chapter 2 literature review 2.1...
TRANSCRIPT
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CHAPTER 2 LITERATURE REVIEW
2.1 Introduction
This chapter brings out the review of relevant literature to the study. Review of
literature is necessary to have a proper knowledge on the subject. It helps in proper
understanding of the research work done by academicians and industry people in the
relevant field of study. Review of literature helps in devising a proper framework to
structure the research and define the research problem. It avoids the chance of
unnecessary duplication of efforts in the same direction. So every research should be
preceded by an in-depth review of related literature as it familiarizes the researcher with
the studies carried out by other people in the same area, the methods adopted by them,
their results and the recommendations for further research. The literature review in this
study tries to present the inputs from both theoretical as well as empirical perspectives.
Retailing encompasses business activities in selling goods and services to consumers for
their personal, family or household consumption. Every sale to the final consumer
ranging from cars to clothes to movie tickets to meals at restaurants is a part of retailing.
It’s the last stage in the distribution process. Retailing today is at a fascinating
crossroads. Sales of some of the leading companies in organized retailing are well ahead
of some manufacturing giants. Ex.- Sales of Wal-Mart is ahead of General Motors,
ExxonMobil. While retail sales remains at the highest peak in the history on one hand,
the retailers face numerous challenges on the other (Evans & Berman, 2007).
Traditional retailing or unorganised retailing is a part of the Indian society since
generations. Traditional retailing signifies the small family run stores in our
neighbourhood. These stores sell products in small quantities and as consumers we buy
our daily need items several times in a month from them. They are also known as
‘kirana’ or ‘mom and pop’stores which sell daily need items like rice, wheat, pulses,
flour, spices, ghee, edible oils, snacks, jam, jelly, milk, vegetables, fruits, and many
such items. They are small in size due to which they do not stock items in large
quantities. Their share is around 96% in the Indian retail market.
Organised retailing or modern format of retailing is new to the Indian retail market but
has emerged very fast in the last decade. It has gained high acceptance because of the
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modern look and various facilities which it provides but is still going through various
changes. The organised retailing has both speciality stores as well as multibrand
multiproduct stores which have become very popular among the consumers. Even with
its high acceptance and growth the share of organised retailing is only 4% in the Indian
retail market. But the small share also signifies a potential of high growth for the
organised retailers in future.
2.2 Retailing in International Context
Retail has emerged as one of the largest industry worldwide in many countries like
USA, UK, Mexico, Poland and Asian economic titans like China, South Korea, Taiwan,
Philippines, Malaysia and none other than our own India. Moreover the economies of
countries like Singapore, Malaysia, Hong Kong and Sri Lanka depend heavily on
retailing. Retail in US generates an average annual sales of more than $3trillion is the
second largest industry ranked both in terms of number of establishments and
employment. The organised retail sector in US generates 17% employment. The
employment generated in other countries are- Poland 17%, China 12% and in India
around 8%(Lahiri & Samanta, 2010). So we see that the contribution of retailing is high
both to employment generation as well as the GDP of several economies of the world.
The centre of economic gravity of the world is moving to the east, i.e. towards the
Eastern Europe and Asia. The Asian market contributes to around 40% of world
population covering three time zones and around 20% of the global GDP. The recent
growth in the retail sector in growing markets like is backed by growing income and
changing lifestyle. The developing markets are able to absorb all types of organised
retailers be it global giants like Wal-Mart or small domestic players. The efforts of
retailers, potential investors and more importantly the government has to make it
happen (Misra & Khan, 2008).
The sales of the top five global retailers in 2010 are depicted through table 2.1. The
table also presents their country of origin and the number of countries in which they are
operating with their different formats of retailing. Wal-Mart tops the list in sales and has
a very big margin with Carrefour which is at second position in terms of sales. It is
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surprising to see that Kroger operates only in US but then also it holds the fifth rank in
terms of sales.
Table 2.1: The top five global retailer’s are-
Retail Sales
Rank
Company Country of
Origin
2010 Group
Revenue (in
US$ mil)
Number of
Countries of
Operations
1 Wal-Mart USA $421,849 16
2 Carrefour France $121,519 33
3 Tesco UK $94,244 13
4 Metro AG Germany $89,311 33
5 Kroger USA $82,189 01
(Source: http://www.stores.org)
As per 2012 Deloitte report which was published in the STORES magazine the United
States retail sector accounts for the highest number of large, lucrative retailers in the
world. In the list of top 250 largest retailers by retail sales revenue in 2010, 32% were in
the United States and accounted for the 41% of the total retail sales. In 2011 the grocery
market in the six Central European countries was around €107bn, about 2.8% more than
the previous year (PMR report: Grocery retail in Central Europe 2012).
Figure 2.1: US Retail Sales 1992-2000
(Source:http://en.wikipedia.orgtail)
The retail market in China is growing fast and is expected to become the second largest
in the world by 2012, overtaking Japan. The modern formats of retailing entered the
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Chinese retail market at the end of 1980’s and has transformed the highly fragmented,
small-scale, provincial operating model to a large-scale modern retail format. In 1992
the China government came with a series of policies to give boost to the retail sector in
China. This brought a fast, healthy and orderly development in the Chinese retail
industry. Dominance of any retail player could not be seen in the Chinese retail market
as the share of top five grocery retailer’s accounts to only 21 percent of the total retail
sales. The popular formats presently in China are shopping centres, department stores,
supermarkets, convenience stores, speciality stores and non-store retailing.
Brazil tops the AT Kearney Global Retail Development Index consecutively for the
second year. The 2012 AT Kearney GRDI reveals that the growth and investment
possibilities in the developing countries are far better than the developed markets. BRIC
nations still tempt the largest global retailers as the world’s largest developing markets.
Table 2.2: Top 5 countries in the AT Kearney 2012 Global Retail Development
Index
Country 2012 Rank 2011 Rank Change
Brazil 1 1 0
Chile 2 2 0
China 3 6 +3
Uruguay 4 3 -1
India 5 4 -1
(Source: http://www.grdi.atkearney.com/)
As per the AT Kearney report on one side the developing countries are showing
accelerated growth and on the other side the European and North American markets are
witnessing an anemic growth which is forcing the global retailers to focus their strategic
expansion in the developing markets. Brazil which tops this list witnessed 15 percent
increase in the retail market size last year. The consumer spending in Brazil has
increased by 9 percent per year since 2007. Chile ranked second on the GRDI is one of
the fastest growing Latin American economies having one of the most competitive retail
markets in the region. With low inflation and low risk Chile is expected to have a GDP
growth of 6.2 percent in 2012.China has jumped to the third position in the 2012 GRDI
shows positive retail sales growth which is expected to be in double digits. China enjoys
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the status of the world’s largest luxury goods market. Inspite of having a small local
population Uruguay is ranked fourth in the 2012 GRDI and is becoming a favourite
retail destination for the global retailers. This could be attributed to the rapid
urbanisation and strong consumption patterns and an all time low level of employment.
The country is showing a growth of 6 percent in GDP since 2007. India ranked fifth in
the 2012 GRDI still tempts the global retailers as a favourite retail destination with
expected accelerated retail market growth of 15 to 20 percent in the next five years.
Georgia ranked sixth in the 2012 GRDI has emerged as a small gem and favourite
destination for global retailers With uprisings in the Arab market a negative impact is
seen in the rankings of countries over there but UAE (ranked seventh) and Oman
(ranked eighth) are still showing good retail growth because of their liberal and
supportive government policies.
2.2.1 International Retailers
Let us have a brief look on the top five retail companies of the world to have a broader
understanding of the international retail scenario.
Wal-Mart
Wal-Mart is the top global retailer in terms of its sales. Started in 1962 with a Sam
Walton discount store in Rogers, Arkansas today Wal-Mart employs more than 1.4
million people in its various retail formats alone in United States. It is famous for its
offering of Every Day Low Prices (EDLP). It became national in 1970s and became
global in 1990s by opening its Sam’s Club in Mexico City.1990s was the time when it
entered in many countries like Canada, China, and the UK. It topped the Fortune 500
ranking of America’s largest companies in 2002. The various formats through which it
operates are Supercenters, Wal-Mart Discount Stores, Neighbourhood markets, Wal-
Mart Express Stores and Sam’s Clubs.
Wal-Mart started opening its Supercenters in 1988 which further made them the largest
grocer in United States. Presently they boast of having more than 3,000 Supercenters in
US and each of these stores are of about 1, 82,000 square feet employing around 300
associates. Most of the supercentres are open for 24 hours and provide a one stop
shopping experience for the customers. They sell groceries, fresh produce, bakery,
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apparels, toys, home furnishings, and dairy products. They may also have speciality
shops of hair and nail salons, pharmacies, branded restaurants, vision centres or health
clinics and banks.
Today it operates more than 600 discount stores each of which employ about 225
associates and sell electronics, apparels, home furnishings, toys, health and beauty aids,
hardware, etc. in an area of about 1,06, 000 square feet which is less than that of
supercentres. Wal-Mart started its neighbourhood markets in 1998 as an option for
communities in need of pharmacies, affordable groceries and merchandise. It is a
smaller option of its stores with a size of around 38,000 square feet employing around
95 associates. Presently about 200 neighbourhood stores are running alone in US which
offer fresh produce, meat and dairy products, bakery, household supplies , health and
beauty aids, pharmacy and daily need items.
The Wal-Mart Express format was started in 2011 with the idea to offer low prices and
convenience to customers in its smallest store format of around 15,000 square feet only.
It offers general merchandise, groceries and pharmacies. Sam Walton started Sam’s
Club in 1983 with the idea to fulfil the growing need of customers who wanted to buy
bulk merchandise. It received high acceptance and operates with around 600 clubs today
in US and 100 clubs internationally. The average size of Sam’s Club is of 1, 34,000
square feet which offers groceries and general merchandise. They also offer speciality
services like pharmacies, photo centre, optical department, or a tire and a battery centre.
Wal-Mart run its chain of stores in the United Kingdom by the name of ASDA in three
formats namely Asda Superstores, Asda Supermarkets and Asda Living. Asda
Superstores carry product range of food, consumables, apparel, and general
merchandise. It offers a one stop shopping experience to customers and operates in an
average size of 82,000 square feet. Asda living operates in an average area of 38, 000
square feet and offers general merchandise, apparel and limited variety of consumables
and food items. Asda Supermarket offers shopping convenience to customers looking
for groceries and general merchandise. It offers full assortment of fresh produce, fresh
meat, dairy, groceries, health and beauty items, pet supplies, general merchandise, etc. It
operates in an average store size of 15,000 square feet (http://corporate.walmart.com).
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Through its Bharti Wal-Mart joint venture it entered India in 2010 by the brand Best
Price. It presently operates in India through this joint venture in Cash & Carry format
which sells goods from a wholesale house.
Carrefour
Carrefour is a French multinational retailer headquartered in Paris. It is the second
largest retail group in the world in terms of revenue and third largest in terms of profit.
Carrefour’s slogan is ‘Low in Price.....but high in trust’. It started its operations in
1959and opened its first store in Annecy, Haute-Savoie, France. Started by Michael
Fournier, Denis Defforey and Jacques Defforey today it has grown today as the second
largest retailer in the world with operations in 33 countries. In 1963 it invented a new
store concept: the hypermarket. It opened its first hypermarket in Europe on 15 June
1963 near Paris with a floor area of 2500 square feet, 12 checkouts and 400 parking
spaces. It entered in Asia in 1989 by opening its first hypermarket in Taiwan. Carrefour
operates majorly in Europe, Brazil, Argentina, China, UAE, Dominican Republic, Qatar
and Saudi Arabia but also has its operations in North Africa and other parts of Asia with
smaller size stores. Presently it operates in hypermarkets, supermarkets, convenience
stores, cash & carry and hard discount formats (http://www.carrefour.com).
In 2007 the company went for accelerated international expansion, especially in Asia. It
opened 35 new hypermarkets out of which 22 were in China. In the same year it broke
its record of opening most number of stores in a year. In India Carrefour operates
through its cash and carry format by the name ‘Carrefour Wholesale Cash & Carry’.
The company achieved a CAGR of 3.9% only in the period of 2005-2010.Carrefour
focuses high on store brands and they account for an important share of the total sales.
In certain countries this share of store brands is quite high of the total units sold. In
Thailand the importance of the store brands is so high that Carrefour launched an ad
campaign which exclusively features store brands (Venkateswaran & Mahalakshmi,
2010).
It started its operations in India by opening its first store on 30 December 2011 in
Shahadra, Delhi. Presently it operates four stores running in Jaipur, Meerut and Agra.
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The company is very positive and enthusiastic to expand its operations in India after the
announcement of the new FDI policy on 20 September, 2012.
Metro AG
It is a German international retailer which started in 1996 with the merger of retail
companies Asko Deutsche Kaufhaus AG, Kaufhof Holding AG and Deutsche SB-Kauf
AG. The company entered in the markets of China and Romania also in the same year.
The company has its operations presently in 33 countries, more than 2200 outlets and
around 2, 80,000 employees from 180 countries. Presently it is the fourth largest retail
group worldwide operating in Europe, Africa and Asia. The year of 1998 was the most
successful one in the company’s history with increase in earnings before interest and tax
by 63.5% and its business abroad accounted to 35.2% of total turnover. The business
abroad grew to 39.2% in 1999 and 42.2% in 2000 and its operations increased to 22
countries. Its operations increased to 28 countries in 2003 and to 30 in 2004.
It operates presently in different formats of Metro Cash & Carry which is the world’s
market leader in cash & carry, Media Markt and Saturn Supermarkets which is Europe’s
leader in consumer electronic retailing, Real Hypermarkets and Galeria Kaufhof which
is the system leader in the department store business. The Saturn Supermarket has
entered into multichannel marketing with the launch of online shops in 2011. The Metro
group is known for its shared corporate culture which has created an identity which
provides code of values that flows across the business segments.
Tesco
Tesco is a UK based international retailer operating in 13 countries and employing
around 5, 00,000 people. It is the third largest retail group in the world which
accounted a CAGR of 9.3% in the period of 2005-2010. The company operates in the
formats of cash & carry, warehouse club, discount stores, department stores,
hypermarkets, supercentres, superstores, electronics speciality and other speciality. It
has operations in the countries of UK, US, China, Czech Republic, Hungary, Ireland,
Japan, Malaysia, Poland, Slovakia, South Korea, Thailand, Turkey.
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The Kroger Co.
Kroger is a US based retailer which operates in various formats. Although the company
operates only in one country, i.e. - the US market but then also its sales are so high that
it is ranked as the fifth largest retailer in the world. The company accounted a CAGR of
6.3% for the period of 2005-2010. The different formats in which the company operates
are convenience/ forecourt stores, hypermarkets/ Supercenters, Superstores,
supermarkets and other speciality. Kroger is a store brand market leader in United
States. Its store brand sales accounts roughly to one-third of the total unit sold
(Venkateswaran & Mahalakshmi, 2010).The company operates with nearly 2500 stores
in US market and employs around 3,40, 000 employees.
2.3 Retailing in India
Retailing is selling goods to the end consumers; it’s the last stage in the distribution
process. Retailing has gone through major transformation in the Indian market. From a
distribution function alone today retailing has evolved into an industry in itself. The
contribution of retail is accounting around 9-10% of India’s GDP and around 8% in the
total employment. The share of organised retail sector is only about 4% which indicates
a high scope for growth. The multiple effects of retail on the Indian economy are -
employment generation, real estate growth, development of small scale units,
development of retail ancillary market, etc. (Aggarwal, 2008).
Retailing is one of the largest sectors in the global economy and is going through a
transition phase. It is also India’s largest industry sector, and also arguably the one with
the highest impact on population. It is the country’s largest source of employment after
agriculture (Kaushal & Sanjay, 2011). Upsurging consumerism, changing lifestyle,
increasing access to information and ever improving technology, made the last decade
observe an enormous development in the retail sector around the globe (Lahiri &
Samanta, 2010). The retail sector in India is witnessing a tremendous growth with the
changing demographics and lifestyles. An improvement could be seen in the quality of
life of urban Indian consumers (Krishnan & Venkatesh, 2008).
The AT Kearney Report 2012 ranks India on the fifth position in the Global Retail
Development Index and on the second position in Asia after China. So India still
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remains an attractive destination for global retailers. This report says thatwhile the
world’s largest markets – particularly the BRIC nations of Brazil, Russia, India, and
China – still tempt the largest global retailers, and show no signs of slowing down as a
source of growth.Many smaller untapped markets are providing new growth
opportunities (Brazil Tops A.T.Kearney Global Retail Development Index for the
Second Year).
With Liberalization, Privatization, Globalization and Modernization, a modern
competitive business is based on understanding the mind of the customers and
providing the kind of products and services he wants. While barter system could be
considered as the oldest form of trade; since independence, retail in India has evolved to
support the unique need of the country, given its size and complexity. Haats, Mandis
and Melas have always been part of the Indian Landscape. They still continue to be
present in most part of the country and form an essential part of trade in various areas.
In the period of 1950s to 1980s, investment in various industries was limited due to the
low purchasing power of consumer and government policy favouring the small scale
sector. Initial step towards liberalization was taken in 1985-90. Many restrictions were
lifted in this period and in 1990s the Indian economy slowly progressed from state-led
to market friendly structure. This was the starting of a new era for retail in India. The
fact that post liberalization, in the economy had opened up a new large middle class
with emerging purchasing power (Das & Kumar, 2009).
The present retail distribution is fragmented with around 12 million players. The retail
outlets are spread in about 5,000 cities and 6, 00,000 villages across the country. The
majority of these are run through small shops of less than 50square feet size. India is
presently seen as a ‘Vibrant Economy’ which tops in the list of emerging markets.
Currently India is the second fastest growing economy, the third largest economy on the
basis of GDP and the fourth largest economy on the basis of purchasing power parity
(PPP). USA, China and Japan are before India in PPP. India is also among the top 5
destinations in attracting FDI from international retailers (Das, 2011).
Around 96% of the 5 million plus outlets are having an area of less than 500 square feet.
It denotes that per capita retailing space of India is about 2 square feet as compared to
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16 square feet in USA. In USA around 20% of the population is engaged in retailing
and the same ratio in India is over 8% (Ashokan & Hariharan, 2008).
The centre of economic gravity of the world is moving to the east, i.e. towards the
Eastern Europe and Asia. The Asian market contributes to around 40% of world
population covering three time zones and around 20% of the global GDP. The recent
growth in the retail sector in growing markets like India is backed by growing income
and changing lifestyle (Misra & Khan, 2008).
The slowdown in the European and North American markets and the accelerated growth
in the developing countries are forcing the global retailers to plan their expansion in the
developing markets. As per Michael Moriarty, A.T. Kearney partner and study co-
leader “In the past five years, U.S.-based Wal-Mart, France-based Carrefour, U.K.-
based Tesco and Germany-based Metro Group saw their revenues in developing
countries grow 2.5 times faster than their home markets” (Brazil Tops A.T.Kearney
Global Retail Development Index for the Second Year).
As per Goldman Sachs, 2005 it is forecasted that the Indian Economic Growth would
surpass China by 2015. Retailing is in our blood either as a shopkeeper or a shopper.
The Indian retail market would grow from US$330billion in 2005 to US$ 427billion by
2010 and US$637billion by 2015 (Das, 2011) and the share of organised retail is
expected to be around 22 percent from the present 4 percent (Dalwadi, Rathod, & Patel,
2010).
Organised retail in India is booming but is still evolving. It is also India’s largest
industry, and also arguably the one with the highest impact on population. It is the
country’s largest source of employment after agriculture. Retailers know that the image
and penetration of the store have significant impact on the perceived quality of the
products, there has not be real differences in products sold at different stores (Kaushal
& Sanjay, 2011).
A restrictive environment and a mindset favouring denial of overconsumption have
stunted the development of Indian retail industry keeping it largely unorganised with
mostly small independent and owner managed shops. But then also it contributes 8% to
the GDP of the country (Lahiri & Samanta, 2010). The experience of the changing retail
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scenario is making the consumers today to think globally. The emergence of retailing in
India has more to do with the increasing purchasing power of the buyers, especially in
the post liberalization era (Prakash, 2007) .
A GDP growth rate of 6 to 7 percent, the rising disposable income, the changing
lifestyles and fast urbanisation makes India a high potential market. An accelerated
retail market growth of 15 to 20 percent is expected over the next five years in India.
The changing FDI climate provided and supported by the Indian Government has
generated a positive environment for the global retailers. The share of organised retail in
India is only 5 to 6 percent but it indicates a room of high growth (India ranks 5th in
Global Retail Development Index but where in Global Ecommerce Index?: A report by
AT Kearney, June 27, 2012). Recent changes in the FDI regulations in October 2012 by
the Government of India indicate a positive environment for the international retailers
and retail growth in general.
The Changing lifestyles, food and eating habits of consumers have contributed largely
to the growth and development of organised food and grocery retail formats in India.
The kirana stores with a share of 99.2% dominate this sector, have strong relationships
with the customers for various technical and functional quality benefits extended to
them. In the recent years huge growth in Indian retail market is due to the high demand
of quality products and services that increased the competition among modern retail
formats. At the same time the intense competition from the kirana store have
necessitated the organised retailers to come up with innovative ways of marketing
(Prasad & Aryasri, 2008).
The growing affluence of the Indian middle class, a flood of imported products in the
fashion and food categories, the increasing space for groceries and the emergence of a
new breed of entrepreneurs are drivers of boom in retail sector of India. The Indian
youth population is driving the changes in consumption and spending patterns. With the
increasing role of woman in workforce, the modern retailing is gaining more
acceptances. The environment created by the modern retailers in their stores, the fast
processing, better quality and hygiene and discounts, all of these issues are welcomed
and appreciated by the modern housewives (Krishnan & Venkatesh, 2008).
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The increasing sophistication in the shopping habits of Indian customers is supporting
the emergence of organised retail. The changing taste and preferences is leading to a
radical transformation in the lifestyle and spending patterns. This is further increasing
the business scope for organised retailers. The proliferation of mega malls is adding
extra spice to the booming Indian retail sector. This development in the organised retail
is also seen in other cities apart from metros (Das, 2011).
According to IMAGES India Retail Report 2007, of the Rs 12, 00,000 crore retail
market, food and grocery retail is by far the single largest block estimated to be around
7, 43,900 crore (63 percent) but 99.2 percent of this market is dominated by the
traditional Kirana Stores and organised sector is having a share of meagre 0.8 percent
which is Rs. 5950 crore only (IMAGES India Retail Report, 2007). Food and grocery is
the second largest segment of the retail trade that constitutes 53 percent of the total
private consumption expenditure (US$ 154 bn) and 70 percent of the total retail sales
(KSA TechnopakRetail Report, 2007)
In an age of increasing competition from giant organized grocery retailers, local
retailers need to have commitment and willingness to the needs of the local community
for their survival (Broadbridge & Calderwood, 2002). To address the growing concern
of livelihood organised retail companies like Reliance Retail have invited small retailers
as well as individuals to become franchisees on revenue sharing model (Thakkar &
Bhatt, 2007). On the same model the Bharti-Wal-Mart venture too intends to offer
employment opportunities to 60, 000 people by 2015 (Times News Network, 2007).
The entry of big grocery format of Reliance and the proposed Bharti-Wal-Mart venture
is expected to further kick up intense competition in the business and put pressure on
margins (Daftari, 2007).
A fully Indian or ‘Swadeshi’ model in Indian modern retailing is still awaited. The
present models which are successful highly in certain parts of the country are only
moderately successful in other areas. Regular entry of new retailers could be seen with
new formats. These new formats have changed the conventional look of chemist shops,
furniture and book stores (Krishnan & Venkatesh, 2008). Arvind Singh, Chairman-
Technopak Advisors is of the view that several India specific retail business models
would emerge in light of the unique peculiarities of the Indian consumers (Das, 2011).
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The Indian retail is able to absorb all types of organised retailers be it global giants like
Wal-Mart or small players like Subhiksha or Adani. The Indian market is ready for this
shift and acceleration in the pace of retail development. The efforts of retailers, potential
investors and more importantly the government has to make it happen (Misra & Khan,
2008).
In India ‘Crossroads’ was the first shopping mall opened in Mumbai in 1999 with food
courts, recreation facilities and big parking space. The traditional retailing is a low cost
structure, generally owner-operated, very low labour costs and real estate, with little or
no taxes to pay. On the contrary organised retailers have to meet huge expenses to meet
and at the same time have to maintain low prices to compete with the traditional
retailers (Ashokan & Hariharan, 2008).
The success story of Wal-Mart in USA has inspired the organised retailers in India who
are focussing on small towns and even eying the villages. The 2000 crore Future Group
has plans to increase its non-grocery business from the present 40% to 50-70% due to
the increasing competition in the grocery business in the coming years. The organisation
feels that the present grocery model would not be competitive enough in future.
Success of international retailers would depend on how well they understand the Indian
cultural values, norms and behaviour which influence the purchase decisions and affect
the acceptance of products and services. The Indian retailers have an edge over foreign
players in being more acquainted with the culture, norms, preferences, etc. of the Indian
consumers. Sanjeev Goenka of RPG group is of the view that if big retailers can
compete with the unorganised Indian retailers then they can compete with international
players also because the unorganised retailers have no overheads but are extremely
presentable (Das, 2011).
A number of players have entered the Indian organised retail market in the past few
years. The potential of the Indian retail market is so high that not only the big business
houses of India like Tata, Reliance, RPG, ITC, etc. have also successfully entered this
sector but also the leading retailers of the world like Wal-Mart, Carrefour, Tesco, etc.
have entered the Indian market. They have posed high competition to the existing
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players who have been trying to improve and increase their presence in this retail
market.
Recent changes in the FDI regulations in October 2012 by the Government of India
indicate a positive environment for the international retailers and retail growth in
general. Almost four months have passed since the government’s brave decision to
allow foreign supermarkets to enter India which was having intense opposition from the
other political parties but not a single investment proposal has been received till date.
Global retail giants are still in a position of wait-and-watch as they are looking for more
clarity about the imposed conditions on their entry. This delay has now started
bothering the government, which nearly had put its survival at risk on this controversial
issue.
The two significant riders government imposed on foreign retailer’s are- first, they will
have to source one-third of the products they sell compulsorily from small and medium
enterprises whose investments should not exceed $1 million in total. Second, they will
have to invest minimum $100 million, fifty percent of which has to go into the backend
infrastructure over a period of three years. Kishore Biyani, owner of India's largest
home grown retail business, The Future Group, said "How can they source one-third of
their goods from small-scale industries? Or even invest fifty million dollars in the
backend in just three years? Fashion or electronics does not require that kind of
investment in the backend'' (www.economictimes.indiatimes.com). The major players in
the Indian retail market are Big Bazaar(Future Group), Shopper’s Stop, Spencer,
Reliance, Croma, Metro, Spar, Big Idea, Vishal Megamart, Metro, BestPrice, etc.
2.3.1 Retailers in India
Big Bazaar is the largest chain of hypermarts in India which was introduced by the
Future Group in September 2001 by the opening of its first four stores in Kolkata,
Indore, Bengaluru and Hyderabad in just a period of 22 days. A present there are more
than 200 stores across 90 cities and towns in India covering around 16 million sq.ft. of
retail space. Promoted by Kishore Biyani of Future Group it started mainly as a fashion
format selling apparels, cosmetics, general merchandise and accessories
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(www.pantaloonretail.in). Over years it has evolved into selling wide assortments of
products and services, ranging from groceries to electronics. It has been designed as an
agglomeration of Indian bazaars which has sections of fashion and apparels, general
merchandise, furniture, food products, books, fast food and leisure and entertainment
products. It aims to deliver customers a feel of the local marketplace. In 2003, Big
Bazaar entered into small towns and cities and has been successful. The first store in
this category was launched that year in Nagpur. It has many awards to its credit and
captures a major share of the food and grocery market of the modern formats of retail in
India. Big Bazaar recently came out with its plan to add more retail services to its
portfolio like grinding, de-seeding and cutting of fruits and vegetables at free of cost.
Big Bazaar scores over other stores due to its value for money proposition for Indian
customers. Apart from Big Bazaar the Future group presently owns Pantaloons, Brand
Factory, Central Hypermart, eZone, HomeTown, futurebazaar.com and KB’s Fair Price.
Spencer’s is a multi-format food-first retailer providing a wide assortment of products
to discerning young customers. Headquartered in Kolkata the company launched its
first Foodworld store in 1996 in Chennai. Presently it has around 400stores in 60 cities
of India. It has a wide range of product assortments which includes fresh and packaged
food, groceries, electronics and electrical equipments, garments and fashion accessories,
toys, home and office essentials, and personal care products. Its stores are mainly of two
types- convenience stores with the name Spencer’s and hypermarkets with the name
Spencer’s Hyper. The company has won many awards. Spencer's boasts of a wide range
of private labels in both foods as well as non-foods FMCG category. 'Spencer's smart
choice' is the leading in store brand which has a large number of products ranging from
juices, noodles, cookies, honey, Air freshner etc. The 'clean home' range of home
improvement products and 'Tasty wonders' a range of snacks and impulse food range.
Apart from this Spencer’s has smartly and successfully launched its general
merchandise products under the brand name of MAROON which includes Non Stick,
Hard Anodized, Home Plastic and Foils (www.spencerretail.com).
Shoppers Stop was started in 1991 by the K Raheja Group with its first store in
Andheri, Mumbai. It is one of the leading retail stores in India which began by
operating a chain of department stores under the name “Shoppers’ Stop” in India.
24
Shoppers Stop has 56 stores across the country (with the latest one being the outlet at
Kumar Pacific Mall, Pune) including three airport stores. Shoppers Stop Ltd was
awarded "the Hall of Fame" and won "the Emerging Market Retailer of the Year
Award", by World Retail Congress at Barcelona on April 10, 2008. It got listed on the
BSE in 2011.
Shoppers Stop retails a range of branded and private label under the following
categories of apparel, footwear, fashion jewellery, leather products, accessories and
home products. Cafe, food, entertainment, personal care and various beauty related
services complement the above categories. Shoppers Stop also has its e-store which was
launched in 2008 with delivery across major cities in India. The website retails all the
products available at Shoppers Stop stores, including apparel, cosmetics and accessories
(www.shoppersstop.com).
Reliance Retail Ltd. is a subsidiary of Reliance Industries headed by Mr. Mukesh
Ambani and is headquartered in Mumbai. Since its inception in 2006, Reliance Retail
Limited (RRL) has grown into an organisation that caters to millions of customers,
thousands of farmers and vendors. Based on its core growth strategy of backward
integration, RRL has made rapid progress towards building an entire value chain
starting from the farmers to the end consumers.
It is the second largest retailer in India. It runs multi product multi brand retail outlets
across several cities in India which sell food & groceries, vegetables, fruits, farm
implements, electronics, apparels, footwear, lifestyle and home improvement products,
flowers, etc. Its focus is on consumer durables, travel services, consumer goods, health
and well-being products, entertainment and leisure, energy, educational products and
services. The below mentioned companies are operating as subsidiaries and divisions
under Reliance Retail –
1) Reliance Fresh – It is a convenience store format selling fruits, vegetables,
staples, groceries, dairy products, etc. Reliance Fresh store is of approximately
3000–4000 square feet and generally caters to a catchment area of 2–3 km.
2) Reliance Hypermart – Retail outlets selling fruits, vegetables, staples, groceries,
apparels, footwear, lifestyle and home improvement products, electronics, etc.
25
3) Reliance Digital – Retail stores selling Consumer Electronics.
4) Reliance Jewels - Retail stores selling Jewellery
5) Reliance Time Out – Retail lifestyle stores selling books, music, toys, stationery,
movies, gaming, fragrances
6) Reliance Trends – Stores selling apparel and clothing
7) Reliance Footprints – Retail outlets selling footwear, baggage trolleys, wallets,
belts, etc.
8) Reliance Wellness – Retail stores selling pharmaceutical products.
9) Reliance Super – Supermarket retail stores selling fruits, vegetables, staples,
groceries, dairy products, fruit juices, etc.
Opening of reliance stores faced great resistance from local vendors in UP and West
Bengal. The company dropped the idea to run its stores over there. The company may
not stock fruit and vegetables in some states. Though Reliance Fresh is not going out of
the fruit and vegetable business altogether, but it has decided not to compete with local
vendors partly due to political reasons, and partly due to its inability to create a robust
supply chain. This is quite different from what the firm had originally planned. Reliance
Retail has also entered into an alliance with Apple for setting up a chain of Apple
Speciality Stores which would be known as iStore. Its first store started in Bangalore;
presently around 17 stores are operational (www.ril.com).
BestPrice is a cash and carry format promoted by the Bharti Wal-Mart joint venture
with a 50:50 stakes in Bharti Wal-Mart Private Limited. It started in 2009 and sells
goods from a wholesale house. This format sells bulk food, consumables and supplies to
businesses. The BestPrice store operates in a size of about 54, 000 square feet. Its first
Cash and carry facility started in May 2009 in Amritsar. They have their stores now in
Jalandhar, Bhopal, Kota, Ludhiana, Indore, Vijaywada, Zirakpur, Meerut, Raipur,
Lucknow, Jammu, Aurangabad, Bhatinda, Guntur, Amravati, Rajahmundry and
Hyderabad.
They sell more than 5000 items in product categories of fresh fruits and vegetables,
general merchandise, dairy products, packaged foods, apparels, footwear, office
supplies, household and electronics appliances, etc. under one roof. Their mission is to
26
enable small business to prosper. Small businesses like restaurants, hotels, mess, kirana
store, general merchandise resellers, caterers, offices and institutions are their target
customers. They ensure competitive prices, consistent availability and member
convenience. They have developed special pack sizes for the HoReCa (Hotel,
Restaurant, and Caterer) segment (http://www.bharti-walmart.in).
2.4 Retailing in Jharkhand
Jharkhand also witnessed the entry of some of the retail chains like- Spencer, Reliance,
Big Bazaar and Vishal Megamart Most of these started with multiple number of outlets
but all of them could not sustain. Closure of some of the retail outlets in Jharkhand sent
a warning signal to the existing ones and also to those who were looking to enter in this
market. It has become now clear to the retail players that only opening the stores will
not lead to success rather one has to catch the pulse of the market and act accordingly
within time. The companies have to be update and upgrade them with the latest
developments to be successful. The retail companies which entered the Jharkhand
market are Spencer, Big Bazaar, Reliance, Vishal Megamart and Bazaar Kolkata.
2.4.1 Retailers in Jharkhand
Spencer started in 2008 in Jharkhand by opening its stores in Ranchi, Dhanbad and
Jamshedpur. It first closed four of its seven outlets in 2009 and later on closed the other
three outlets also. According to a company official the company did not found the
Jharkhand market viable (Kiro, 2009).
Vishal Megamart opened its centres in Ranchi, Dhanbad, Ramgarh, Hazaribagh and
Bokaro (franchisee store). It was successful in its early years but with opening of
Reliance stores and Big Bazaar its market share went down. The acceptability came so
low that its store got closed in Dhanbad. Vishal Megamart opened its second store in
Dhanbad at a different location but it again was not successful and got closed.
27
Big Bazaar opened its store in Ranchi in 2008 and has been running successfully. It
also has its store in Jamshedpur, Dhanbad and Deoghar. The Future group opened its
Pantaloons showroom in Ranchi and Dhanbad in the year 2012.
Reliance opened its stores in 2006 in the cities of Ranchi, Dhanbad and Jamshedpur. It
has entered the Jharkhand retail market in multiple formats of Reliance fresh, Reliance
Super and Reliance Mart. Although it faced some problem in the early years as it closed
two of its outlets in 2009 but now it is running successfully. Later on it opened its other
speciality formats of Reliance Trends, Reliance Footprints and Reliance Jewels.
Presently around 30 reliance stores in various formats are running in Jharkhand.
BazaarKolkata is running its multiproduct multibrand store in Ranchi.
Presently the major retail players operational in Jharkhand are Big Bazaar, Reliance,
Vishal Megamart, and Kolkata Bazaar. Reliance when started in Jharkhand faced the ire
of mobs of local vegetable vendors. The mob attacked the stores claiming that they
would affect their livelihoods. However, now they are running successfully.
2.5 Factors affecting Organised Retailing
Upsurging Consumerism, changing lifestyle, increasing access to information and ever
improving technology, made the last decade observe an enormous development in the
retail sector around the globe (Lahiri & Samanta, 2010). Organised retail in India is
booming yet it is in a nascent stage. It is also India’s largest industry sector, and also
arguably the one with the highest impact on population (Kaushal & Sanjay, 2011). To
be successful a retailer must provide better products, services and physical facilities
which are becoming important with the increasing sophistication in the lifestyle of the
Indian consumers.
With sweeping changes in the Indian retail market an interesting future could be
foreseen. The Indian middle class which is the world’s largest is waking to the retail
revolution. Much time would be required to reach the optimal penetration. It is already
becoming tough for the retailers to operate in the Indian market with high costs and low
margins. Retailers with the right marketing strategies would only be successful (Gupta
D. D.). To remain successful repeat business is very important for the retailers. For
28
increasing repeat business retailers are trying to increase retention of customers by
creating customer loyalty programs, rewards, and databases with personal information
of customers. A comprehensive credit system scheme may help the organised retailers
to enhance their sales potential and growth (Ramanathan & Hari, 2011). The ‘Reliance
One’ card by reliance retail, the ‘Payback’ card acceptable by many other retailers in
India is an example of loyalty program efforts put by retailers.
Previous studies on shopper preferences suggest that factors like quality (Ramanathan &
Hari, 2011), product variety and convenient timings appear to be the primary
impression about the store, consumers carry with them (Sinha & Arindum,
2004).Shoppers prefer a mega mart due to its convenience in terms of space, billing
system, product range, multiple choice, etc. (Sonia, 2008). Factors like ease of parking,
special offers, best prices, loyalty or benefit card, incentives affect the shopping attitude
of customers (Nielson, 1996). Consumers look for quality, value and a frictionless
shopping experience in totality (Tillman, 2007).
The future will witness an ‘Adaptive Marketing Era’, a period for marketers to be more
adaptable to new channel and constructs for interacting with customers, and flood the
market keeping overall brand promise- Forrester Research inference (Berry, 2002). The
customers give importance to factors like quality, price and time (Kaushal & Sanjay,
2011).
Based on the above discussions we could say that there are some preference variables
which are important for the success of organised retail and they could be majorly
grouped into the following factors-
Product
Place
Price
Promotion
Service
Brand
Shopping Experience
Others
29
2.5.1 Product
The retail sector in India is witnessing a tremendous growth with the changing
demographics and lifestyles. Prakash (2007) observes that emergence of retailing in
India has more to do with the increasing purchasing power of the buyers, especially post
liberalization era. An improvement could be seen in the quality of life of urban Indian
consumers. The growing affluence of the Indian middle class, a flood of imported
products in the fashion and food categories, the increasing space for groceries and the
emergence of a new breed of entrepreneurs are drivers of boom in retail sector of India.
(Krishnan & Venkatesh, 2008).
Variety has been regularly advocated by authors as an important driver for attracting
customers to stores. Product variety and convenient timings seem to be the primary
impression about the store, consumers carry with them (Banerjee & Dasgupta, 2010).
The growth of retail is contributing to fulfil the expectations of an average Indian who
likes to spend some time on leisure every day (Banerjee & Dasgupta, 2010).
Retailers must have the right assortment of products which should be sold in
consistency with the overall strategy. Variety is something which is expected from
organised retailers. This expectation of the customers could be readily seen to be
fulfilled by most of the multibrand retail stores. The hypermarkets offer a wide scope in
fulfilling all routine shopping needs of the customers in one stop. The hypermarkets
which have successfully entered to the Tier II and III cities are Big Bazaar, Vishal
Megamart, Reliance Fresh, Spencer’s Retail and Marks and Spencer (Chandra &
Pattanayak, 2012). Product range and multiple choices act as important determinants for
preference of Mega Marts (Sonia, 2008).
With the increasing incomes of the consuming class and increasing attitude ‘Look good-
Feel good’, customers are ready to dress smartly in all age groups. This has increased
their customer base which needs to be addressed with the right mix of merchandise
(Krishnan & Venkatesh, 2008). This has led to the introduction of private labels as it
has added variety and value in the retailers offering. Since manufacturer brands enjoy a
better value over private labels (Kokatnur, 2009) it becomes a more tough exercise to
30
make them popular and acceptable. In order to highlight their store brands retailers give
them more shelf space at attractive places (Burt, 2000).
Retailers delivering the fun experience should offer wide assortment and an ambience in
which the shopper’s would like to spend more time (Sinha, Banerjee, & Uniyal, 2002).
Organised retailers should offer a better product mix and assortment strategy to target
the consumers according to their income group. They should also give adequate
importance to get feedback from shoppers about the products they offer as it would help
them in retaining the existing customers (Ramanathan & Hari, 2011).
It does not mean that retailers should copy the famous designs as it would look like a
duplicate and may not enjoy customer’s preference. A unique original design would
better attract customers. Instead of stealing popular designs the merchandise should be
originally developed by professional designers or design houses for them. This would
lead to a distinct image and more loyal customers for the stores. Pantaloons have been
successful in this case with private labels like- Gia, Richmond, Rig, Eliza, etc.
(Krishnan & Venkatesh, 2008).
India being a large country taste and preferences of customers vary in different regions
so retailers need to make products available accordingly in their stores to enhance their
sales. Westside has used the same strategy and has been successful as the company
viewed that customers in south are smaller as compared to north. In certain cities
woman rarely wear sleeveless dresses (Krishnan & Venkatesh, 2008).
Apart from the groceries the variety offered are almost same in a large size store and a
specialized medium size store, this has led to higher impulse purchases in medium size
stores. Impulse purchase categories differ across the different store sizes (Gupta, Heng,
& Sahu, 2009). It indicates that it is not necessary to open only big stores to increase
impulse purchases rather stores like reliance fresh are more than enough for this
purpose.
The increasing sophistication in the shopping habits of Indian customers is supporting
the emergence of organised retail (Das, 2011). The wide assortment of products
arranged neatly in a sequence impresses the customers. It is very seldom required by
customers to ask where the products are lying in the organised retail formats due to
31
proper arrangement of similar kind of products at a defined place. Customers today
prefer to take their own decisions, so they prefer to pick and choose on their own. In this
information age the customers are well acquainted with new products and service so
they do not like to be advised unless they require it. The modern retail formats are
fulfilling this unstated need of customers.
The Indian youth population is driving the changes in consumption and spending
patterns (Krishnan & Venkatesh, 2008). The changing taste and preferences is leading
to a radical transformation in the lifestyle and spending patterns (Das, 2011). This has
indirectly led to the preference of organised retail stores. The increasing acceptance of
packed and frozen foods has led to increase in the sales of these retailers. With the
increasing role of woman in workforce and at the modern retailing is gaining more
acceptances (Krishnan & Venkatesh, 2008). This all are further increasing the business
scope for organised retailers. The proliferation of mega malls is adding extra spice to
the booming India retail sector (Das, 2011).
2.5.2 Place
Upsurging Consumerism, changing lifestyle, increasing access to information and ever
improving technology, made the last decade observe an enormous development in the
retail sector around the globe (Lahiri & Samanta, 2010). The purchasing power of
Indian consumers has increased in general. In addition to this the changing lifestyle is
demanding comfort and ease in purchasing. This aspect has been properly noticed and
utilised by organised retailers.
Location convenience is always been preferred by customers (Kar & Nanda, 2011).
With changing lifestyle and rapid urbanisation convenience has gained importance.
Convenience has emerged as a requirement which customers are looking for in the
modern lifestyle. The customer is even ready to pay a little more if convenience is
delivered by the seller. Factors like apathy, convenience, enjoyment, shopping as a
routine activity and as an event govern the shopping attitudes of customers
(Chetthamrongchai & Davies, 2000).
Convenient location of shops plays an important role in attracting customers and thus
increases sales (Lalitha, Kumar, & Padmavalli, 2008). The location of the retail outlets
32
plays an important role in attracting customers and adding convenience (Ashokan &
Hariharan, 2008). In a study on shopping orientations in the evolving Indian market the
author observed that the shopper’s preference for a store which is near and could be
approached easily and frequently poses a big challenge in the present retail scenario
(Sinha, Banerjee, & Uniyal, 2002).
With the changing lifestyle and increase in the number of nuclear families the role of
woman is changing in the society. It has brought woman to the workplace in a role of
employee as well as entrepreneurs. This changing role has reduced the time for
marketing and leisure but the modern retail formats have helped them in fulfilling this
challenging task easily. The increasing role of woman in workforce the modern retailing
is gaining more acceptances (Krishnan & Venkatesh, 2008) as they have delivered
convenience to them in terms of delivering products and services. More than 60 percent
of the customers perceive that shopping convenience to be good in the organised retail
outlets (Dalwadi, Rathod, & Patel, 2010)
Modern retail stores have delivered women the outfits which are not only making them
impressive and attractive but which also suits their personal and professional life. They
have also pioneered in delivering products for their kitchen which makes their tasks
easy at home. The convenience of one-stop shopping with wide product portfolio is
very much appreciated by the customers especially the modern housewives (Krishnan &
Venkatesh, 2008) as it has added comfort and ease in their purchasing.
Sonia (2008) conducted a study on customer’s perception towards Mega Marts in
Ludhiana deduced that customers preferred a particular mega mart due to its
convenience in terms of space, billing system, product range, multiple choice, etc.
Malik (2012) observes that customer’s desire for a frictionless shopping experience in
which shopping convenience is an important factor.
Although the unorganised retailers could be attributed more of conveniences in terms of
daily need items which are provided through the neighbourhood stores. The overall
convenience delivered by the organised retailers is far better in terms of location,
variety, value, family shopping, etc. It is not possible for older consumers to roam and
shop for their requirements. Modern retail formats have added high convenience to the
aged customers who can come and do their complete shopping at a single place in an air
33
conditioned environment and with many value-added services. This is one of the reason
that small store based retailers are succumbing to the growing power of giant retailers
(Kotler, 2002).
Organised retailers have helped customers in saving time by providing complete
shopping under one roof along with enjoyment and entertainment. The author has
named the customers as time saving conscious customers who look for saving time in
their purchase and finding the products easily (Kaushal & Sanjay, 2011). Convenience
has been ranked as an important attribute by the author in the study on factors affecting
the purchase of apparels from organised retail store (Lahiri & Samanta, 2010). Factors
like- locations, near to home, convenience are important in driving customers to retail
stores (Chavadi & Kokatnur, 2008). Application of new technologies has developed
alternate channels like teleshopping and internet which are acting as catalyst of
consumer impulse purchase behaviour. They are increasing the accessibility of products
and services and also increasing the ease in impulse purchasing. This has added
convenience for the shoppers. The convenience offered in a large size store is also
available in a specialized medium size store and so the impulse purchases are higher
comparatively in medium size stores (Gupta, Heng, & Sahu, 2009).
2.5.3 Price
Price is the single element in the marketing mix that brings in revenues, all others
generate only cost. Sales volume along with price decides the revenue for any business.
Since sales volume is dependent on price to an extent, the latter becomes the key to the
revenue for an organisation. Price is also the most important parameter in determining
the profitability of the business (Ramaswamy & Namakumari, 2007). To decide
whether their offering would be price oriented or value oriented. This would also
depend on their business model or the format through which they would sell (Krishnan
& Venkatesh, 2008)
Products should be priced in such a way that it achieves profitability for the retailer and
satisfaction for the customers. Pricing should be such that it supports the positioning of
the organisation and generates the expected return on investment. A retailer has three
basic pricing options: (1) A discount orientation where they use low prices as their
major competitive advantage. It has few shopping frills, low profit margins, and a low
34
price image. They target price oriented customers by maintaining low operating costs
and high inventory turnover. Full-line discount stores and Off-price retailers fall in this
category. (2) With an at-the-market orientation where they offer average prices. It
offers a robust service and a good ambience to middle class shoppers. Average and
above average quality products are offered for sale. These retailers finds tough to
increase its spectrum of prices as they are sandwiched between the discounters and
prestige stores. (3) Through an upscale orientation they maintain a prestigious image
which is their key competitive advantage. They have a small target market but loyal
customers, incur high expenses due to distinctive products and services but are
successful because of higher profit margins. In this category we have upscale
departmental stores and speciality stores (Berman & Evans, 2007).
Organised retailers have realised that discount retailing has the potential to be a really
big category because Indian customers are price sensitive. (Malik, 2012)
An important key to successful retailing is positioning in such a way that a good value
is achieved in customer’s mind- for the price orientation chosen. Today the customers
are interested in the best or right value which could be delivered through a superior
shopping experience. In the present retail scenario another challenge faced by retailers
is internet through which the customer easily compares prices of any type of products or
services required by them. Customers do not need to visit stores physically to compare
prices rather with few clicks on the computer, smart phones, etc. they can do it.
Websites like naaptol.com, gaadi.com, etc. could be referred at home, office or
anywhere for this purpose (Berman & Evans, 2007). Deciding and fixing the price
would be a big challenge as technology is resulting in easy comparison of prices for the
customers. In case of unique products it would be tougher to arrive at a price (Chavadi
& Kokatnur, 2008).
Price has a very influential role in the success of organisations particularly in India for
any type of business. Retailers have to adjust with the razor thin margins because the
Indian customers are highly price sensitive. Older consumers are highly price conscious
as compared to the young ones (Das, 2011). More than 60 percent of the customers
perceive that product pricing to be good in the organised retail outlets (Dalwadi,
Rathod, & Patel, 2010).
35
Many studies suggest that consumers go for brand switching either due to intrinsic
motives (the desire to try a new brand) or extrinsic motives (price, coupons). Extrinsic
motives to switch are more common with experienced consumers compared to the ones
with limited buying experience. Satisfied customers may also show change in their
repurchase decision even in presence of high switching barriers like interpersonal
relationships, switching costs and competitor’s attractiveness. Irrespective of how
strong the brand relationship is customers do go for price comparisons (Sahay &
Sharma, 2010).
As pricing is one of the crucial determinants of sales, retailers need to focus on it. Apart
from the actual price how the price offering is presented to customers also affects the
evaluation of the product offering by the customer (Krishna, Briesch, Lehmann, &
Yuan, 2002) . Retailers need to go for such pricing that it becomes very inviting for the
customers to pay close attention. Special pricing do have a high impact on the
customers purchase decision process. (Patil & Vedak, 2011).
Sanjeev Goenka of RPG group is of the view that if big retailers can compete with the
unorganised Indian retailers then they can compete with international players also
because the unorganised retailers have no overheads but are extremely presentable (Das,
2011).
In a study on modern retail outlets in the food and grocery sector in India the author was
of the view that such retail outlets would benefit if differentiation in prices and quality
standards in fresh fruits and vegetables would somehow prevent the customer’s
defection to other retail stores (Prasad & Aryasri, 2008)
In a study on multibrand and multiproduct outlets in India the author found that even
though the outlets claim to be cheaper the perceptions of the customers are different.
Majority customers do not find much difference in prices as compared to regular
outlets. But then also the price expectations are reported to be satisfactory by majority
of the customers. (Ashokan & Hariharan, 2008).
In a study on the shopping proclivity of hypermarkets the author found that it is
positively attributed to the quality of products it offers and the prices it charges on the
spectrum of products. (Chandra & Pattanayak, 2012).
36
In a study conducted in the semi-urban markets of India the author found price as the
most important factor for impulse purchases. Price was the biggest stimulant of
unplanned purchases in small size stores. Prices and product displays are the main in-
store stimuli for the big size retail stores for impulse purchases (Gupta, Heng, & Sahu,
2009).
Retailers have to adjust with the razor thin margins because the Indian customers are
highly price sensitive (Vijayraghavan & Ramsurya, 2007). Retailers also need to
sharpen their pricing skills in order to survive in this competitive environment (Banerjee
& Banerjee, 2000). Older consumers are highly price conscious as compared to the
young ones (Das, 2011). In as study the author observed that product image
significantly affects the price which the consumer is willing to pay for apparels
(Goswami, 2007). Prices do affect the shopping attitude of customers (Nielson, 1996).
Recent empirical research indicate that satisfied customers are less price sensitive and
are ready to pay a premium price (Homburg, Hoyer, & Koschate, 2005). In the present
market scenario retailers compete on a number of variables. The retail mix, limitation of
shelf space, overcoming the competition among national brands and private labels are
some the major challenges which are faced by the retailers (Chavadi & Kokatnur,
2008).
2.5.4 Promotion
Promotions play an important role in increasing the sales of products. Promotions do
affect the preference of stores. In a study on shopping proclivity of hypermarkets the
author found that the promotional purchases made during festivals and special occasions
accompanied with price discounts on the spectrum of products negatively affect the
preference of hypermarkets (Chandra & Pattanayak, 2012).
Promotions do not generate long-term benefits in promoting a brand, it only generates
the sales and margin which are beneficial in the short term. Promotions should be used
as an alternative to boost the sales during the dust-settling period. Monetary support is
considered to be the most important promotional support. (Das, 2011).
In a study on convenience goods the author found that demographic parameters had no
impact on sales promotion. Various reasons could be attributed to the purchase decision
37
of a product. If product satisfaction is kept constant, then sales promotion is the major
reason behind the purchase of convenience goods. Sales promotion leads to higher
sales. Although location plays an important role in purchase decision but if sales
promotion is going on then location does not has a significant role in purchase decision.
The study also highlights that future sales promotion cannot make customers wait for it.
Sales promotions have a limited role in ensuring repeat visit to the stores (Das, 2011).
In terms of consumer sales promotions discount coupons were almost used by everyone.
Promotions like ‘buy one get one free’, contests, lucky draws, gifts, were utilised by
few customers only (Vyas, 2005).
In a study on the Indian apparel retail sector the author observed that it is very important
for the retailer to clear of the stocks at the end of the season; else they have to incur
substantial inventory carrying costs, allocate the limited shelf space to it and in the next
season it may be out of fashion and remain unsold forever. The common discount given
on end of season sale on stock clearance of apparels is upto 50% on Maximum Retail
Price (Vyas, 2007). Retailers need to do proper promotions for discount offers in a
strategic manner to achieve fruitful results (Malik, 2012)
2.5.5 Service
A good service has its own benefits for any business be it a retail business or any other.
Services provided to customers are one very essential factor which leads to more
number of customers to an organisation. Good service and good selling help in
retaining, enhancing and cementing relationship resulting in relationship management
which finally leads to competitive advantage for the firm (Kar & Nanda, 2011). Good
Customer Service attracts more customers and increases consumer satisfaction
(Ashokan & Hariharan, 2008). Organised retailer should implement various value-
added services to provide pleasant shopping experiences to consumers (Ramanathan &
Hari, 2011).
Since their starting organised retailers have used customer service as one of the
important tool to attract new and retain existing customers. Organised retailers have also
used technology as a tool to differentiate their services as compared to the traditional
retailers. Literature suggests that customer-contact employee interaction affects the
overall service quality (Mittal & Lassar, 1996), customer satisfaction (Spies, Heese, &
38
Loesch, 1997), customer loyalty (Beatty, M, Colema, Reynolds, & Lee, 1996), and
customer purchase intentions (Macintosh & Lockshin, 1997). More than 60 percent of
the customers perceive that customer service to be good in the organised retail outlets
(Dalwadi, Rathod, & Patel, 2010)
The Indian customers are very busy in their office & house hold activities due to which
they are in lack of time particularly in big cities. The services offered by the organised
retailers has not only taken care for this rather they have also tried that the customers do
their purchasing in less time with ease and comfort. Old customers enjoy interactions
and prefer those retail stores where they receive special assistance services like valet
parking, carry-out assistance and delivery assistance (Das, 2011).
Competitive Superiority of the retailer from other firms involves attributes like order
completeness, consistent performance, response to faults, exceptional requests and
services, and data request (Karadeniz, 2010). Marketing in future will witness an
‘Adaptive Marketing Era’, a period for marketers to be more adaptable to new channel
and constructs for interacting with customers, and flood the market keeping overall
brand promise- Forrester Research inference. The focus now shifts from outbound to
surround, from campaigns to experiences and from segmented audiences to individuals.
This reinforces that the Relationship marketing practices will always be vital for
organisations (Kar & Nanda, 2011).
Personalised services may be required to offer to avoid the movement of customers to
competitors. Managers and marketers of retail store services in particular and service
organisations in general should recognise the essence of these factors in their efforts to
deliver superior value to customers and manage customer relationship more effectively
(Prasad & Aryasri, 2008). Customers receive relational benefits from service
relationships (Gwinner, Gremler, & Bitner, 1998).
The importance of relationship marketing has increased and gained the attention of
many researchers to know how companies are being benefited by building long-term
relationships with customers (Parasuraman, Berry, & Zeithmal, 1991). Relationship
marketing not only help marketers in understanding customer need but also leads in
reducing costs, increasing market share and thus profitability (Shani & Sujana, 1992).
39
In the recent years huge growth in Indian retail market is due to the high demand of
qualitative products and services that increased the competition among modern retail
formats. At the same time the intense competition from the kirana store have
necessitated the organised retailers to come up with innovative ways of marketing.
CRM practices have gained attention from both academics and practitioners in the
recent years due to the intense completion in the retail market. The product-centric
business has transformed into a customer-centric business in this intense competitive
environment (Prasad & Aryasri, 2008). Efforts to stay in touch with customers are
identified as key determinants of relationship enhancement in retailer-customer
relationship (Bajaj, Tuli, & Srivastava, 2005).
Academicians would agree that customer satisfaction plays the central role in marketing
research (Xueming & Christian, 2007). Marketing literature consistently identifies
customer satisfaction as a key antecedent to loyalty and repurchases behaviour
(Seisders, 2005). Commitment strengthens the covalent bond between the retailers and
customers, and is an important instrument to measure customer loyalty as well as to
forecast the future purchase frequency (Morgan & Hunt, 1994). Delivering products and
services as promised helps in meeting commitments and enhancing the relationship with
customers.
Regular entry of new retailers could be seen with new formats. The present models
which are successful highly in certain parts of the country are only moderately
successful in other areas. Better services are used as one of the important driver to
bridge this gap (Krishnan & Venkatesh, 2008).
Billing system acts as one of the important determinants for preference of Mega Marts
(Sonia, 2008). Use of optical scanners at billing counters has made the billing process
faster. This has facilitated in completing the purchasing exercise faster for the customers
in today’s busy life. They have used the services not only to differentiate but also to add
value in the shopping experience of the customers. Fast processing is welcomed and
appreciated by the modern housewives (Krishnan & Venkatesh, 2008). The
environment created by the modern retailers in their stores, the fast processing, better
quality and hygiene, discounts all of them are welcomed and appreciated by the modern
housewives (Krishnan & Venkatesh, 2008).
40
Technology would be the primary driver in future for differentiating services.
Application of technology will revamp the stores and the shopping experience for the
customers. One can imagine walking into a large departmental store which is fully air
conditioned. The customer pulls a trolley fitted with barcode reader which automatically
registers all the items for billing as they are put in the trolley. If the customer takes out
any of the items from the trolley while purchasing then it automatically removes them
from your billing list. An item which the customer is not able to find, he/she goes to the
small menu driven touch screen kiosk and it easily guides the customer towards the
exact rack where the item is available. After getting all the goods, the customer moves
to the billing counter, and finds that the bill is already ready. Customer has payment
options of cash, card or other forms of e-payment. This would definitely be welcomed
today as people want to avoid going to crowded markets with the fear of pick pocketing
and tedious shopping experience. These modern stores would be having advanced
security and surveillance systems to check unwanted customers as they would be having
a visual database of city’s pickpockets and shoplifters who would be easily identified
and avoided in their premises (Misra & Khan, 2008).
The Exchange &/or return policy has been used by all modern retailers which has
helped them in gaining higher confidence among customers. This is easily possible with
private labels as they produce it themselves (Krishnan & Venkatesh, 2008). Most of the
multibrand organised retailers provide one week for exchanging products and they
particularly have a separate counter to facilitate customers for this activity.
To date there is a lack of studies that examine the various aspects of service that are
important for customer retention (Zeithmal, 2000). As customers we can easily deduce
that customer service provided by the organised retailers have been better as compared
to the traditional retailers in India. Since still there is lack of studies justifying the role
of services, more work is required to be carried out in this direction.
2.5.6 Brand
In this information age brand management is the key to the success of organisations in
the markets. In this transition phase of retailing it has gained a greater importance
because a number of new brands are entering the Indian retail market. In the era
globalisation and liberalisation the choice of Indian customers is shifting from
41
traditional tailor-made to readymade dresses. Although the tailor-made products are
cheaper as compared to the readymade garments then also the preference of customers
has shifted. The reason for this shift is due to the wide variety and tempting designs.
The market is delivering products with almost similar features like name (with a single
word difference in spelling), colour, packaging, etc. brand management plays a more
important role for the survival and success of products and organisations (Lalitha,
Kumar, & Padmavalli, 2008).
A brand is defined as a name, symbol, sign, logo, picture, group of words or a
combination of these which differentiates and identifies a company’s product in group
of similar competing products. The brand name helps a customer to instantaneously
recall and choose the product which she/he is looking for. It takes years to build a brand
and if it is successful then the brand becomes the preferred choice of customers. The
branding activity involves advertisements, promotions, publicity, personal selling.
Internet is now also acting as a useful and strong medium for branding the products and
services.
The battle in the marketplace is between brands and not between organisations.
Consumers buy brands and these brands generate income. So developing a strong brand
becomes very necessary for organisations. Only few brands are successful in any
product category. It takes years in brand building. Rich nourishment, timely support of
marketing, promotions and distribution result in a winning brand. The marketing
programmes tries to create a distinct and powerful positioning of the brand in the minds
of consumers. The whole activity requires intensive resources and is very time
consuming. Brand building is a very difficult task which needs proper execution
(Ramaswamy & Namakumari, 2007). This can be done by identifying your competitive
advantage and regularly advertising the same (Banerjee & Banerjee, 2000).
Advertisements play a limited role in influencing the purchase of branded products
(Lalitha, Kumar, & Padmavalli, 2008).
A brand signifies the quality of products, its price, social recognition, status and also the
mental peace in terms of confidence that the consumers feel that they have bought the
right product. The hectic official schedules and personal engagements leave no time for
the Indian customers and this is also acting as one of the reason for preference of
readymade garments by Indian customers. Seeing this preference in garments many
42
textile producing companies have launched their readymade garments brand.
Raymond’s launched Park Avenue men’s range of readymade garments, Color Plus,
etc.; Bombay Dyeing launched Vivaldi shirts; Madura Garments range of Van Heusen,
Louis Philippe, etc.; Arvind mills Arrow, Newport, etc. and all have been successful.
These brands today are very popular and preferred by the consumers.
Retailers as a part of their assortment planning choose a proper mix of manufacturer,
private and generic brands. Manufacture brands, private brand and generic brands play
complementary roles. Indian consumers give preference to national brands over private
label because of better quality and trust. (Patil & Vedak, 2011). Manufacturer brands are
produced and controlled by manufacturers. They are also known as national brands.
They are well established names in the market enjoying the preference of customers.
They are supported by advertisements of manufacturer and sold by many types of
retailers. They require very low investments by the retailer and generally represent
maximum quality for the customers. Manufacturer brands dominate sales in various
product categories. Some popular manufacturer brands are Kissan, Taj Mahal, Lakme,
Eveready, Liberty, Pepsi, Videocon, etc. The retailers who prefer and rely heavily on
manufacturer brands are small firms, discounters, television retailers, web retailers, and
others who require the credibility of these well known brands to gain the confidence of
customers. Discounters rely because they sell the products at a lower price which can
easily be compared with the prices offered by other retailers.
Private brands are also known as private labels or dealer brands. Their brand names are
given by the wholesalers or retailers. They are more profitable and are better controlled
by retailers. They are low priced compared to national brands and are not sold by
competing retailers thus they result in higher store loyalty for retailers. Private brands
are nurtured for years by organised retailers. They increase the retailer’s value
proposition for customers (Patil & Vedak, 2011). They are also used by retailers to fill
the gap in different product categories not catered by manufacturer brands thus leading
to in depth assortments and greater store loyalty. The exercise of the retailer increases
with private brands as they need to select suppliers, plan promotions, and arrange for
distribution and warehousing. In-store displays have emerged as a strong medium to
promote private labels apart from advertisements. They are generally priced 20 to 30
43
percent below manufacturer brands which is a win-win situation for both the customers
and the retailers (Berman & Evans, 2007).
Private labels are classified into three categories namely store brands, umbrella brands
and individual brands. Store brands carry the retailer’s name which is evident in the
packaging like – ‘Westside’. Umbrella brand is carried out in multiple categories like –
‘Bare’ by Pantaloons. Individual brands are specific names for a particular market
segment and category like – ‘Life’ fashion apparel of Shopper’s Stop and ‘Kashish’
ethnic apparel of Shopper’s Stop (Krishnan & Venkatesh, 2008).
Retailers use unique branding strategy to position their private brands. The strategy
could be independent stand alone for different categories termed as a house of brands
strategy, or the same brand name across various categories termed as branded house
strategy (Aaker & Joachimsthaler, 2000). In order to highlight their store brands
retailers give them more shelf space at attractive places (Burt, 2000).
Private labels are becoming popular among customers and in some cases have come at
par or exceeded the manufacturer brands. Tasty Bites, a private label of Big Bazaar has
taken over Frito Lay. The average contribution of private labels is around 18% in total
sales. The growth is varying in different categories. Apparel is growing at a rate of 33%,
consumer durables at 12%, food and grocery at 28% and lifestyle products at 7%. The
future for private labels depend upon the ability of the retailers in overcoming the key
challenges like quality infrastructure, adaptive supply chain, co-optation, talented
professionals, hybrid marketing channels, accelerated growth in new categories,
reduction of the dividing lines between national brands and private labels and the
increase in manufacturing know-how. Private brands apart from enhancing profits for
retailers also increase the category sales and develop store loyalty. Private labels will
grow and make their presence felt inspite of all the challenges because they create an
environment of win-win for both the retailers and the customers (Chavadi & Kokatnur,
2008).
Generic brands have products with generic names as brands like-canned peas. They are
no-frills goods stocked by retailers. They are a sort of private label which receive
secondary shelf location, get little or no promotion support by retailers. They may be
44
having less quality compared to national or private brands are stocked in limited
assortments and have plain packaging. In supermarkets their share is less than 1 percent
(Berman & Evans, 2007). They are used to increase the assortment offered by the
retailers and attract a wide class of customers.
The increasing competition and changing tastes and preferences of customers have led
to a battle of brands where these manufacturer, private and generic brands are fighting
for more shelf space and control. This battle could easily be witnessed in supermarkets
where all types of brands are placed together.
The role of retailers is increasing in the modern formats of retailing. This increasing role
is giving them the power to negotiate with the manufacturer to produce a product
according to their requirements. As retailers are in direct touch with the customers they
know best what is liked by the customers and in what sizes or quantities customers
prefer to buy. The confidence of the customers is increasing regularly in the organised
retailers as these retailers are in themselves very large in terms of their operations.
A customer buying a product from an organised retailer is confident of a particular
minimum quality be it a manufacturer brand, a store brand or a generic brand. Retailers
are themselves going for brand building exercise of their stores. Positive image of the
outlets / stores lead to more acceptance by the consumers. Consumers generally
perceive the products and brands offered by renowned organised retail outlets to be of
good quality. Customers evaluate the brands on the basis of extrinsic cues of the store.
This may be in respect of price, quality, service, performance, value for money, etc.
(Kokatnur, 2009).
Quality plays a very important role in increasing the confidence of customers in a
product. If quality is regularly delivered it leads to building a good brand image. The
modern retail outlets in the food and grocery sector in India would benefit if
differentiation in prices and quality standards in fresh fruits and vegetables would
somehow prevent the customer’s defection to other retail stores (Prasad & Aryasri,
2008). Customer perceived value depends on many factors like mutually beneficial
exchanges, trust building through commitment, long term orientation, close relationship
building, reducing operational time gap, etc. Quality acts as the core and tangible
45
benefit which differentiates the retailer’s product from other competing products (Kar &
Nanda, 2011).
Customers perceive the manufacturer brands to be of better quality as compared to
private labels. The qualities of private labels are perceived by customers by associating
them with the stores which carry them (Kokatnur, 2009). This signifies that the
customers trust the renowned retail outlets on the parameter of quality. Increase in this
trust on the retailers encourages repeat purchases by the customers. If this trust
continues for a long time then this acts as a source of word-of-mouth promotion for the
retail store and attracts new customers also. This increasing numbers of satisfied
customers is acknowledged by the general public who seeing others, visit the retail
store.
If quality is consistently delivered, the brand image improves and the number of
customers is automatically going to increase. The rush in the stores are may also attract
tourists who watching others would visit the stores. This may increase sales through
impulse and window shopping. Customers who are quality conscious prefer to buy
branded products from shopping malls (Kaushal & Sanjay, 2011).
Quality and status symbol play an important role for preference of branded products
among consumers. (Lalitha, Kumar, & Padmavalli, 2008). Some of the retailers enjoy
high reputation in the market because of their quality offering. Customers prefer to shop
at these retail outlets also because it gives them the satisfaction of purchasing from a
reputed place which gives them social recognition. Particularly if the customers is
shifting from a lower social class to a higher social class by purchasing there then it
automatically provide them social recognition.
Shopping proclivity of hypermarkets is positively attributed to the quality of products it
offers and the prices it charges on the spectrum of products (Chandra & Pattanayak,
2012).
If retailers want to enjoy higher brand loyalty there stores should be located near to the
home and offices of their target customers. Brand loyal customers are ready to pay
higher if better quality and variety is offered in stores (Goswami, 2007).
46
Many studies suggest that consumers go for brand switching either due to intrinsic
motives (the desire to try a new brand) or extrinsic motives (price, coupons). Satisfied
customers may also show change in their repurchase decision even in presence of high
switching barriers like interpersonal relationships, switching costs and competitor’s
attractiveness. Irrespective of how strong the brand relationship is customers do go for
price comparisons (Sahay & Sharma, 2010).
2.5.7 Shopping Experience
Shopping experience has emerged as one of the important factor in attracting customers
to the organised retail. It has helped in increase the customer traffic in the stores. The
authors were of the view that the retailers delivering the fun experience should offer
wide assortment and an ambience in which the shopper’s would like to spend more
time. They viewed that shopper’s attach importance to ambience and facilities at the
store (Sinha, Banerjee, & Uniyal, 2002). The more time the shopper spends in the store,
the more is the chance of purchasing by them.
With changing lifestyles and habits the visit to the stores may always not have the
purpose of purchasing. Studies have shown that the primary purpose of visit by
shoppers is window shopping followed by hangouts. The ambience is so attractive that
students generally visit with friends for a good hangout. Mall atmosphere and decor
highly appeal the customers (Ashokan & Hariharan, 2008).
Giant malls offer a unique experience to the customers during shopping regardless of
their status, where people with less purchasing power also throng the stores. Everybody
wants to be seen, enjoy and experience the feeling of shopping at such big malls and
they have already linked it with status. Today it’s not just shopping, dining or watching
movie, it’s a lifestyle activity, an experience which the shoppers are looking for. Malls
are built-up with this idea as their USP to deliver a complete experience (Banerjee &
Dasgupta, 2010).
The environment created by the modern retailers in their stores, the fast processing,
better quality and hygiene, discounts all of them are welcomed and appreciated by the
modern housewives(Krishnan & Venkatesh, 2008).Store ambience does have an effect
on sales but it has little impact on impulse purchases (Gupta, Heng, & Sahu, 2009).
47
Big Malls are preferred today as they have gained impetus and have developed into
recreation and social places apart from being a shopping alternative. The shopping
experience has developed into an important component of consumer’s lives and
consequently consumption has developed as a way of experience production and an
expression of one’s self or self-image.
The increasing number of vehicles in India, parking has emerged as a problem for
customers during purchasing. Customers are in chaos when visiting old markets or
markets in which unorganised retailers are mostly present due to the problem of
parking. Customers have to park much far from the markets generally in metros and big
cities. But the modern retail formats have attracted more customers because they are
mostly providing this facility in their stores. Hassle-free parking attracts more
customers. (Ashokan & Hariharan, 2008).
The mall managers should highlight facilities of anchor stores and entertainment along
with parking facility, easy accessibility, pleasant ambience, spacious floors and food
courts, elevators, etc. to create an attractive image so that customer traffic could be
enhanced and result in more sales for retailers (Khare & Prakash, 2010). Consumers,
especially young ones today even go for throwing their anniversary or birthday parties
in malls having food courts.
In the busy schedules it is not possible for customers to shop things separately due to
lack of time and this has led to preference of multibrand retailers and malls. With the
modern facilities customers can buy, entertain themselves and dine at the same place
and then happily go home after all these activities. The rush in the weekends is very
high in these stores. Shopping in malls has been termed as retail therapy. “Buying takes
some thought and involves an investment of time. All this makes one feel important and
worthwhile. But most importantly it distracts the shopper out of his misery for that
moment, which is why he/she feels relieved and happy doing it”( P S Das, Psychiatrist,
Max Healthcare).
Organised retailer should implement various value-added services to provide pleasant
shopping experiences to consumers (Ramanathan & Hari, 2011). Authors are of the
view that factors like apathy, convenience, enjoyment, shopping as a routine activity
48
and as an event govern the shopping attitudes of customers (Chetthamrongchai &
Davies, 2000).
Consumers look for quality, value and a frictionless shopping experience in totality
(Tillman, 2007). Organised retailers have tried to deliver a better shopping experience
through their modern formats in which customers find it easy to locate products. This
has added comfort in their overall experience. It has also indirectly led to impulse
purchase because they do not feel tired while purchasing. Evening is the preferred
shopping time in retail outlets. One of the primary reasons behind it is that salaried
people shop after their office hours along with their colleagues (Ashokan & Hariharan,
2008).
The retailers need not only to focus on the pleasantness of the shopping experience but
also to the arousal-level expectation of the shoppers. Mall ambience plays an important
role in the influencing the strong shopping motives of the shoppers (Chandra &
Pattanayak, 2012).
2.5.8 Others
This category is a grouping of those variables which have been found in the available
literature. The variables have been obtained by different academicians in their study on
retail but have been named differently by different researchers. The variables are new to
this field of study but have appeared as important ones in affecting the retail buyer
behaviour. Let us have a look on them.
Employees have been considered as the best resource for any type of organisations.
They are the brand ambassadors for an organisation. The better value they create the
better is the reputation of the organisation. Retail being a service industry moving with
this idea organised retail players have been very cautious in recruiting the employees.
Today they can boast of having some of the best employees with them in satisfying the
customers. A desire for a frictionless shopping experience signifies fast shopping,
getting the right products easily, and shopping convenience. (Malik, 2012). As we have
mentioned customers are looking for an overall shopping experience which products
can alone not satisfy. Employees play a very important role in making the overall
49
shopping experience pleasant for the customers. The attitude of the staff in the
organised retail stores is very positive and helpful. When they greet on the entrance of
the stores the customers mind becomes fresh for the shopping activity. This indirectly
leads to enhanced sales for the retailers.
Managers and marketers of retail store services in particular and service organisations in
general should recognise the essence sales force management practices to serve the
employees as well as customers satisfactorily in their efforts to deliver superior value to
customers and manage customer relationship more effectively (Prasad & Aryasri, 2008)
Shoppers find very courteous staffs at the organised retail stores which creates an
impressive and distinctive image about the organised retailers. Such staffs are generally
not seen at the unorganised retail outlets. This differentiation automatically pulls the
customers to the organised retail outlets.
Efforts to stay in touch with customers are identified as key determinants of relationship
enhancement in retailer-customer relationship (Bajaj, Tuli, & Srivastava, 2005). Certain
times when the staff in the organised retail outlets feel that the customer would be
requiring support then they would try to give personal attention to the customers. In this
personal attention they first try to fully understand the need of the customer and then
take the necessary steps to fulfil it. In the process of understanding the need if required
they would give suggestions for a better product or service which may satisfy the need
of the customer. It is not necessary that they would give the product which the customer
is demanding rather they may advice a product which may better satisfy the need of the
customers, although the final decision would still be with the customers.
In categories like consumer durables, mobiles, laptops, furniture’s such type of advice
and personal attention is regularly seen. Through their advice the staff would never try
to cheat the customers. Organised retailers generally enjoy the reputation of trust and
confidence of not being different in their offers to different customers. Since the prices
are fixed the confidence of not being cheated is always in the minds of the customers.
At unorganised retail outlets the prices of same product may be varying for different
customers due to which customers feel cheated several times. Trust is one of the
important variables to understand the strength of a marketing relationship quality
(Calonius, 1998).
50
With the increasing competition due to entry of new players at regular intervals in the
organised retail sector ‘personal attention to customers’ is now used as a medium to
impress the customers and increase their loyalty towards the stores. As satisfied
customers are more loyal, it increases the chances of repurchase. Satisfied customers
also do not care more about prices so this result in a better business not only at that
instance but also in future for the organised retailers. Recent empirical research indicate
that satisfied customers are less price sensitive and are ready to pay a premium price
(Homburg, Hoyer, & Koschate, 2005).
The next phase of marketing will be ‘Adaptive Marketing Era’, a period for marketers
to be more adaptable to new channel and constructs for interacting with customers, and
flood the market keeping overall brand promise- Forrester Research inference. The
focus now shifts from outbound to surround, from campaigns to experiences and from
segmented audiences to individuals.
Good service and good selling help in retaining, enhancing and cementing relationship
resulting in relationship management which finally leads to competitive advantage for
the firm (Kar & Nanda, 2011). The authors indicate that alert staff helps in building this
relationship by being courteous and giving personal attention to the customers. More
than 60 percent of the customers perceive that customer service to be good in the
organised retail outlets (Dalwadi, Rathod, & Patel, 2010)
Viewing the importance of the employees in improving the future of organisation
through increased customer satisfaction and loyalty we have considered the statements
‘courteous staff to customers’ and personal attention to customers’ in our study for
getting the preferences of the customers.
Freebies include those facilities which are provide free of cost to the customers. Free is
a word which is readily highlighted in the advertisements of organisations as it gains
high attention of customers and pulls them to the stores. Customers are interested in
anything which is provided free and this helps them in arousing them to go for
purchases. Although highlighted as an important feature by most of the researchers it
has not gained place in most of the empirical studies. In his study Relationship
marketing and Indian shoppers the role of freebies has been highlighted. The author was
of the view that customer perceived value depends on many factors, ‘freebies’ was
51
extracted as one of these important factor in building relationship with customers which
leads to customer loyalty and hence more business for the retailers. He mentions that it
helps in creating a competitive advantage for the retailers (Kar & Nanda, 2011).
Free gift packaging is a feature which attracts customers to the stores. Whenever
customers have to buy gifts on various occasions they prefer to visit those stores which
do the gift wrapping also. And if this gift wrapping is free it becomes a much better
reason for pulling the customers to those stores who are providing it. This facility is
provided free of cost in foreign markets by organised retailers. In India the facility of
gift packaging is available but is not free at all the organised retail outlets. Looking at
the benefit which it delivers in terms of a better favourable image and more customer
traffic all organised retailers should provide this facility.
Free alteration is a facility which is available at all the organised retail outlets but is
generally chargeable if provided at the unorganised retail outlets. Customers buying any
type of apparels could avail this facility in the organised retail stores. The charges of the
alteration are not very high but in their limited resource of money and employees
unorganised players are unable to provide it. It has created a psychological advantage
which organised players are enjoying over the unorganised players. It has helped in
creating a goodwill and better impression of the organised retailers in the minds of the
customers. This attribute has made the organised retail outlets a preferred destination of
the customers.
Tourists are benefited in a much better way by this facility. As tourists are in lack of
time they cannot afford to wait for the alterations, in such cases they can get it done at
any outlet of the stores across the country if they carry the bill with them. This has
created an added value in the serving basket of the organised retailers and has
automatically attracted customers to their stores.
Since much empirical evidence could not be found in the available literature work is
needed in this area. Although advocated as an important feature by most of the
researchers theoretically we cannot ignore it. So we have considered ‘freebies’ in our
study for which two statements ‘Free gift packaging’ and ‘Free alteration’ were
included.
52
The growth of retail is contributing to fulfil the expectations of an average Indian who
likes to spend some time on leisure every day (Banerjee & Dasgupta, 2010). Customers
are looking for a hassle free shopping which requires some additional features in the
retail stores. A section of shoppers are tired of the traditional way of purchasing and
they have been especially targeted by the organised retailers. Organised retailers have
tried to fulfil this desire of shoppers to pull them towards their stores. Organised
retailers have developed superior store amenities to customers to make their purchasing
pleasant and comfortable. Customers get tired moving from one shop to another while
purchasing but superior store amenities provide have been able to remove this.
The authors observed that shopper does attach importance to ambience and facilities at
the store (Sinha, Banerjee, & Uniyal, 2002). Store ambience does have an effect on
sales but it has little impact on impulse purchases (Gupta, Heng, & Sahu, 2009). More
than 60 percent of the customers perceive that store layout is good in the organised
retail outlets (Dalwadi, Rathod, & Patel, 2010).
Competitive Superiority of the retailer from other firms involves attributes like order
completeness, consistent performance, response to faults, exceptional requests and
services, and data request (Karadeniz, 2010). With the buying of the product the
customers also want to satisfy their unstated needs. If the unstated needs are fulfilled in
the shopping mall then there is a possibility of revisit. The objectives of the retailers are
to attract more number of customers through different extra benefits and store amenities
are one of them which may lead to attract customers (Das & Kumar, 2009).
Giant malls offer a unique experience to the customers during shopping regardless of
their status, where people with less purchasing power also throng the stores. Everybody
wants to be seen, enjoy and experience the feeling of shopping at such big malls and
they have already linked it with status. Today it’s not just shopping, dining or watching
movie, it’s a lifestyle activity, an experience which the shoppers are looking for. Malls
are built-up with this idea as their USP to deliver a complete experience through better
store amenities (Banerjee & Dasgupta, 2010).
The traditional retailing is a low cost structure, generally owner-operated, very low
labour costs and real estate, with little or no taxes to pay. On the contrary organised
retailers have to meet huge expenses to meet and at the same time have to maintain low
53
prices to compete with the traditional retailers (Ashokan & Hariharan, 2008). Better
store amenities have cost the organised retailers higher but at the same time have also
attracted more customer traffic.
The author was of the view that customer perceived value depends on many factors;
‘Superior Layout’ was named as one of the important extracted factor. Authors observe
that it helps in creating a competitive advantage for the firm. Authors have also
highlighted the role of safe trial rooms in gaining the confidence of customers for the
stores (Kar & Nanda, 2011).
Availability of prams in stores like Big Bazaar has been welcomed and appreciated by
the parents of the newly born babies. It has helped them to go for shopping while taking
appropriate care of their child. It was very tough for them to go for purchasing but such
facilities have made it possible for them. It has not only made it possible but also added
comfort and ease in their shopping. With comfort and ease they now spend more time in
the organised retail stores which not only leads to higher purchase for the retailers but
also results in a satisfied and loyal customer for them.
Organised retail stores provide trial rooms which is not always available with
unorganised retailers. Even if it is available with the unorganised players it is congested.
In the modern retail stores these trial rooms are not only available but also are
convenient and safe for the customers. Generally store representatives are available near
the trial rooms to help and support the customers which highlight the comfort and safety
of the trial rooms.
Although literature could be found on shopper friendly store design very less empirical
evidence regarding child care facility and safe trial rooms is available in the literature
but looking at their importance in pulling more customers to the stores we have
considered all three of them in our study.
In a study on the Long-Term Impact of Loyalty Programs on Consumer Purchase
Behaviour, the author found that heavy buyers at the commencement of the loyalty
program were most likely to claim their loyalty rewards, but it did not prompt them to
change their purchase behaviour. For light buyers the loyalty program acted as a
medium to broaden their relationship with the firm into other business areas (Yuping,
2007).
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Factors like ease of parking, special offers, best prices, loyalty or benefit card,
incentives affect the shopping attitude of customers (Nielson, 1996). Organising
customer clubs and loyalty programs in order to serve them effectively helps to deliver
superior value to customers and manage customer relationship more effectively (Prasad
& Aryasri, 2008).
A comprehensive credit system scheme may help the organised retailers to enhance
their sales potential and growth (Ramanathan & Hari, 2011). Customer loyalty
programs have become necessary to attract and encourage customers for more and
repeat purchases. Big Bazaar and Shopper’s Stop have successfully used them
(Krishnan & Venkatesh, 2008). The credit system policy is seen to be regularly used at
all organised retail outlets but it does not exist with the unorganised retailers.
The option of paying in cash or through cards is mostly not available at the unorganised
retail counters. Even if it is available at some of the stores most of them charge a
difference of 2%. But this facility is available and is without any extra charge in all the
stores of the organised retailers. Although old age people hesitate to use cards but the
young generation is frequent and confident in using them.
Young people today spend primarily on clothes, music, food, books and electronic
gadgets. Youths today have come up as a huge customer base. With the boom in IT, call
centres and BPOs the money is now in young hands who are moving with the idea of
spending and enjoying. They are very much open to the concept of credit (Banerjee &
Dasgupta, 2010) and this has led to increased sales for organised retailers.
Young customers neither fear nor are hesitant in using cards (debit or credit cards) or
online banking for purchasing. People above the age of 50years are generally hesitant in
going for online shopping or in using cards because of the fear of frauds. Thus youths
have emerged as a significant customer base for retailers, banks, tour operators, etc.
They are also targeted as customers who would generally go for impulse purchase thus
increasing the overall sales for the retailers.
Majority of the people preferred a cash payment mode (Dalwadi, Rathod, & Patel,
2010). The preferred mode of payment is cash in regions where people do not have a
credit card (Ashokan & Hariharan, 2008). But at other places plastic money has been
55
readily preferred because of convenience and safety. Credit and debit cards have led to
more unplanned purchases by the customers. The payment options have definitely
increased the purchases at the organised retail stores. Observing the growing use
importance of plastic money and the benefits of membership cards we have considered
them in our study.
Consumers perceive organised retail as a sound provider of better facilities, neat and
clean ambience, good store design, better merchandising, nice sales persons, better
products, attractive prices and attractive displays. The Changing lifestyles, food and
eating habits of consumers have contributed largely to the growth and development of
organised food and grocery retail formats in India (Prasad & Aryasri, 2008). The taste
and preferences are fast changing. The retail sector in India is witnessing a tremendous
growth with the changing demographics and lifestyles (Krishnan & Venkatesh, 2008).
With the boom in Indian economy and the rise in the income Indian customers are
demanding for the best facilities. At the same time the intense competition from the
kirana store have necessitated the organised retailers to come up with innovative ways
of marketing (Prasad & Aryasri, 2008). Organised retailers have clearly understood this
and have tried to deliver distinctive facilities to pull the customers towards their stores.
An effort to this could be seen by customers clearly through the differentiated products
and services delivered by organised and unorganised retailers. Facilities which are
delivered as basics by the organised retailers that is generally not available with the
unorganised retailers. With Liberalization, Privatization, Globalization and
Modernization, a modern competitive business is based on understanding the mind of
the customers and providing the kind of products and services he wants (Das & Kumar,
2009). Understanding the preferences of the customers organised retailers are providing
these facilities and attracting more customer traffic to their stores.
Basic facilities like trolleys for a hassle free purchase, spacious trial rooms which are
adding comfort in shopping, washroom facility which add convenience, timely
communication about the latest offers so that proper planning could be done, neat and
clean staff with a positive mood to support the customers are provided by the organised
retailers. Most of these facilities lack with the unorganised retailers. Many could argue
that these facilities are not necessary and which do not have a direct influence on the
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purchase decision but they do change the attitude and impression of the customers
towards the stores.
An improvement could be seen in the quality of life of urban Indian consumers
(Krishnan & Venkatesh, 2008). This improvement in the quality of life at work and
home is changing the expectations of the customers. Organised retailers have tried to
meet the expectations of the customers by providing superior products and services.
Some of them have even delighted the customers with their facilities.
When the customers enter the stores of organised retailers the ambience which they
have created is very impressive. At the entrance customers find support staff greeting
and welcoming them to the stores. The environment created by the modern retailers in
their stores, the fast processing, better quality and hygiene, discounts all of them are
welcomed and appreciated by the modern housewives (Krishnan & Venkatesh, 2008).
The sales and support staff are neatly dressed, ready to help you always with a positive
attitude. This changes the whole mood of shopping in a positive way and customers
spend more time in the stores resulting in enhanced sales for the retailers.
While the customers are trying various apparels they again could find the support staff
near trial rooms to help them if needed. The difference could be easily judged in these
trial rooms also which are quite spacious with fill size mirrors in which the customer
could fully watch themselves with the outfit they are trying. The unorganised retailers
may have trial rooms but which are generally very small where the customer has to
accommodate themselves and do the exercise of trying the outfit. The customers could
hardly view themselves so they ask the person accompanying them suggestions on the
outfit.
Communicating about the latest products and service is not a very time taking activity
but it again lacks with the unorganised retailers. Organised retailers have viewed the
importance of communication and have rightly used it to attract customers to their
stores. Several researchers have emphasised the importance of communication.
Communication or sharing information is an important variable that plays an important
role in relationship marketing. Cultivating loyal customers may result in enhanced sales
and customer share, reduced costs and higher prices. By nurturing quality relationship
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with customer’s retail outlets would be able to attract and retain them ever loyal (Prasad
& Aryasri, 2008).
The increasing sophistication in the shopping habits of Indian customers is supporting
the emergence of organised retail. The changing taste and preferences is leading to a
radical transformation in the lifestyle and spending patterns. This is further increasing
the business scope for organised retailers (Das, 2011).
Technology has not only supported the role communication but has also made it very
effective. Application of new technologies has developed alternate channels like
teleshopping and internet are acting as catalyst of consumer impulse purchase
behaviour. They are increasing the accessibility of products and services and also
increasing the ease in impulse purchasing (Das, 2011). Technology apart from helping
in increasing the impulse purchases has also emerged as one of the most effective tool
of communication since it is very fast. It has helped to communicate with the customers
on a mass basis at a high speed and lower cost. Text messaging has been used by banks
to promote and popularize its products and services (Gopal, 2007).
In her research on innovative marketing practices the author has highlighted the role of
sms (short messaging service) and internet in communicating effectively with customers
(Agrawal, 2010). Websites like www.ways2sms.com and www.fullonsms.com have
helped in achieving the above in a speedy and cheaper way because they are offering
free service for sending SMS on mobiles. Advance communication has helped the
customers to plan the purchases according to the schemes announced by the organised
retailers. This has increased the number of satisfied and happy customers. Although this
is known to unorganised retailers but few young unorganised businessmen are only
using this facility for their businesses.
At organised retail outlets the facility of trolley and/or shopping bags has assisted the
customers to shop with ease and comfort. Customers easily purchase even for their
monthly requirements of groceries and other items with the help of the trolleys. Looking
at the ease and advantage provided by the trolleys even some of the unorganised
retailers have employed them in their stores. This is a small facility but has removed
tiredness in the purchasing of Indian shoppers.
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Washroom facility is a very basic facility required by customers. This may be available
at some of the unorganised retail stores but is not clean and hygienic. The emergence of
the mall culture has reflected it as a basic requirement which should be available at all
shopping centres. The washroom facility is provided by all the organised retailers in a
very clean and hygienic environment. This has positively affected the preference of the
customers towards the organised retailers.
Reviewing the importance and requirements of these facilities we have considered
washroom facility, neat appearance of staff, good condition of trolleys, safe trial rooms
and information about new schemes through sms &/or email in advance in our research
study.
Timings are playing an important role in attracting customers to the retail stores.
Convenient timings have been a major reason behind the choice and success of small
shops in India. Recognising the possible advantage of timings and the competition from
mom and pop stores, the organised retailers are trying to open there stores at timings
convenient to customers. They are open for all the seven days of the week and are now
opening for long hours. Some of the organised retailers have gone for opening their
stores on the petrol pumps which are open 24 hours.
The kirana shops are having a share of around 96% in the Indian retail market and are
giving a tough competition to the organised retailers. As the potential in the Indian retail
market is very high organised retailers in their efforts to attract more customers are
trying to widen their offerings. This is helping them in attracting customers from all the
economic classes of the society and indirectly leading to higher turnover and increased
profits for them. Hence we have considered ‘convenient timings’ and ‘it accommodates
all class of buyers’ as statements to achieve information from customers.
2.6 Demographics in Retail Purchases
The choice of consumers for a product may vary according to the type of product and
the socio economic status of the consumer. Monthly household income has emerged as
a significant factor but it was reflector more on the basis of type of products to be
purchased (Sinha, Banerjee, & Uniyal, 2002).The experience of the changing retail
scenario is making the consumers today to think globally. The emergence of retailing in
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India has more to do with the increasing purchasing power of the buyers, especially in
the post liberalization era (Prakash, 2007) .
The retail sector in India is witnessing a tremendous growth with the changing
demographics and lifestyles. The Indian youth population is driving the changes in
consumption and spending patterns. With the increasing role of woman in workforce
and at the modern retailing is gaining more acceptances (Krishnan & Venkatesh, 2008).
Gender and age play an important role in the choice of store. The authors suggest that
men gave more importance to proximity while women traded this off with the
merchandise. Women emerged as a more regular buyer (Sinha, Banerjee, & Uniyal,
2002).
Salaries in India have gone up by 14.4 percent in 2006 and by 15.5 percent in 2007. As
per an ASSOCHAM survey average monthly allowance of children in urban areas in the
age group of 10-17years has increased from Rs. 300 in 1998 to Rs. 1300 in 2008. This
segment is of has attractiveness because of its size, large exposure to media and
growing purchasing power. The young is passionate about their brands and loves them
while the old group although develop strong relationship with the brand but that is more
rational because of their maturity, independence, financial constraints and increasing
responsibilities (Sahay & Sharma, 2010).
Qualification, employment status and age group act as influencing factors in purchase of
branded shirts and pants. Customers in the age group of 20-50 years are earning people
and prefer to spend on branded products (Lalitha, Kumar, & Padmavalli, 2008).
Shoppers in the age group of 30-50 years are highly demanding and therefore evaluate
the store on more number of dimensions in store choice and prefer the one which
delivers on all the dimensions (Sinha, Banerjee, & Uniyal, 2002). The phenomenal
success of Indian retail industry has been triggered by the increasing personal
disposable income of the Indians (Chandra & Pattanayak, 2012).Authors are of the view
that consumer’s choice of a store is dependent on their socio-economic background,
past buying experience and their personality (Aaker & Jones, 1971)( (Dodge &
Summer, 1969).
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2.7 Shifting Preferences of Consumers towards Organised Retail in India
The Changing lifestyles, food and eating habits of consumers have contributed largely
to the growth and development of organised food and grocery retail formats in India
(Prasad & Aryasri, 2008). An improvement could be seen in the quality of life of urban
Indian consumers. The growing affluence of the Indian middle class, a flood of
imported products in the fashion and food categories, the increasing space for groceries
and the emergence of a new breed of entrepreneurs are drivers of boom in retail sector
of India. (Krishnan & Venkatesh, 2008).
The Changing lifestyles, food and eating habits of consumers have contributed largely
to the growth and development of organised food and grocery retail formats in India
(Prasad & Aryasri, 2008). The phenomenal success of Indian retail industry has been
triggered by the increasing personal disposable income of the Indians (Chandra &
Pattanayak, 2012).
An improvement could be seen in the quality of life of urban Indian consumers. The
growing affluence of the Indian middle class, a flood of imported products in the
fashion and food categories, the increasing space for groceries and the emergence of a
new breed of entrepreneurs are drivers of boom in retail sector of India. The Indian
youth population is driving the changes in consumption and spending patterns. With the
increasing role of woman in workforce and at the modern retailing is gaining more
acceptances (Krishnan & Venkatesh, 2008).
The above studies indicate that the shifting preferences of consumers towards modern
formats of retailing are not because of a single factor rather it is a combination of a
number of factors. This combination of factors would vary according to the type of
products to be purchased and the purpose of the visit of the customer. Demographic
characteristics may also play a major role in the shifting preferences of consumers
towards the modern formats of retailing.