demerged by Future

Group)

86outlets spread across the

country in 40 cities

spans a retail space of 1.7 million

square feet

Tata group- Trent

Westside- Lifestyle Fashion wear-Specialty

store

82stores in the metros of India.

consolidated revenues pegged at

over Rs.17000 Crores

Landmark- bookstore chain

Star Bazaar- hypermarket

Infiniti Retail- multi-brand electronics

stores

Coma.- electronics retail chain, online store

Raheja Group

Shoppers' Stop- Department store, e-store

74 stores across 35 cities in India.

Crossword – Life style book store-

specialty store

Inorbit Mall- Mall

Home Stop -Home solutions-concept store

Hypercity- hypermarket

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share followed by fashion. The relatively low contribution of other categories

indicates opportunity for organised retail growth in these segments, especially

with India being one of the world's youngest markets.

Chart 1.2 Sector wise contribution of Indian Retail Market

Transition from traditional retail to organised retail is taking place due to

changing consumer expectations, growing middle class, higher disposable

income, preference for luxury goods, and change in the demographic mix, etc.

The convenience of shopping with multiplicity of choice under one roof (Shop-

in-Shop), and the increase of mall culture etc. are factors appreciated by the new

generation. These factors are expected to drive organized retail growth in India

over the long run.

1.3.3 Growth of organized retailing

The Indian Retail sector has come off age and has gone through major

transformation over the last decade with a noticeable shift towards organised

retailing. A T Kearney, a US Based global management consulting firm has

ranked India as the fourth most attractive nation for retail investment among 30

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flourishing markets. Consumerism in India is witnessing unprecedented

growth driven by favorable demographics, a young and working population,

rising income levels, urbanization and growing brand orientation. This, in turn,

is reflected in India’s retail market, which in 2013, was estimated at US$520

billion and is expected to grow at a CAGR of 13% to reach around US$950

billion by 2018. Organized retail penetration, currently estimated at 7.5%, is

expected to clock a 19-20% p.a. growth to reach 10% by 2018. Penetration in

tier-II and III cities, improvement in business models and operations, coupled

with movement from unorganized to organized trade are expected to play an

integral role in driving this growth.

1.4 Opportunities and challenges in Indian retailing

High operating costs, low bargaining power with vendors, and heavy

discounting to improve sales have affected profits and expansion plans. Real

estate cost and space availability also remain important issues. Retail growth of

14 to 15 percent per year is expected through 2015. Modern retail remains

limited (7 percent in 2012), but it is expected to grow as the country urbanizes

and retailers make new investments.

As Tier I cities become saturated, retailers are likely to move to Tier II,

Tier III cities where profits are higher due to lower rentals and operating costs.

Online shopping is in the early stages, with e-commerce sales equal to less than

1 percent of all retail sales, but growth is expected as more people access the

Internet. Mobile phones, electronic appliances, apparel, movies, music, and

books are the fastest-growing categories.

The retail market, (including organised and unorganised retail), was at

Rs. 23 lakhs crore in 2011-12. According to the study1, organised retail, that

comprised just seven per cent of the overall retail market in 2011-12, is expected

to grow at a CAGR of 24 per cent and attain 10.2 per cent share of the total retail

sector by 2016-17.In terms of sheer space, the organised retail supply in 2013

was about 4.7 million square feet (sq ft). This showed a 78 per cent increase

over the total mall supply of just 2.5 million sq ft in 2012. Although the growth

potential in the sector is immense, there are obstacles too, that could slow the

1 AT Kearney Global Retail Development Index 2013

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pace of growth for new entrants. Rigid regulations, high personnel costs, real

estate costs, lack of basic infrastructure, and highly competitive domestic retailer

groups are some such challenges.

1.4.1 Organised Retail- The Emergence

In the past few years, Indian Retail sector has seen tremendous growth in

the organised segment. Major domestic players have stepped into the retail arena

with long term, ambitious plans to expand their business across verticals, cities

and formats. Companies like Tata, Reliance, Adani Enterprise and Bharti have

been investing considerably in the booming Indian Retail market. Along with

these giant retailers, a number of transnational brands have also entered into the

market to set up retail chains in close association with bigger Indian companies.

Even Tier I & Tier II cities and towns are witnessing a major shift in

consumer preferences and lifestyles, the result of which, they have emerged as

attractive markets for retailers to expand their presence. The food market for

India is vast and the amount of scope that retail chains would be exposed to is

phenomenal, taking into consideration the demographics and raise in standards

of living. Social trends of a country have impact on the scheme of growth of

food retailing in a country. India is the country that is geographically vast and

culturally diverse. This has taken its toll on food retailing with retailers having to

adapt to the local cultures of the area in which they have established or plan to

establish. This is a major reason for most retailing chains restricting their

operations to a certain part of the country. But current trends show that they are

now slowly moving towards cultural integration where people of all states and

diametrically opposite cultures tend to try out foods and materials of other states

and communities. This movement towards social integration would make it very

feasible in the near future for retailing chains and erstwhile local chains to

spread across the country.

According to the Tata Strategic Management Group (TSMG)’s

projection, organized Food & Grocery (F&G) retail in India could grow to Rs.

1750 Billion (at current prices) by 2015 representing ~11% of overall Food &

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Grocery sales. As the organized food retail market matures in India, there would

be an increased need for players to differentiate through innovation. Innovations

would largely come under two heads namely store based and technology based.

Store based retailers have been categorized into Food retailers and non-

food retailers. Food retailers sell general merchandise also but proportion of

revenue from food items is quite significant. Thus it becomes meaningful to take

food as separate category .The percentage of food and grocery in overall retail is

60% .Indians have variety of food habits due to cultural , religious and lifestyle

diversity that is a challenge for retailer.

1.4.2 Unorganized Vs Organized Retailing in India

Retail industry can be broadly classified into two categories namely-

organised and unorganised retail .Organized retail - Organised traders/retailers,

who are licensed for trading activities and registered to pay taxes to the

government. Unorganized retail – It consists of unauthorized small shops -

conventional Kirana shops, general stores, corner shops among various other

small retail outlets - but remain as the radiating force of Indian retail industry. In

the developed countries, the organised retail industry accounts for almost 80% of

the total retail trade. In contrast, in India organised retail trade accounts for

merely 8-10% of the total retail trade. This highlights a lot of scope for further

penetration of organized retail in India.

Modern format of Indian retailing, suffers from few disadvantages such

as lack of differentiation strategies, lack of trained man power, huge real estate

investments, lack of ample research in the area of retailing in India, soaring

overhead costs and very importantly, the inclination of masses towards

traditional retail formats especially in the suburban and rural areas. For the

traditional retailers, there are few accrued advantages from factors such as

familiarity of being at the consumer neighborhood, availability of credit to the

consumers, absence of labor costs as mostly the shops are owner-operated, total

exclusion of advertising expenses, limited inventory with low to moderate

working capital.

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It is evident that both traditional and modern retail formats will coexist

and will not mutually threaten the existence of the other. As long as the

consumers see certain conveniences, in both these formats, it is good for the

industry in terms of huge employment opportunities and contribution to the

GDP. It can be assumed that while stock-up purchases (buying the month's

groceries/ week-end vegetable purchases, for instance) are likely to move to the

supermarkets and hypermarkets, top-ups (when you run out of, say,

shampoo/oil/consumer staples, in the middle of the month) will continue at local

stores.

1.4.3 FDI in Indian Retail

Larger FDI will generate larger employment, incomes and better

technology and inventory management. Organized retail requires large

investments and the domestic capital generation is not easy. Retail operations are

more efficiently managed by foreign players who have experience. The

consumers would be glad to welcome larger and hopefully affordable range of

products in the market. The flip side is that the players in the unorganized sector

fear that allowing FDI in retail will kill their livelihood and render many people

jobless. There is a possibility that global retailers would consider global sourcing

which would in turn affect local producers. There might be chances of major

players having a monopoly on the prices. There might be asymmetric growth in

the cities leading to discontent elsewhere. The political implications of backlash

of the stakeholders in unorganized retail are too large for the Government to

ignore. Current global and domestic economic and political scenario is not too

conducive for large investments in the retail sector. Though FDI in multi-brand

retailing was allowed by the previous government, the decision was left to

respective state governments whether to allow foreign retailers into their state or

not.

1.5 Food Retail-Concept

Food retailing has come of age from a period when food items were sold

in small road side grocery shops and mandis, haats and bazzars by vendors to a

stage when food products (processed and groceries) are retailed through modern

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retail stores. In these modern retail stores consumers can inspect, select and pick

up the products they like in a comfortable ambience and still pay a fair price for

the merchandise. Shopping for food is no longer a strenuous and uncomfortable

affair for the Indian consumer.

A recent analysis shows that countries go through a distinct and

evolutionary pattern of food consumption. In the first stage the focus is on

obtaining basic dietary inputs. The second stage focuses on improving and

building basic foods before moving to the third stage of adding premium food to

the diet. Most of urban India has already moved to the third stage and it is

proving to be a great focus area for food retailers. The future would witness

creation of specific models or formats – one for the upwardly mobile urbanite

and the other for the rural markets.

1.5.1 Growth of Organized Food Retail in India

Integration of food industry

India is world’s second largest grower of fruits and vegetables after

Brazil and China. While the agriculture sector has witnessed several leaps of

innovation and technological advancements, the processing sector is still in its

infancy. Even with less than 4 percent processing of fruits and vegetables, the

Food Processing Industry sector in India is one of the largest in terms of

production, consumption within India, export and growth prospects. The

processed food market for India is vast and the amount of scope that retail chains

would be exposed to is phenomenal, taking into consideration the demographics

and raise in standards of living. Retailers could throng the market with all these

processed and packaged foods with their private labels.

Growing economic status of women

The rise in Indian women's literacy and their increased representation in

the labour force have led to their growing economic independence. This has

resulted in an increase in double income families who have higher disposable

income. In the case of double-income families with no kids, a greater proportion

of disposable income is spent on leisure and recreation, eating out and health and

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fitness. In case of double income families with kids, a greater proportion of

disposable income is spent on children's education, educational toys, nutrition,

and books (Euromonitor International, 2010).

A woman in India spends most of her shopping time buying grocery

items for her home, because she does spend a lot of time making sure her family

gets a good meal. Women’s role as caregiver persists even as women's

professional responsibilities mount. This responsibility contributes to women's

more acute shopping awareness and higher expectations. Women clearly

dedicate a lot of time to make sure that they find the best deals and the most

suitable items for their needs. Given such an important emerging role of women,

it is so significant for the retail firms to identify, analyse and aggregate their

shopping behaviour across various categories especially in food.

Social Trends

Social trends of a country have impact on the scheme of growth of food

retailing in a country. Increased income levels and more women willing to make

use of their education by joining work has increasingly affected the shopping

patterns that are moving towards fulfilling the need of convenience shopping

through modern retail formats. Indian consumer is quality and price conscious

and this awareness would drive the retailers to rework their supply chain

relationships. Further, it is widely felt that the key differentiator between the

successful and not so successful retailers is primarily in the area of technology.

Simultaneously, it will be technology that will help the organized retailer score

over the unorganized players, giving both cost and service advantages.

1.5.2 Food retail formats

With the changing food consumption patterns and changing consumer

need for convenience, choice and value for money, the set-up of retail formats in

the country are also changing. The Indian consumers do visit about eight to ten

outlets to purchase various food products, which make up their daily

consumption basket. This includes visiting neighborhood kirana stores, bakeries,

fruit and vegetable outlets, dairy booths and chakkies (small flour mills), which

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is very time-consuming and unproductive way of shopping for food. With

changing lifestyle there is growing scarcity of time, and convenience in food

shopping is emerging as an important driver of growth of one-stop retail formats

that can offer consumer 'value for time' in addition to 'value for money'. These

are giving an opportunity to various other retail formats like:

Neighborhood or Convenience store

In India, about 90 percent of food purchases are made within a distance

of 1.5 km from the customer's home. This means that organized retailers should

have a format based on the customer’s basic need of locational convenience in

order to capture the share of wallet that the customer spent on food. These stores

cater to the consumer's daily and weekly needs.

A convenience store is a well located, food oriented retailer that is open

for long hours and carries limited number of items.

Average to limited variety and assortment, above average prices, average

atmospherics and customer services.

Situated within residential areas thus reducing consumer travelling time

and customers can pay multiple visits during the week.

Few examples of convenience retail formats in organized food retail sector are

Table 1.2 Convenience retail formats in organized food retail

Retail Organization Convenience Formats

Spencer’s Retail (RPG Group) Spencer’s Daily, Express

Reliance Retail Reliance Delight

Bharti Retail Ltd., Easy Day

Supermarkets

This retail format caters to the consumer’s need for choice and variety.

These needs translate into ‘more width’ and ‘more depth’ in each category. Most

Indian Supermarkets (which are basically large grocery stores) are located in and

around major cities. They follow centralized purchasing system and are supplied

by distribution centers of the parent organization.

The supermarket typically comprises fresh fruits and vegetables, dairy

products and baked food products, canned and packaged food, a variety

of household goods.

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Usually situated near a residential area in order to be easily accessible

and open for long hours and offer average variety and assortment of

merchandise

Large super markets with an area of 3500-5000 sq ft; Mini

Supermarkets with an area of 1000-2000 sq ft.

Table 1.3 Supermarket retail formats in organized food retail

Retail organization Supermarket formats

Reliance Retail Reliance Fresh

The Nilgiris Dairy Farm Pvt. Ltd Nilgiris

Aditya Birla Retail Ltd., More

Foodworld Supermarkets Ltd Food world

Hypermarket

Hypermarkets are essentially destination stores catering to the

consumers' bulk shopping needs in both food and non-food categories.

Hypermarkets (above 10,000 sq. ft.) have come up across major metropolitan

cities, offering a range of value-added products and services to price-conscious

middle income consumers. The hypermarket retail concept has three basic

percepts:

A large floor space, varying between 40,000 sq. ft to 2, 00,000 sq .ft, so

that it can have the widest assortment of products. It is associated to a

large parking lot.

It aims to sell products at a discount in comparison to market prices thus

offer low price points.

It deploys self-service techniques based on effective merchandising and

sales promotion methods.

Many hypermarkets choose sub-urban or out-of-town, stand-alone locations as

they need huge space for merchandise and parking and other facilities.

Table 1.4 Hypermarket retail formats in organized food retail

Retail organization Hypermarket Format

Spencer’s Spencer’s Hyper

Reliance Retail Reliance mart

Future Group Big Bazaar

Trent(Tata group) Star India Bazaar

Auchan Hypermarket India Auchan

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Cash and Carry (C & C) stores

Cash and Carry (C & C) stores sell their products to their members only.

The typical area of a C & C store is 70,000 to 100,000 sq. ft. and both food and

non-food products are stocked. The members are typically retailers and

institutions. The key added value is a wide range of products under one roof,

available at wholesale prices. So far, only four (three foreign and one domestic)

companies operate in this space: Metro (German), Shoprite (South African), and

SPAR (Dutch) are the foreign players while Wal-Mart has recently set up a joint

venture with Bharti retail with Cash and Carry stores. However, there is a large

variance in the categorization of these stores by area as retailers have different

definitions for various patterns of stores.

Online grocery outlets:

Increasing shortage of time of urban Indians is fuelling the growth of

online grocery formats. Grocery is a standardized category which doesn’t

require much touch and feel like apparel. Hence online grocery purchase is

growing and it is considered as a convenient format. Selling perishable goods

online is far more difficult than selling non-perishables. Selling groceries online

requires expensive investments to build high-end IT infrastructure, an efficient

supply chain, quality warehousing and storage facilities, and an efficient

delivery system.

According to retail consultancy Technopak, the online grocery retail

market is growing at 25 to 30 percent in the metros and other large cities in the

country. With a large customer base and increasing penetration of Internet

connectivity (partly through smart phones) and growing popularity of online

shopping, there is huge potential in for online groceries. Online grocery stores

are experimenting with different business and delivery models. They are still

evolving with a right format.

Famous online grocers in India

veggibazaar.com

fresh n daily.com

farm2kitchen.com

aaramshop.com,

ekstop.com,

bigbasket.com

atmydoorsteps.com

mygrahak.com,

rationhut.com

seatohome.com

zopnow.com localbanya.com

Compiled from online retail directory

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Famous online grocers in Tamil Nadu Chennai chennaionlinegrocery.com chennaibasket.com

angaadi.com veggibazaar.com

ordervegetableonline.com frrutto.com

Coimbatore clickmart.co.in

groceryraja.com

purebasket.com dhoolmart.com

fastcovai.com

kovaimaligai.com

Tiruchirapalli

www.maligai.net

Madurai ekadai.in

rajkumaronlineshopping.com

sbuyer.com

getmarche.com

Compiled from online retail directory

Most of the online grocers are functioning within a geographical area or

delivering to a particular region.

1.5.3 Top Food Retailers in India

A brief profile of some of the leading food retail chains operating in the country

are:

Reliance Fresh

Reliance Fresh was launched by the opening of new retail stores in

Hyderabad on November 3, 2006. Later in 2007, 12 Reliance Fresh outlets were

opened in Chennai increasing the total store count to 40. Reliance tested its retail

concepts by controlled entry, beginning in the southern states. The stores

stocked their own private label in staples and food under the ‘Reliance Select’

label. The company already has 1691 Reliance Fresh outlets across the country.

These stores sell fresh fruits and vegetables, staples, groceries, fresh juice, bars,

and dairy products.

Big Bazaar

Big Bazaar was launched in September, 2001 with the opening of its first

four stores in Calcutta, Indore, Bangalore and Hyderabad. Within a span of 13

years, there are now 214 Big Bazaar stores in 80 cities and towns across India.

Big Bazaar is designed as an agglomeration of bazaars or Indian markets with

clusters offering a wide range of merchandise including fashion and apparels,

food products, general merchandise, furniture, electronics, books, fast food,

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leisure and entertainment section. Big Bazaar is part of Future Group and is

owned through a wholly owned subsidiary of Pantaloon Retail India Limited.

More

ABRL’s (Aditya Birla Retail Limited) foray into the retail sector began

in December 2006 when it acquired Trinethra, the chain of stores based in South

India. In May 2007, ABRL launched its own brand of stores called ‘More’. The

company had set up more than 500 Supermarkets and 16 Hypermarkets. All the

Supermarkets are branded ‘More’ and the Hypermarkets are branded ‘More

Megastore’. Supermarkets branded as ‘More’ are averaging 2,500 sq. ft. area

with the core proposition of offering value, convenience and trust to the

customers. ABRL plans to open 100 supermarkets and 6-8 hypermarkets in the

near future.

6-TEN

The 6-Ten neighborhood Convenience store chain is a division of REI

Agro Ltd, India’s leading producer and exporter of basmati rice. Launched on

March 27, 2007, neighborhood convenience store chain 6Ten’s retail network

has already spread to over 344 stores across NCR, Chandigarh, Mohali,

Panchkula, Amritsar, Ludhiana, Ambala, and Nagpur with 3,10,000 sq.ft of

retail space on investment of Rs.150 crore. It offers products such as grocery

items, FMCG, and fruit and vegetables. Targeting middle class consumers, the

Convenience stores are typically located close to consumers.

Easy Day

Easyday is an Indian retail brand that runs chains of consumer retail

department. The brand is wholly owned by Bharti Enterprises Limited and is

operated by its subsidiary, Bharti Retail Limited, which is headquartered in New

Delhi. The technical and management support for the brand is provided

by Arkansas, United States based Wal-Mart Stores, Inc,. Bharti Enterprises

announced its foray into retail in February 2007and the first store was opened

in Punjab, India in April 2008. Easy day presently has 220 stores across 13 states

and in over 110 towns and cities. Easyday has aggressive plans for expansion

and is aiming to have 638 stores by December 2018.

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Spencer's

Owned by the RPG Group, Spencer's Retail Limited is one of India's

largest and fastest growing multi-format retailers with 400 stores, including 30

large format stores across 60 cities in India. Spencer's focuses on verticals like

fresh fruits and vegetables, Food and Grocery, personal care, garments and

fashion accessories, home and office essentials, and electrical and electronics

items. Established in 1996, Spencer's has become a popular destination for

shoppers in India with Hypermarkets and Convenient stores catering to various

shopping needs of its large consumer base.

Nature’s Basket

It was started in 2005 as a single fresh food store. It is a venture of

Godrej Agrovet. The company started its fruits, vegetables, dairy and poultry

retail business through its Nature’s Basket stores in the urban areas. 32-store

chain of premium gourmet stores strategically located at high street locations in

Mumbai, Delhi/NCR, Pune, Hyderabad and Bangalore.

ITC Choupal Fresh

These stores were started in the cities of Chandigarh, Hyderabad, and

Pune, with their own cold chain supply to wholesale and retail clients. ITC had

designed the supply chain in collaboration with Ingersoll Rand and Mitsubishi's

Snowman. Ingersoll Rand had designed the climate-control shelves, the freezer

trucks in which farmers send produce, the pre-coolers, and Snowman managed

the logistics of the produce. It is expected that the organized retail market for

fresh produce would touch US$12.4 billion (Rs. 500 billion) in the three years.

The e-choupal project was empowering farmers and in turn, helping create new

businesses for the company.

Heritage Fresh

The Heritage Group, founded in 1992 by Nara Chandrababu Naidu, with

three-business divisions viz. Dairy, Retail and Agri under its flagship companies

– Heritage Foods (India) Limited (HFIL), one infrastructure subsidiary –

Heritage Infra Developers Limited and other associate Companies viz. Heritage

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Finlease Limited, Heritage International Limited and Heritage Agro Merine

Private Limited. Presently Heritage’s milk products have market presence in

Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Maharashtra and in its

retail stores across Bangalore, Chennai and Hyderabad. Heritage Fresh today has

a total of 91 stores across three cities. 50 stored in Hyderabad, 14 in Bangalore,

and 27 stores in Chennai.

Nilgiri’s

Nilgiri’s is South India’s leading chain of retail stores providing

consumers with a shopping experience that hinges around freshness of produce,

superior quality and better value. From humble beginning in the hills around

Ooty and Coonoor, Nilgiris has grown from being a Dairy Farm to a

Supermarket chain of over 90 stores spread across India’s southern states. On

November 21, 2014, Future Consumer Enterprises Ltd. acquired the 98% from

Actis Capital and other promoters and thus becoming fully owned subsidiary

under Future Consumer Enterprises Ltd (FCEL), which is a Future Group

Company.

Table 1.5 Top Food Retailers in India

Company Food &Grocery Retailers Number of Stores

Reliance Industries Reliance Fresh 1691 Future Group Big Bazaar, Food Bazaar, Food Hall,

KB’sFair Price 530

Aditya Birla Group More 504 REI Agro Group 6Ten 344 Bharti Group Easy Day 220

RP- Sanjiv Goenka Group

Spencer’s 400

Avenue Supermarkets

D-Mart 79

Godrej Group Nature’s Basket 32 Tata Sons Star Bazaar 11

Source: Company Reports, NewsReports.2014

1.5.4 Categories of food retailing in India

Food as a sector can be defined as food &grocery and food services

which include catering services and restaurants, fast food centers, etc. Food

&grocery sector consists of as Vegetables, Fruits, Egg, Meat, Fish and other

categories such as Dairy products, Staples, Eatables, Ready to eat and Ready to

cook.

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Categories of food retailing

Vegetables Fruits Egg Meat Fish

Dairy

Products Staples Eatables Ready to Eat

Ready to

Cook

Table 1.6 Food category other than Vegetables, Fruits, Egg, Fish & Meat

Food Category Items included

Dairy products Milk, Curd, Butter, Cheese, Paneer

Staples Cereals, Pulses, Flour, Spices, Sugar, Salt, edible oils

Eatables Biscuits, Sweets, Savouries, ice creams and beverages

like cola and fruit drinks

Ready to Eat Cornflakes, Cereals, Pickles, Bread, Cooked

Chapattis, Parottas, Desserts

Ready to cook Canned Veg/Non-Veg, Noodles, pasta, instant mixes

Compiled from various sources

1.6 Food Retailing in Tamil Nadu

Retail grocery business is one of the most profitable businesses in

Tamilnadu. Consumers purchase all grocery items which are useful for day to

day life like rice, Pulses, soaps, brushes, toothpaste, breads etc from the grocery

shops near their houses. Generally these grocery shops are owned by a specific

community in Tamilnadu called ‘Nadars’. Grocery shops are the part of

Tamilnadu market since 18th century; every street or lane in Tamilnadu will

have at least 2 or 3 grocery shops and every one of them will be successful as

they have their own market to make profits.

Tamil Nadu is one of the largest retail markets in the country2. It is also

the preferred test market for most of the FMCG players as the state is renowned

for its penchant to try out new products. In case, a product fails to live up to its

expectations, the people do not purchase it again. On the other hand, the

customers from Tamil Nadu are loyal to their brands. Therefore, if a company

captures and gets well-entrenched in the market and continues to provide the

customers with quality products, its market share will remain intact.

2 ‘The Indian Kaleidoscope-Emerging trends in retail’ PwC report, September 2012, pp 45.

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The food retail activities in the state of Tamilnadu is on par with the

overall retail scenario of the country. Most of the national players in this

segment operate their stores across the state and are successfully doing their

business. Some of the major organized food retailers in the state are, Reliance

fresh, Nilgiris, Spencer’s, More and food bazaar. Competing with them is one of

the household names – the vegetable and fruit retail chain ‘Pazhamudhir

Nilayam’ based in Coimbatore. Thus the food retail market environment is

highly competitive and with more choices for the customers.

Food Retail in the Major Cities of Tamilnadu

This research covers the four major cities in Tamilnadu viz., Chennai,

Madurai, Coimbatore and Tiruchirapalli. These are the cities which are

populous, commercially vibrant and industrially developed. By and large these

cities are witnessing tremendous developments in the area of retailing.

Chennai

Chennai being a metro it has its own importance in the retail map of the

country. Being the capital of the state, by virtue of its significance and

development, almost all the national food retailers have their stores across the

city. The city also has a mix of population exhibiting widely varying food

culture and shopping behaviour.

The following is the list of major food retailers operating in and around Chennai:

1.7 Major food retailers operating in and around Chennai

Name of the store No. of stores

More Supermarket 25 stores

Spencer’s Retail More than 50 stores (all formats)

Reliance Fresh More than 25 stores

Food World Limited number of stores – less than 10

Nilgiris Around 25 stores

Food Bazaar 4 stores (as a part of Big bazaar)

Tata’s Star bazaar 1 store

Compiled from online retail directory

Apart from these there are several local chain of stores across variety of

food categories such as are also doing a sizeable business of which

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‘Pazhamudhir’ (name used as prefix & suffix by many such vegetable and fruit

retail chains across the city).

Madurai

Madurai -the second largest city in the state has its own preference when

it comes to food and food shopping in particular. Though the obvious choice for

the food shoppers in this temple city is the local markets and weekly markets,

still there are lots of organized retailers operating here. The following is the list

of organized food retailers in Madurai:

Table 1.8 List of organized food retailers in Madurai

Name of the store No. of stores

More Supermarket -

Spencer’s Retail 2 stores

Reliance Fresh 5 stores

Food World -

Nilgiris 4 stores

Food Bazaar 1 store (as a part of Big bazaar)

Compiled from online retail directory

The details mentioned above indicate the nascent stage of organized food

retail market in Madurai. Though this list represents only national food retailers,

there are other local stores that are into food retailing here. These are kannan

departmental store, femina super daily home needs, Remuki supermarket and

quite a few pazhamudhir nilayam.

Coimbatore

The Southern Manchester as it is popularly known, this textile city has

developed quite dynamically in recent times. Next to Chennai, Coimbatore hosts

lot of industrial activities across various categories. This city has a mixed

population from across the country and quiet understandably has a good number

of upper middle class populations. Higher purchasing power, growing working

class and attractive social indicators are driving the growth of organized retail

activities in this city. The city has a good number of organized retailers

operating various formats. The city also houses two malls with a good number of

foot falls. The following is the list of organized retailers in the city:

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Table 1.9 List of organized food retailers in Coimbatore

Name of the store No. of stores

More Supermarket 2

Spencer’s Retail 3

Reliance Fresh 5 stores

Food World -

Nilgiris 2 stores

Food Bazaar 1 store (as a part of Big bazaar)

Spar 1 store (in a mall)

Reliance Hyper 1 store

Compiled from online retail directory

Apart from the above, there are other local food retail chains across

various food categories are quiet popular in this region. They are kannan

departmental store, Kovai Pazhamudhir, Krishna sweets, K.R Bakery and so on.

Tiruchirapalli

Of all the four cities selected for the study, Tiruchirapalli has relatively

less number of organized retail stores. Apart from them mentioned below, there

are other local modern food retailers such as chain of pazhamudhir stores,

popular bakery outlets and fast food outlets too. Interestingly, the city has a

growing preference for new-age retailers across the categories and definitely it is

a fast developing retail market in the tier II category in the state.

Table 1.10 List of organized food retailers in Tiruchirapalli

Name of the store No. of stores

Reliance Fresh 2

Spencer’s Retail 1

Reliance Hyper 1

Nilgiris 1

Compiled from online retail directory

1.7 Shopping Behaviour-Conceptual Introduction

1.7.1 Women Shopping Behaviour-Conceptual Introduction

A woman in India spends most of her shopping time buying grocery

items for her home, because she does spend a lot of time making sure her family

gets a good meal. Women’s role as caregiver persists even as women's

professional responsibilities mount. This responsibility contributes to women's

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more acute shopping awareness and higher expectations. Women think of

shopping in an inter-personal, human fashion and men treat it as more

instrumental. Women clearly dedicate a lot of time to making sure they find the

best deals and the most suitable items for their needs. Shopper typologies

address a number of different variables, but what seems to be missing is the

gender variable.

Shopping is very much a gendered activity, meaning that men and

women have very different roles to play, and that they would make very

different decisions. The actual act of shopping seemed to be much more part of

the woman’s domain, while the man’s role was to take care of monetary issues.

Women are much more interested in the activity than men are, and that they also

much more likely to have a positive attitude to the activity than men do. If the

retailers treat men and women differently, then they are going to be more

successful. It’s important for retailers to remember it's not only what they're

purchasing, but also how they're doing it.

1.7.2 Factors influencing Women Shopping Behaviour

Consumer related factors

Age, Gender, Education, Family lifecycle, Family size, Occupation,

Family Income, Food preference, Life style, Food budget, Shopping Ideologies

and orientation, Shopping companion, and Location, are the consumer related

factors which are considered for the study. The Food shopping behaviour of the

consumer is influenced by these factors to larger extent. As age increases the

lifecycle changes happen and it brings lot of changes in food preference.

Lifestyle of the consumer decides the place of purchase and frequency of

purchase of food items. During these changes consumer’s health related

concerns, fitness requirements also warrant the changes in their food shopping

behaviour. It also affects the distance travelled and time spent on food shopping.

Occupation of the person has an effect on food preparation time which results in

bulk stocking, eating out and inclination towards ready to eat and ready to cook

food items.

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The extent of food retail penetration in the location may have an impact

on the perception of the consumers in that area. Family size is the indicator of

amount of food requirement and the need for different variety of food. Food

preference such as vegetarian, Non-vegetarian and Eggitarian has direct

influence on the food budget and the frequency of purchase. Family income and

the Food budget may influence the impulsive shopping behaviour. Shopping

companion who accompanies the shopper may influence on decision making on

place of purchase and choice of product. Shopping Ideologies and orientation

towards food shopping may have an impact on food shopping behaviour.

Consumption related factors

Consumption of food has the following factors which decide the overall

food shopping behaviour of consumers. They are Money spent and Time spent

on food shopping, Frequency of food purchase & Distance travelled for food

shopping across various categories, mode of payment and Choice of store. It is

all about how much time and money spent for food shopping, the distance

consumer is willing to travel to procure the food items, and the frequency in

which they are shopping these food categories and in which store format. Mode

of payment such as cash, debit card, credit card is also an important factor which

influences the food shopping behaviour.

Store related factors:

The selection of the store by the consumers may be influenced by the

location of the store, parking facility available in the store, store ambience and

price of the products, offers and discounts available in the store, quality of the

products available in the store, merchandise availability and availability of all

brands and products, assortment and variety of products, quick billing and

checkout, image and popularity of the store and customer friendly layout of the

store.

Though the traditional retail formats are dominant in food retail in India,

the emergence of packaged and semi processed food categories coupled with

modern store ambience have resulted in the preference for organised retail stores

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in metros and cities. The rise in Indian women's literacy and their increased

representation in the labour force have led to their growing economic

independence. Indian consumer is quality and price conscious and this awareness

would drive the retailers to rework their supply chain relationships.

Being familiar with the Age, Gender, Marital status, Address, Religion,

Occupation and Income of consumer is just not enough and retailers need to

explore more about Attitude, Interest, Opinion and lifestyle of consumers to build

up a much more stronger relationship . As ‘Psychographics’ go beyond the basic

information and analyze the personal details of the consumer such as their

hobbies, personality traits, values, opinions, and behaviours, this understanding

can help the retailers to learn what consumers prefer and how they make the

purchase decisions. To be precise demographics helps to identify who is our

consumer; Psychographics helps to understand his internal attributes and

attitudes. Demographics help you understand who buys your product or service,

while psychographics helps you understand why they buy. Further, the knowledge

of consumers’ demographics and psychographics will enable the retailer to

advertise, market, and sell to them more effectively. Together, demographics and

psychographics can give retailers a critical winning edge.

1.8 Organization of thesis

The thesis is organized in a sequential manner with details of observations and

analysis under five chapters as follows:

Chapter I - Introduction

The concepts of retailing with specific reference to its evolution, birth of

organized retailing in India are reviewed. Growth of Organized Food retail in

India with various formats is discussed. Evolution of food retail in Tamilnadu

and the major food retailers are reviewed. Concept of Market segmentation is

reviewed with a focus to understand the consumers better. The influence of

women consumers in food shopping and the factors affecting their decision are

discussed.

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Chapter II - Review of Literature

Studies conducted at both abroad and India are reviewed and discussed

in this chapter. Publication in national international Journals, Books, Industrial

Reports, Articles from Magazines and Newspapers, Company websites; Papers

presented in Conferences and previous research studies from various libraries

were reviewed. Literature on food retailing, shopping behaviour, Studies relating

to the influence of Demographic and psychographic profile on shopping

behaviour and Studies relating to women shopping behaviour were the topics

reviewed by the researcher.

Chapter III – Methodology

The research methodology used for the study is described in this chapter

with details about sources of data, sample design, tools of analysis and research

model. Further need for the study, objectives, research questions, scope and

limitations of the study are stated.

Chapter IV - Results and Discussion

The results of the analysis are tabulated and discussed with appropriate

charts and diagrams to meet the research objectives of the study. The related

interpretations are also discussed.

Chapter V - Findings, Recommendations & Conclusion

A summary of findings with related recommendations are presented in

this chapter. The chapter is concluded with directions for future research.