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    Asia Pacific Journal of Marketing and LogisticsAre Indian consumers brand conscious? Insights for global retailers

    Arpita Mukherjee Divya Satija Tanu M. Goyal Murali K. Mantrala Shaoming ZouArticle in format ion:

    To cite this document:Arpita Mukherjee Divya Satija Tanu M. Goyal Murali K. Mantrala Shaoming Zou, (2012),"Are Indianconsumers brand conscious? Insights for global retailers", Asia Pacific Journal of Marketing and Logistics,Vol. 24 Iss 3 pp. 482 - 499Permanent link to this document:http://dx.doi.org/10.1108/13555851211237920

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    Are Indian consumers brandconscious? Insights for global

    retailersArpita Mukherjee, Divya Satija and Tanu M. Goyal

    Indian Council for Research on International Economic Relations,New Delhi, India, and

    Murali K. Mantrala and Shaoming ZouTrulaske College of Business, University of Missouri, Columbia, Missouri, USA

    Abstract

    Purpose The purpose of this paper is to assess Indian consumers brand consciousness by

    examining their brand knowledge, purchase behaviour and perceptions of foreign brands. It provideskey inputs for global retailers to harness the potential in growing consumerism in India.

    Design/methodology/approach A survey of 300 Indian consumers was conducted and the datawere analysed using descriptive and simple regression techniques.

    Findings Thestudy found that brand purchase in India varies across product categories. At present,consumer knowledge and use of foreign brands is low, and Indian consumers are price-sensitive. Indianconsumers are experimenting with brands and would like more foreign brands to enter the Indianmarket.

    Research limitations/implications Due to the small sample size, advanced econometricstechniques could not be used to analyse the dataset.

    Originality/value The paper is the first to assess the impact of retail liberalisation on Indianconsumers shopping behaviour, particularly their brand consciousness.

    KeywordsRetail, Consumer behaviour, Global retailers, Brand consciousness, FDI, India, RetailingPaper typeResearch paper

    The relationship between economic development, rise in per capita income, growingconsumerism, proliferation of branded products[1], and retail modernisation is globallywell researched (Alexander and Myers, 1999; Buonofina, 1987; Goldman, 1974;Witt, 2001). International studies show that with high economic growth, per capitaincome increases, which leads to a shift in consumption patterns from necessity items todiscretionary consumption. Consumers start experimenting with brands. The growth ofretail and growing brand consciousness are also closely linked. Webster (2000) pointedout that brands offer retailers many benefits including increased consumer demand,

    a favourable attitude towards branded products in their stores, and credibility. One ofthe key beneficiaries of the interplay of such linkages demonstrated especially in anemerging economy is global retailers.

    Indias gross domestic product (GDP) growth rate for 2010-2011 was 8.6 percent(Economic Survey, 2010-2011) and the economy is projected to grow at the rate of9-9.5 percent during the 12th plan (2012-2017) according to the Planning Commission,Government of India (2008). The number of rich and middle-income consumers hasincreased, with a corresponding fall in the number of people below the poverty line.

    The current issue and full text archive of this journal is available at

    www.emeraldinsight.com/1355-5855.htm

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    Received 20 October 2011Revised 12 March 2012Accepted 14 March 2012

    Asia Pacific Journal of Marketing andLogisticsVol. 24 No. 3, 2012pp. 482-499q Emerald Group Publishing Limited1355-5855DOI 10.1108/13555851211237920

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    Between 2001 and 2010, the size of the rich consumer class increased by 21.4 percent,while the middle class increased by 12.9 percent (Shukla, 2010).

    Over the past few years, the emerging Indian market has attracted foreign retailers,and in 2010, India attracted the largest number of new retailers among emerging and

    mature markets (CBRE, 2011). As a result, the Indian consumer market is growing. In2007, India was ranked the 12th largest consumer market and it is expected to be thefifth-largest consumer market by 2025 after the USA, Japan, China and the UK(McKinsey Global Institute, 2007). At the same time, there has been a notable change inthe spending pattern of Indian consumers due to the growing size of the middle class,rising GDP, and disposable incomes, In India, around 60 percent of the GDP isconsumed[2]. At present, more than 40 percent of consumer spending is on food, but thispercentage is expected to decline, while spending on non-discretionary items likewellness products is expected to rise (McKinsey Global Institute, 2007). The entry offoreign retail opened avenues for exposure to more international brands and Indianconsumers are expected to become more brand conscious. In 2007, India was ranked asthe third most brand conscious country, after Greece and Hong Kong (AC Nielsen, 2008).

    Prior to the 1990s, India was a closed economy. The retail sector mainly consisted ofsmall, privately owned single stores that did not have corporate management and wereknown as traditional retailers (Saraogi, 2006). These stores largely sold non-brandedproducts. The concept of branding was limited and very few brands such as Bata werepresent in the Indian market. With the liberalisation of the economy in the 1990s,a number of multinationals entered the Indian market (Burch and Lawrence, 2007).Several Indian corporates started investing in retail and different store and non-storeformats evolved. On the demand side, there has been not only an increase in income butalso a change in the demographic profile of consumers (Sinha and Kar, 2007).Educational qualifications have increased, women have started entering the workforceand nuclear families have begun to replace the traditional joint family system. There is

    also increased awareness about global shopping patterns and products, brought aboutby the liberalisation of the media and access to international travel when travelrestrictions were removed and airfares became cheaper (Rao, 2000). All these factorscontributed to the growth and modernisation of retail.

    Retail is now one of the fastest growing sectors in India. It is estimated that theshare of retail trade in GDP is approximately 11-12 percent[3]. In 2010, the Indian retailmarket was valued at $415 billion, of which the share of organised or modern retail was7 percent or $29.05 billion (Kearney, 2011). The sector is expected to grow to$535 billion by 2013, while the share of modern retail is expected to reach 10 percent by2013 and 20 percent by 2020 (Kearney, 2010, 2011)[4].

    In 2010, food and grocery was the largest segment of retail in India with a share ofaround 50 percent, butonly around 1 percentwas in themodernsector(Guruswamy etal.,

    2005). Modern retail has a larger presence in product categories like clothing, watchesand footwear where there has been significant penetration of branded products.

    Branded products are now sold in India through both traditional and modern retailoutlets, using different retail formats such as exclusive brand outlets and multi-branddepartment stores. Brand visibility has increased through multiple advertising channelssuch as direct-to-home (DTH) television and lifestyle magazines. Brand-owners andretailers have implemented schemes such as customer loyalty cards to attractconsumers and retain them (Aneja, 1996). Hence, Indian consumers have started

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    experimenting with brands (Mukherj ee and Patel, 2005). However,non-branded products continue to be sold through traditional retail outlets, althoughproducts such as food products are sold through both traditional and modern outlets(Chattopadhyayet al., 2011).

    Modern retail is not spread equally across the country. It started in the south of Indiaand large metro cities and has spread to smaller cities (Joseph and Soundararajan, 2009).Around 20 Indian cities that account for merely 10 percent of the population generate31 percent of disposable income. Hence, modern retail has largely developed in thesecities (NCAER and Future Capital Research, 2008). With the growth in modern retail,shopping space has increased; from three shopping malls in 1999 the umber of mallsincreased to 280 in 2007 and is expected to increase at a compound annual growth rate ofmore than 18.9 percent between 2007 and 2015 (Images Group, 2009).

    To facilitate higher growth in modern retail and provide greater variety at lowerprices to consumers, in 2006 the Indian government partially opened up FDI in retail,allowing 51 percent FDI in a retail enterprise, subject to certain conditions. In January2012, the Indian government permitted 100 percent FDI in single-brand retail with thefollowing conditions:

    . only single-brand products can be sold (i.e. retail of multi-brand goods even ifproduced by the same manufacturer are not be allowed);

    . products should be sold under the same brand internationally;

    . retail of single-brand products covers only products that are branded duringmanufacture;

    . any addition to product categories to be sold under single-brand will requirefresh approval from the government;

    . the foreign investor should be the owner of the brand; and

    . for FDI above 51 percent, 30 percent sourcing from small and medium-scaleenterprises (SMEs) is mandatory.

    India is probably the only country in the world that has a brand-based retail FDI policy.Although FDI is not allowed in multi-brand retail, foreign multi-brand retailers

    have entered the Indian market through routes such as wholesale cash-and-carry(for example, Tesco and WalMart), franchises (for example, Versace and NEXT), andlicensing that allow 100 percent FDI (Singh and Kaur, 2010).

    Regardless of the present FDI restrictions, studies predict that modern retail willcontinue to witness double-digit growth in India (AC Nielsen, 2008; Kearney, 2011;McKinsey Global Institute, 2007). Since the Indian market is unsaturated, this is theright time for global retailers to enter the Indian market (Kearney, 2011).

    Despite these important changes in Indian retail, little research has been conductedto assess how shopping behaviour is changing in the evolving retail and policyenvironment, particularly with regard to the brand consciousness of Indian consumers.Such an analysis would help global retailers who plan to enter the Indian market afterthe 2012 policy liberalisation. This paper examines the following questions:

    . What do Indian consumers currently know about brands?

    . What factors affect Indian consumers choice of brands across certain productcategories?

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    . What are Indian consumers perceptions and attitudes towards foreign brands?

    . What are the implications for global retailers?

    1. Consumer choice behaviour: a review of literatureBoth globally and in India, various studies have examined brand knowledge,awareness and consumer purchase behaviour. Andrews and Currim (2001) used aninter-category logit model on a stratified sample of 300 households to analyse thechoice behaviour of households across product categories, using indicators such asbrand loyalty, price sensitivity, store features, and aisle display. The study found thatidentical choice behaviour of households across categories depends on the similarity ofproduct categories, but it does not analyse whether brand choice varies across differentproduct categories. Blattberget al.(1976) analysed brand choice using panel data from343 households, using two sets of similar and dissimilar products; they found thatbrand choice among the households is different for both sets of products. Nelson (2007)concludes that consumers are more likely to base their purchase decision on

    personal experience than on preliminary research about the quality of the products.Webster (2000) highlights the importance of understanding the relationship betweenmanufacturers, retailers and consumers; brand management is more effective whenmanufacturers and retailers work in close co-operation to strengthen their own brandposition in the market. It is essential to analyse the linkages between brand loyalty andmarket strategies because trust in a brand is positively related to brand loyalty(Lau and Lee, 1999).

    India has no official system to collect consumer data on consumers store choice andpurchase behaviour across different products. Existing consumer studies mapconsumers demographic profile but do not analyse their brand behaviour (Shukla,2010). Thus, most of the research in this area is based on primary surveys.Ramachander (1988) concluded that the degree of brand loyalty, pricing, packaging

    and other intervening variables such as culture and socio-economic factors influenceconsumers shopping behaviour. Indian consumers recognise that a brand adds valueto a product (Rao, 1998). Urban and rural markets are similar in brand awareness andassociating established brands with quality, but in better developed states there is adistinct preference for foreign brands (Rao, 2000), which is associated with. Kinra(2006), using seven-point semantic differential scale and CETSCALE on a sample of112 consumers in Lucknow, India found that Indian consumers perceive foreign brandsto be of better quality than Indian brands (Kinra, 2006). Kumar et al. (2007) andBandyopadhyay and Banerjee (2008) based on a primary survey of consumers inAhmedabad and Calcutta in India; highlight that country-of-origin is an importantdeterminant of consumers shopping behaviour and products of advanced countriesenjoy positive country-of-origin effect. Foreign products are not perceived differently

    even if they are manufactured domestically.Gupta and Singh (2007), show that brand loyalty and preferences for brands are

    strongly linked in India. Indian consumers are also price sensitive ( Joseph andSoundararajan, 2009; McKinsey & Company, 2008). In a survey of 32 villages, Kumarand Bishnoi (2007) found that rural consumers are willing to buy a variety of productsand brands if their prices are lowered in the future. Within the fast-moving consumergoods (FMCG) range, low priced products constitute the majority of sales volume(KPMG, 2005).

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    In India consumers shopping behaviour is affected by demographic factors such asage and gender. With women joining the workforce, shopping patterns have changed.Women prefer a wider range of brands so that they can compare different brandsbefore making a choice (Sinhaet al., 2002). The young are more willing to experiment

    with different brands and children are becoming key decision-makers in householdpurchases (Kaur and Singh, 2007). Since around 54 percent of Indians are below the ageof 25 (IBEF, 2008), there is tremendous scope for brand penetration in India.

    These studies provide insights into Indian consumers shopping behaviour and theirbrand consciousness, highlighting that their brand preferences vary across rural andurban areas and different product categories and domestic and foreign brands. Somestudies show that Indian consumers preference for foreign brands is growing and thatchildren and women are emerging as key decision-makers. However, the evolving policyand retail environment can be expected to impact consumer behaviour, requiring theinformation to be updated. For example, after policy liberalisation in 2006, new foreignbrands such as Giorgio Armani, Bottega Veneta and NEXT, entered the Indian market,but their impact on Indian consumers shopping behaviour has not been studied.

    Based on a pan-India survey, this study analyses the Indian consumers choice ofbranded and non-branded products across a wide range of products, their knowledgeof foreign brands, and their attitudes towards foreign brands. It adds to the existingliterature by providing insights into Indian consumers behaviour towards globalretailers that entered the market after the FDI policy change in 2006 or are planning toenter after further liberalisation of the policy in January 2012.

    2. Methodology2.1 InstrumentThe survey was conducted using a semi-structured questionnaire. Part of thequestionnaire was kept open-ended to maximise the information obtained. The

    questions focused on the following:. Purchase of branded versus non-branded products within each product category.. Factors affecting willingness to spend on branded products and actual

    expenditure on branded products.. Consumer knowledge about foreign brands.. Consumer attitudes towards allowing foreign brands in India.

    Since the sample size was small, purchase behaviour was examined across a largenumber of product categories and the data were collected at a single point of time.Hence, largely descriptive techniques, simple regressions and logistic regressions wereused to analyse the data.

    2.2 Sampling procedure and representationA pan-India survey was conducted in 2009-2010 covering 300 consumers. The samplewas selected using a stratified random sampling technique and the data were collectedthrough exit interviews, door-to-door surveys, and interviews in shopping malls andmarket areas. Exit and random interviews were conducted because shop intercepts(exit interviews) capture the recency effect and an interview away from the shop mightbring only visualised perception rather than the real experience (Sinha et al., 2002).

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    Individuals who have a say in the purchase decision of the family were interviewed. Toassess purchase behaviour across different product categories, 12 product categorieswere selected. These were fresh fruits and vegetables, preserved food and agroproducts, FMCG, dietary supplements, apparel, footwear, handbags, watches, metal

    jewellery, costume jewellery, furniture, and consumer durables. This covers most of theproducts that consumers purchase like fresh fruits and vegetables that are purchasedon a regular basis, preserved food and agro products and FMCGs that are purchasedon a monthly basis, and jewellery, which is purchased occasionally.

    The entire sample was stratified based on their income, occupation and education.The data on respondents income were divided into three broad categories based onaverage annual household income: low income group of $1,980-$4,000, middle-incomegroup of $4,000-$21,000 and rich with more than $21,000. Consumers in socio-economicclassification (SEC) A, B and C, classified on the basis of education and occupation,were selected from six Tier I cities, four Tier II cities and one Tier III city[5]where modern retail has a presence. Around 94 percent of the respondents were in theage group of 23-60 years, which constitutes the core of the working population and the

    decision-makers in each household. A total of 62 percent of the respondents were male.

    2.3 TechniqueThe techniques used to analyse the issues listed in Section 2.1, are described below:

    (1) The purchase of branded productsvis-a-visnon-branded products was analysedby calculating the consumers average spending on branded products for eachproduct category as a proportion of total average spending on that product(both branded and non-branded).

    (2) To determine the factors affecting willingness to spend and actual expenditureon branded products, the ordinary least square method was used. Since theshopping choices of Indian consumers are affected by factors such as level of

    income, education, international travel, gender and age, a few factors wereselected as the independent variables annual household income (i), gender (g),and international travel (n) but variables such as education and age had to bedropped because they were found to be insignificant.

    The dependent variable, wb, defined as the willingness to spend on brandedproducts, is each respondents proportion of amount they are willing to spendon branded products to the total amount they are willing to spend on allproducts (including expenditure on both branded and non-branded products).The regression function is as follows:

    wb a b1ib2gb3net

    The dependant variable, y

    b

    , is each respondents proportion of actualexpenditure on branded products to the total expenditure on all products(including expenditure on both branded and non-branded products). Theregression function is as follows:

    yb a b1ib2gb3net

    (3) Variations in factors influencing the choice of brands across selected productswere identified using logistic regression. The respondents were asked whether

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    they buy or do not buy branded handbags and jewellery, furniture and freshfruits and vegetables. Since their responses were coded as no 0 and yes 1,the dependent variable, Y, which is purchase of branded products, is an ordereddependent variable. Hence, logistic regression was used and the regression

    function is given below:Y0;1 b1i b2net

    (4) Laurent et al. (1995), defined the classic measures of brand awareness, and weused one measure the aided awareness measure to analyse Indianconsumers knowledge about foreign brands. To assess this the interviewerread out a list of brands to which the respondents express familiarity only aftergetting to see or hear the brand name. Respondents were shown a randomlyselected sample of foreign brands that are present in the Indian market andasked whether they:. know and use the brand;. know but do not use the brand; and. do not know and do not use the brand.

    Foreign brands selection was done randomly to ensure that both luxuryand non-luxury brands were covered across different product categories.The sample comprised both brands that entered the Indian market before2006 and those that entered only after the 2006 policy change.

    (5) Demographic factors affecting consumers attitude towards allowingforeign brands, F, to enter the Indian market were identified using logisticregression. The respondents were asked whether or not they wanted moreforeign brands to enter the Indian market. Since their responses were coded as no(0) and yes (1), the dependent variable, F, is an ordered dependent variable. Hence,

    logistic regression was used and the regression function is given below:

    F0;1 b1i b2eet

    where, e is thelevel of educationof therespondents. In this particular regressionother independent variables such as international travel, media exposure, genderand age had to be dropped as they turned out to be insignificant.

    3. Results3.1 Total expenditure on each product categoryFood (both fresh and preserved) accounts for 32.15 percent of the total expenditure of therespondents, as it is part of their habitual consumption. These products are bought on aregular basis largely from neighbourhood stores, due to easier access. The secondimportant category is apparel on which around 14 percent of the total expenditure ismade (Images Group, 2009). Jewellery is a high-value product that is often treated as aninvestment. It is bought occasionally but accounts for around 10 percent of respondentsexpenditure. Consumer durables account for only 8.4 percent of the total expenditure.Some products such as dietary supplements, costume jewellery and tiles that have notbeen purchased by the majority of the respondents in the past one year are clubbed in theothers category, which accounts for 13.7 percent of the total expenditure.

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    3.2 Expenditure across branded and non-branded productsRespondents mainly bought branded products in product categories such as watchesand dietary supplements. In categories like apparel, footwear and handbags, they buyboth branded and non-branded products, while in categories like fresh fruits and

    vegetables, the bulk of the purchases are non-branded products (Figure 1).

    3.3 Regional variations in purchases of branded productsThere are regional variations in purchase of brands across different regions in differentproduct categories (Images Group, 2009). The survey results show that respondents inthe north and west of India are more likely to purchase branded fresh fruits andvegetables. In the Eastern part of India, in cities like Kolkata respondents prefer Indianbrands such as Khadims in the low to mid-price ranges for shoes and handbags, while inDelhi, in the Northern part of India, respondents buy both high-priced products frommodern retail outlets and non-branded products from street shops (Table I).

    Figure 1.Total purchases and

    branded purchases acrossdifferent products

    Notes:*A large number of respondents buy both branded and non-branded apparel; therefore,

    the percentage of respondents who buy only branded apparel is low

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    3.4 Factors affecting choice of branded and non-branded productsRespondents purchase behaviour across branded and non-branded products dependson factors such as brand availability and their perception of the quality and reliability ofbrands. Respondents bought branded dietary supplements because the popular ones

    available in retail outlets (whether traditional or modern) are largely branded. Theyconsider them to be reliable as they go through health and safety checks and have tomeet government regulations. In the consumer durables category, brands are considereda proxy for good quality, and good after-sales service is provided for branded products.Most fast-moving consumer goods (FMCG) are branded, and branded FMCGs areavailable across all price ranges in both modern and traditional outlets.

    In product categories like footwear, apparel and handbags, branded products arechosen for design, comfort, durability and quality, while non-branded products arecheaper. In these product categories, brand loyalty is low and respondents experimentwith different brands.

    In the case of jewellery, products are bought from traditional retailers due to trust

    and interpersonal relationships. Moreover, traditional retailers offer the flexibility ofexchanging old jewellery for new ones besides offering customised designs. In recentyears, Indian corporate retailers have entered the jewellery business and the concept ofbranding has emerged. Consumers consider jewellery sold by branded corporate

    jewellers like Tanishq to be of better quality.Non-branded products are preferred for products like furniture, fresh and preserved

    food products, and costume jewellery. Respondents like to customise their furnitureand, therefore, most furniture items are non-branded and made to order. Non-brandedfurniture is available in all price ranges at traditional retail outlets.

    Respondents pointed out that they mainly buy fresh fruits and vegetables fromtraditional retailers, street vendors, and hawkers. In this product category there areonly a few brands and respondents perceive branded products as more expensive thannon-branded products. The survey found that knowledge of brands in this segmentis low.The bulk of costume jewellery is bought from street vendors. In recent years, theconcept of branded costume jewellery has gained momentum and respondents showeda willingness to experiment with different brands.

    Products North South East West

    Sample distribution (no.) 85 75 70 70In percentFresh fruits and vegetables 10.6 2.7 2.9 12.9

    Preserved food and agro products 64.7 21.3 51.4 20Apparel 24.7 56 48.6 35.7Handbags 65.9 28 61.4 37.1Footwear 78.8 93.3 92.9 91.4Jewellery 68.2 57.3 68.6 47.1Consumer durables 100 89.3 90 90Costume jewellery 32.9 4 18.6 27.1Furniture 51.8 30.7 32.9 27.1Ceramic tiles/sanitaryware 83.5 65.3 50 28.6

    Table I.Regional distributionof branded productpurchases

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    3.5 Demographic effectsDemographic factors (gender, education, age, location, and income) and awarenessfactors (media exposure and international travel) were analysed for their impact onconsumers choice of branded products. The data were analysed using multiple

    regression. While some of these factors were insignificant, others such as age, location,and media exposure had to be dropped due to homogeneity in the sample.

    In the case of respondents in the rich income group, a 100 percent increase in incomeleads to a 9.3 percent increase in their willingness to spend on branded productscompared to the results for those in the low and middle-income groups (Table II).Women are 4.7 percent more willing than men to spend on branded products. Thesefindings are similar to Sinha et al.(2002). The actual spending pattern is quite similarto the willingness to spend (Table III). International travel does not have a significantimpact on willingness to spend or actual spending on branded products.

    Logistic regression was used to assess the effect of demographic and awarenessfactors on purchase of branded products across different product categories and theresults are shown in Table IV. For handbags and jewellery, brand purchase is affected

    by both household income and international travel. However, in the case of furniture,household income is not a significant factor because even rich consumers prefercustomised products. For fresh fruits and vegetables, household income influences thedecision to buy brands, since branded products are perceived as expensive.

    3.6 Knowledge and use of foreign brandsThe survey results show that knowledge of brands does not ensure brand usage(i.e. a person may know of the brand but may not use it), while brand use may not ensurethat a person is aware of the country-of-origin or history and mode of entry of the brand.

    Brand knowledge and use were assessed through an aided awareness measure andthe responses are compiled in Figure 2. The points on the outer-most circle on the webrepresent the highest percentage of respondents giving that response while the pointsin the inner circles represent lower percentages. The longer the brand has been in India,the more likely is it to be known and used. Examples include Bata, Rayban,United Colors of Benetton, and Nike.

    Beta coefficient t-value Significance level

    Annual household income 0.0931253 5.11 0.000Gender 0.0476802 2.6 0.010Travelled abroad 0.0407052 1.56 0.120

    Note:ModelR2 0.1394, F 15.99, Prob. . F 0.000

    Table II.Factors affecting

    willingness to spendon branded products

    Beta coefficient t-value Significance level

    Annual household income 0.0927454 5.09 0.000Gender 0.0513272 2.8 0.006Travelled abroad 0.0442255 1.69 0.092

    Note:ModelR2 0.1445, F 16.67, Prob. . F 0.000

    Table III.Factors affecting

    actual spending onbranded products

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    The aided awareness test results show that brands that are globally well advertised aremore likely to be well known. Also, brand location has a crucial bearing on knowledgeabout the brand. Since brands like Ermenegildo Zegna and Giorgio Armani are locatedin luxury malls and five-star hotels and are not advertised extensively, awareness ofthese brands is limited. In contrast, brands like NEXT and Mango have positionedthemselves in non-luxury malls where they are more visible and, hence, better knownto a larger customer base.

    ResultsVariables Exp(B) Wald Significance Level

    Handbags and jewellery

    Annual household income 0.598 16.13 0Travelled abroad 0.336 8.14 0.004Model statistics 22 Log likelihood 379.75, p , 0.001

    FurnitureAnnual household incomeTravelled abroad 0.268 12.79 0Model statistics 22 Log likelihood 381.35, p , 0 .001

    Fresh fruits and vegetablesAnnual household income 0.509 9.23 0Travelled abroadModel statistics 22 Log likelihood 166.83, p , 0.005

    Table IV.Demographic effectson Indian consumerspurchase ofbranded products

    Figure 2.Knowledge anduse of foreign brands

    Note:Figures in parentheses show the year that the brand entered India

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    The mode of entry of a brand is not related to consumers knowledge of the brand.For instance, Versace, Ermenegildo Zegna and NEXT have entered through franchiseeagreements but NEXT is better known.

    Brands such as Giorgio Armani and Dolce and Gabbana are mainly popular for

    accessories like sunglasses and perfumes. These have been available through Indiandepartment stores and shop-in-shop arrangements. Consumers tend to buy theseaccessories to conspicuously display their brand consciousness, which has indirectlyincreased awareness of these brands among consumers.

    The survey results show that, in general, knowledge and use of luxury brands inIndia are low. Around 98 percent of the sample constitutes middle and rich Indianconsumers and the aided awareness test revealed that even this group is not aware of anumber of foreign brands, especially luxury brands because these brands are onlyavailable in a limited number of luxury malls and brands, such as Giorgio Armani andDolce & Gabbana, have only recently entered the Indian market. Another reason is thatthese brands are relatively expensive, and only a very small proportion of the Indianpopulation can afford these brands. Besides, Indian consumers are price sensitive(Joseph and Soundararajan, 2009; McKinsey & Company, 2008; Kumar and Bishnoi,2007; KPMG, 2005). Respondents pointed out that since the import duty on importedluxury brands is as high as 40 percent of the maximum retail price (MRP), it is cheaperto buy them abroad than in India. In addition, respondents said that they have comeacross a wider range of products during their international trips. However, with risingincomes and the growing penetration of foreign brands in the Indian market, bothknowledge and usage of foreign brands is expected to grow.

    3.7 Consumers attitudes towards foreign brandsAround 83 percent of the respondents are in favour of allowing more foreign brands intothe Indian market. The factors that contribute to this attitude are the high level of

    education (graduation and post-graduation) and level of income (middle and richincome) (Table V). When asked what restricted their access to foreign brands, therespondents pointed to the restrictions on foreign multi-brand retail. Removing theserestrictions would facilitate the entry of more foreign brands into the Indian market andprovide consumers with greater access. Respondents argued that the quality of foreignbrands is superior, and their entry into the Indian market would infuse competition,forcing domestic brands to upgrade, and would lead to the diffusion of better designsand technologies. Respondents also argued that Indian consumers are ready toexperimentwithbrands, and access to more foreign brands would increase the choice forconsumers. However, around 17 percent of the respondents are against allowing moreforeign brands in India and argue that foreign brands are more expensive than Indian

    brands and cater primarily to higher-income groups.

    Exp (B) Wald Significance level

    Education 1.984 8.604 0.003Annual household income 0.661 6.868 0.009

    Notes: ModelR2 0.1394,F 15.99, Prob. .F 0.000

    Table V.Demographic effects

    on consumers attitudetowards allowing foreign

    brands in India

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    4. Discussion: implications for global retailersDeveloping country markets are remarkably different from those of developedcountries. In particular the Indian market is unusual on account of factors such aspurchasing habits that vary across regions, product categories, branded and

    non-branded products, gender, etc. There was also a difference in the knowledge andusage of foreign brands across respondents. The analysis indicates that Indianconsumers are becoming more receptive to foreign brands. Global retailers entering theIndian market need to understand the variation in the Indian market and take intoaccount these factors before devising a go-to-market strategy for India.

    4.1 Go-to-market strategyThis is a market entry strategy or multiple approaches to enter a market in consonancewith the local needs of that country. Among the multiple approaches that can beadopted, scale and speed are two critical factors. Scale of operations refers to adoptinga stratified approach of targeting customers, and speed of expansion refers to the rateat which the foreign retailers intend to expand their operations and market sway inIndia. Since different global retailers have different types of products to offer they needto identify their target consumers and hence approach them accordingly. Table VIillustrates how different strata of consumers can be targeted across different productcategories. The product categories have been outlined based on their affordability/price range, frequency of demand, and the nature of the products.

    Target niche. This strategy is used to cater to specific strata of consumers who buyluxury products, such as designer clothes and high-end gadgets that have a lowdemand because they are expensive. Most of these luxury brands cater to less than onepercent of the Indian population, but 1 percent of the population of India is close to20 percent of the population of countries such as Italy, that has a large number of

    luxury brands[6]. As shown above, income and gender are positively correlated withspending on branded products. Hence, global luxury brands should target high-incomeIndian consumers. In addition, women are more likely to buy branded products thanmen. This provides opportunity to global luxury brands in cosmetics, handbags,footwear, apparel, etc. to target high-income Indian women. The study also found thatIndian consumers like personalised service, especially when they buy luxury products.Thus, in order to target high-end Indian consumers, global retailers should use apersonalised approach to sell premium products.

    Productcategories

    Affordability and accessibility high/low

    Consumer needs global/locala Correct strategy

    Luxury Low Global Target nicheNecessity High Global Create a platformMedium range High Local LocaliseInferior (lowrange)

    Low Local Reinvest in businessmodel

    Notes: aGlobal needs imply consumer needs, which are quite similar across geographies; local needsare more country-specific and dissimilar across geographies

    Table VI.Go-to-market strategy

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    Create a platform. Creating a platform refers to generating market presence bylaunching a range of products within a well-established industry structure. This strategyis most suitable for necessity products such as consumer durables and automobiles thathave a regular demand in India. The survey shows that respondents purchase branded

    consumer durables, but the expenditure on consumer durables in proportion to the totalexpenditure is low. Herein lie opportunities for global retailers who plan to enter thissegment. In India the demand for such necessity products exists and is growing. Hence,market roll-out plans are not needed; instead a platform needs to be created for foreignbrands that are new to the market. However, Indian consumers are heterogeneous. Thestudy found regional variations in the demand patterns of the respondents. The Indianmarket is huge and diverse with socio-cultural variations. For instance, Indian consumersin the south of India prefer pure gold jewellery, whereas consumers in the north of Indiaprefer diamond jewellery. Hence, global retailers need to identify similar consumersegments. Each of these segments should use products and services that have similarindustry structures, rates of consumer adoption, and socio-religious factors. They need todesign and implement specific product and channel strategies adapted to the specificcharacteristics of the targeted consumer segments. For instance, within the consumerdurables segment, demand for room heating devices is higher in the north of Indiacompared to the south due to their different climatic conditions.

    Localise. This strategy is suitable for various medium-range product categories suchas dietary supplements, preserved and processed foods, costume jewellery, and personalcare products. The study found that expenditure on such medium-range products is notvery high and preferences for branded vis-a-vis non-branded products vary. For instance,respondents purchase branded dietary supplements and non-branded preserved foods.There are not many international brands in this segment. However, various Indiancompanies operate in this segment. Hence, to cater to the demand for such products globalretailers willhave to compete with the existinglocal players by customising their products

    according to Indian consumers tastes and preferences. For instance, PepsiCo successfullycaptured the Indian snack market by introducing a customised brand of chips calledKurkure. Though it is a global food and beverage company, it has been successful incapturing a large portion of the Indian snack market by selling customised products.Despite having a global distributor and packer Frito-Lay, the product is quite local.

    In the case of fresh fruits and vegetables the survey found that the demand forbranded products is very low. Food items account for the highest proportion of Indianconsumers expenditure. Hence, there is a huge untapped market for global retailers.However, since 100 percent FDI is not allowed in multi-brand retail, global retailershave the option of two strategies:

    (1) they can sell their products through Indian retailers, which will enable them tocreate market awareness about their brands in the Indian market; or

    (2) they can set up a wholesale cash-and-carry operation in partnership with anIndian company.

    The study found that knowledge about a brand has a high positive correlation with thenumber of years the brand has been present in India. Hence, global retailers planningto enter the Indian market will face competition from older international brands suchas Bata, Reebok, Nike and Adidas. To combat it, global retailers can conduct marketresearch to identify and target segments where such brands do not have a presence. In

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    addition, for competitive pricing, global retailers should explore the possibilities ofsourcing locally as import duties are high in India.

    In addition, aggressive marketing techniques through popular mediums such asnewspaper and television advertisements will help global retailers entering the Indian

    market to generate awareness about their brand and products.

    4.2 Future researchThough the present survey provides useful insight into Indian consumers behaviour,the sample size is small compared to the Indian population. Since India is not ahomogenous market, a larger sample will help to capture more variations inconsumers shopping behaviour and perceptions across different regions of India byadopting better econometric techniques. Also the Indian FDI policy was liberalised in

    January 2012. It is likely to facilitate the entry of more foreign brands and to impact theIndian consumers shopping behaviour. Hence, future research needs to be conductedto analyse the impact of changes in the retail policy in light of its benefits for Indianconsumers and global retailers.

    5. ConclusionsIndian consumers are changing-disposable income is rising, consumption patterns arechanging, and the level of brand consciousness is rising. This has led to the growth ofmodern retail, and many global and Indian corporates are either investing or planning toinvest in the Indian retail sector. Based on a pan-India survey of rich and middle-incomeconsumers, this paper examines consumer shopping behaviour for brands acrossdifferent product categories and knowledge and perception of foreign brands.

    The study found that Indian consumers are heterogeneous. Their preferences forbrandedvis-a-vis non-branded products vary across product categories and there areregional variations in their demand patterns as well. The bulk of the respondents

    expenditure is still on food and grocery products and it is in this segment that theylargely buy non-branded products. This is not merely because branded products arenot available, but because the available branded products are expensive. Demand forluxury products is low and is confined to a niche segment of the market. Althoughbrand consciousness is increasing, knowledge of foreign brands in general was lowacross survey participants. Brands with a longer presence in the Indian market aremore likely to be known and used. The mode of entry of a foreign brand is notassociated with brand knowledge. Indian consumers are price sensitive and therefore,appropriate pricing of the product is crucial for market entry and penetration.

    Hence, it is important that global retailers adopt appropriate strategies to targetIndian consumers given their demographic profile, income patterns, purchasebehaviour, and level of brand consciousness.

    Notes

    1. Branded products are associated with a design, symbol, or a feature that identifies onemanufacturer or sellers goods as distinct from those of other manufacturers or sellers,whereas non-branded products are not marked with the name or symbol of the company thatmanufactures or sells them.

    2. Authors own calculations from Central Statistical Organisation (CSO), 2008-2009.

    3. Estimates from CSO (2008-2009).

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    4. It is important to know that there are various projections of the Indian retail sector and theyvary widely. However, they all project double-digit growth for modern retail.

    5. McKinsey Global Institute (2007) classifies Tier I cities as those that have populationsgreater than four billion and total income greater than 100 billion Indian rupees. Tier II cities

    have populations between 1 million and 4 million and Tier III cities have populationsbetween 5,00,000 and 1 million. For the survey, Tier I cities were Delhi, Mumbai, Kolkata,Chennai, Hyderabad and Ahmedabad. Tier II cities were Surat, Visakhapatnam, Kanpur andAllahabad and the Tier III city was Bhubaneswar.

    6. Authors own calculations from CIA World Fact book.

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    Corresponding authorArpita Mukherjee can be contacted at: [email protected]

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