kiranization of indian malls

8/3/2019 Kiranization of Indian Malls

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KIRANIZATION OF INDIAN MALLS : THE SNOW WHITE

AND THE SEVEN DWARFS EFFECT

Rajan Johree, Ruhbani Singh and Karan Makhania

ABSTRACT In the current changing scenario, it is crucial to be flexible in all

possible contexts. Such a scenario currently exists in the Indian retail

sector. It is currently estimated to be a USD 200 billion industry andrecently saw the entry of very large retailers in the form of malls.

Currently, while the malls are attracting a lot of interest in the form of footfalls of visitors, they are not able to convert a sufficient number of

these into purchases. This is where the malls need to be flexible andlearn from the kirana stores a traditional format of small, corner

retailers popular in India.

Indiaand its markets are undergoing a sweeping change. This change is notonly in the market structures but also in the way goods are being sold. Gone are thetimes when a customer would have to make good with whatever merchandise wasavailable, the price and the delivery mode prevalent in those times and finally the

value for money that he is given. Today markets and their processes are more flexiblein all aspects. The new Snow-white market places have started to replace thetraditional bazaar kind of dwarfed tiny cornerkiranashop. Be it the supply chain orthe point of purchase experience, markets and marketers are deriving sustainablecompetitive edge based on flexibility.

Let us look at the current market position of the Indian malls. The number ofshopping malls, which were virtually non-existent inIndiatill five years ago, nowstands at about 300. Many more are in the pipeline and will soon be a part of theorganized retail segment in our country (India).Indiais at present a fast growing

economy and is attracting considerable amount of interest in its retail sector which istill now still in its nascent stages. Shopping malls are a relatively new phenomenoninIndiaand seem to be linked to the growing middle class and increasing interest inthe west.

In the Western World there have been malls for so long that they have become part of the public's psyche, but inIndiait's a new concept, so various factors thatgovern the success of a mall have to be kept in mind. It is in this context that this


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paper is being presented on the acceptability and adaptability of the shopping mallconcept in Indian cities and to the Indian population.

HYPOTHESIS

The problem being studied in this article is that of the Indian malls and how to

adapt them to the Indian context. The study looks at the possibility of the mallsreplacing the Kirana stores (a popular form of market stores in India) by adopting aflexible strategy which enables it to successfully adopt the key features of these localstores and at the same time provide the benefits of the shopping malls. The studyundertakes an analysis of the attitudes of Indian consumers towards these malls andhow the malls need to modify themselves to better service the Indian consumer.

Linking the concept of flexibility management systems to the Indian retailsegment, this article talks about Indian malls and their need to be flexible and adaptivein order to be successful in the Indian market. Retailing is the business activity ofselling goods or services to the final consumer. A retailer is any businessestablishment that directs its marketing efforts towards the final consumer for the

purpose of selling goods or services.

The Indian Retail Industry is ranked among the ten largest retail markets in theworld. It is currently estimated to be a US$ 200 billion industry and organizedRetailing comprises of 3 per cent (or) US$6.4 Billion of the retail industry. With agrowth over 20 percent per annum over the last 5 years, organized retailing is

projected to reach US$ 23 Billion by 2010. There are multiple factors driving Indianretail growth. With roughly 60 percent of the total population below 30 years of age,favorable demographics are expected to drive consumption across categories. The

purchasing power of a young consuming middle class has been talked of considerablysince the time of economic liberalization in 1991.

TABLE 1


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Table 2


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Table 3

As can be seen from the above tables ( taken from the FICCI KPMG RetailSurvey, 2005 ) despite Food and Grocery being the fastest growing retail segment inIndia today, only 8% of it is in the organized retail segment, which offers a hugeopportunity for malls to exploit. Presently, this segment is being catered to by theunorganized players, notably the kirana stores.

These centrally air-conditioned malls with piped music, high-speed escalators,underground parking space, a multiplex movie theater, multi-cuisine restaurants and ahost of national and international brands, these malls generate approximately 25,000footfalls each, per day, with figures doubling on weekends. It is estimated that thereare 450 malls in various stages of development across India, 60 in the greater Delhiarea alone. The frequency of visits to these malls can be measured by the number offootfalls and their conversion rates. The number of footfalls that are actuallyconverted to purchases is what is measured by the conversion rates. However at

present, most malls in India are regarded as entertainment zones by the people and notas places for making their daily basic purchases. They primarily attract consumers for

purchases of furniture, home furnishings apparel and other lifestyle products.Subsequently it has been observed that the footfalls in the Indian malls might be high

but the actual conversion rates are low.

THEORETICAL FRAMEWORK

In our study of flexible management systems, we have referred to the bookCornerstones of Enterprise Flexibility by Dr Sushil. This book provided the basis of


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our study and provided the broad framework within which we have studied the case ofthe Indian shopping malls. We begin with an introduction to the FlexibilityManagement Systems.

BACKGROUND

In this changing world the only thing that is constant is change and the besttool we have with us to deal with this change is Flexibility. The winds of liberalizationand globalization are creating a fast changing business scenario. As the barriers acrossthe world gradually diminish with a change in the economic and technologicalscenario, there emerges a need for higher and higher levels of enterprise flexibility toresonate with these environmental changes. Flexibility is the most valuable strategicoption in this turbulent environment and proposes a construct of internal and externalflexibilities at the operational, structural and strategic levels. The pillars of thisflexibility concept are:

y Agilityy Resiliencey Freedom of choicey Adaptive nessy Opennessy Responsivenessy Customization

An important concept is called Enterprise Flexibility, which means creating

options at various levels in the enterprise, developing ways and means of changeacross the range of options and providing freedom of choice to various actors in theenterprise for making this change happen with minimum time and effort.

The various types of flexibility within an enterprise include:

y Strategic flexibilityy Organizational flexibilityy Flexibility of various types of systems including financial, information, marketing etc.

In the present decade of fast changing environment and uncertain levels oforganizational operation, a strategy which can absorb the shocks of change and helpthe organization to adapt it at all levels i.e. from strategy to operations will besuccessful. The change in the environment has to be learnt by the organization. It hasto unlearn the earlier practices which have become redundant /impediments in movingahead. Such identified changes are absorbed in the corporate strategy and mix ofdifferent functional strategies set accordingly.


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An enterprise with more options and having systems and processes that canchange from one option to another, can easily adapt to the environmental changes.Enterprises that develop an open system will be able to learn about the expectedchanges in the environment and be proactive in adjusting itself accordingly.Flexibility in an organization should be brought about in the dimensions of strategy,

structure, systems and people. In order to generate enterprise flexibility the strategyshould be regenerated, organization needs to be restructured, the systems are to beredesigned and the people to be reawakened so as to recreate the culture and adapt tochanges.

METHODOLOGYAn exhaustive and detailed questionnaire has been designed to explore all the

aspects enumerated above. To arrive at the final questionnaire, we first formulated arough draft with a few questions, which generated a lot of qualitative data, which

played a crucial role in helping us zero in on the final questions. An attempt was

made to make the study as broad based as possible by taking a sample of 20 malls inthe Delhi NCR region. A minimum of 5-8 shopkeepers and tenants in each of thesemalls were contacted and surveyed. Detailed and specific information was extractedfrom them and documented. Personal visits were made to conduct a detailed interviewof the respondents (these included both the customers and shopkeepers at these malls).A method of passive observation of shoppers at these malls was also adopted to studythe shopping styles and behavior of the Indian customer.

Another important tool used for data collection was that of AppreciativeInquiry (AI). Appreciative Inquiry is a positive approach to change that focuses on

probing a firm's best attributes and practices. AI is typically thought of as a "soft"strategy used in creating organizational visions, aligning groups, and buildingcultures. We visited various malls and observed the way the various consumers weregoing about making their purchases. This helped us get a glimpse of how the mind ofthe consumer makes choices in real life scenarios.

Case studies have also been undertaken and focused group discussions havealso been used to collect data and information.

ANALYSISOur Study of Consumer Behavior in India

At this stage a study of consumer behavior yields great insights into thestrategy which must be adopted by the organized retail sector in India. Consumer

behavior is seen to involve a mental decision process as well as physical activity. Theactual act of purchase is just one stage in a series of mental and physical activities thatoccur during a period of time . Some of these activities precede the actual buying ,while others follow it. However since all are capable of influencing the adoption of

products and services , they will be considered as part of the behavior of consumers.


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Table 4

Know your enemy, as the saying goes, is considered to be among the mostcrucial factors for success in retail. Comparing oneself with the competition is a

perpetual function of all marketers. The two most commonly used factors for

comparison are price and quality, and the perception of the people in both thesefactors is paramount.

In our survey, the respondents perceived the malls to be more expensiveas compared to the local kirana stores. This is a clear indication of the need toadopt an effective strategy by the malls to communicate their competitiveadvantage to the right audience.


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Table 5

Another aspect that emerged was the strong preference of the buyer for triedand tested brands and also his penchant for variety at the point of purchase.Traditionally, kirana stores are known to keep an inventory of brands that their regularcustomers usually buy (e.g. Parachute HairOil) while malls stock up on a wide range

of brands in the same category. While the customers do appreciate a large variety tochoose from, the more popular brands should be displayed prominently to


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Table 6

Table 7


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The process of choosing a specific store involves the matching of consumercharacteristics and purchase characteristics with store characteristics. An individualmay use different criteria to evaluate which store best meets his or her needsdepending on the type of purchase. Consumers compare retail and store options basedon how they perceive each will perform on the various criteria.

Evaluative Criteria:

y Location ( Distance )

y Assortment Breadth and Depth

y Price

y Advertising and Promotion

y Point Of Purchase (POP) Display

y

Store Personnely Services

y Customer Characteristics

y Store Atmosphere

As observed in Tables 6 and 7, the convenience seeking consumer greatlyappreciates the provision of multiple services under one roof. Although this facility isavailable in the malls, most people surveyed were found to be purchasing their dailygroceries and other requirements from the local grocer or kirana store. Thiscontradiction in consumer behavior maybe attributed to the drawbacks that people

perceive in the malls as well as to certain convenience factors in the kirana stores thatthey treasure, which prevents them from making this switch.

ANOVA BRAND

Sum of Squares df Mean

Square

F Sig.

Between Groups 2.137 3 .712 3.034 .034

Within Groups 20.186 86 .235

Total 22.322 89

The above table reveals the relationship between people who usually buyproducts on the basis of the brand and also the people who value convenience greatly .In this table the brand is the dependent variable which is shown to be dependent onthe convenience factors that people value in the kirana stores(home delivery , personal


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association with shop keeper etc).This tells us about the need to stock the brands thatthe target customer values and usually buys and to also display it in the best possibleway . This is another segment that the malls need to aggressively target as theircurrent shopping behavior is being serviced by the local kirana stores extremely well.

Table 8

The people surveyed seem to fall in one of the 2 categories those who shopfor products as and when the need arises and also those who visit a store once/twice amonth and stock up. The malls need to decide on a strategy to target the buyers whoshop as and when the need arises as such people greatly value convenience andusually buy such products from the nearby local vendors.


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Table 9

The reason for this is largely typical to India lack of appropriate physicalinfrastructure like fast moving roads and vacant urban lots for parking requirements.Also, many people tend to indulge in window shopping at the malls ,while not makingany significant purchases.


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Table 10

It has often been noticed that what others say often influences consumer behavior to a very large extent. The termconspicuous consumptiondescribespurchase decisions motivated in part by the desire to show others just how successfulwe are. As can be seen, this kind of outlook is widely prevalent amongst the people

surveyed.Hence, two factors which we felt would be highly correlated did not turn out to

show any significant relationship these factors included the prestige factorassociated with shopping in the malls and also the peoples perception of the prices inthe malls.

ANOVA

Where would the people rather be seen

Sum of

Squares

df Mean

Square

F Sig.

Between Groups 3.716 3 1.239 .840 .476

Within Groups 122.353 83 1.474

Total 126.069 86


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Table 11

This chart emphasizes the traditional value seeking behavior of the Indianconsumer. Any retail format aiming to target the masses must be seen as providing the

best value for the consumers money.

Through our focused group discussions and interviews with people in themalls we were able to identify certain strengths and weaknesses of the malls in India,as perceived by the people who shop in them.

BENEFITS OF THE MALLS

y The whole retail and merchandizing industry depends on the efficient use of supplychain, pricing and range of products. Single elements alone cannot offer the customer adelightful shopping experience. Small Kirana stores cannot offer this experience as manyprocesses are involved, there are high costs of manpower and infrastructure.

y Large retail formats , owing to their bulk purchases can achieve better economies of scaleas compared to a small shop.

y The shopping malls offer the customers a wider variety of goods , and also provides themwith a better display of products. The store design and better display are point ofdifferentiation for the shopping malls. They provide the consumer with a memorableshopping experience. The package offered to the consumer involves environment,service, price and the product.


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y The shopping mall offers the consumer a one stop shop for all his needs. The concept isto be able to satisfy multiple needs of the customer and to provide for all his requirementsat one location,under one roof.

y The malls attract people on the basis of their superior store atmosphere , store activities, shopping experience and better services.

THREATS SPECIFIC TO INDIAy Crowds of people window shopping and long queues are one of the major problems

which keeps people away from the malls.

y The stores are often out of stock of the goods that the customer is looking for (as theymay be in greta demand at that particular point of time) and no information is availableon when the stock will come again and also on how soon will it be arriving.

y Coming to the malls to shop for one or two products as and when the need arises is notfeasible. The malls seem restricted to that segment of the people who shop once/twice amonth to stock up , either to save time or to avail of better prices.

y The bad physical infrastructure lack of fast moving roads resulting in traffic jams on theway is something that keeps people restricted to their local shops and kirana stores.

Much attention needs to be paid to the customization of the malls to the Indiancontext and to the needs of the local clientele. Just as when a product is beinglaunched in a new market it needs to be customized to the culture of that particular

place and the needs of the people there, similarly the concept of malls when applied toIndia must be tailor made to adjust to the complexities and diversities of the Indiancontext. Emphasis must be laid on the following:

1. Retail Image- represents an overall composite of how consumers see and what consumersfeel about a given retailer

2. Marketing concept sending the right message to the right audience through the rightmedia

- adjust the product, price, place, promotion to satisfy the needs and wants of theconsumer

One possible course of action could be to not market the malls as upscaleshopping areas with big brands only but should try and make themselves a part of the

peoples daily lives and portray themselves as places where one can buy a widevariety of things under the same roof. Branding would include the logo, the

advertising and also the overall store ambience. In branding the malls, they should beshown to imbibe and reflect the values of the local / target population. By creating adistinct identity, one that the consumer relates to, the retailer differentiates themselvesfrom the competition and creates a unique position or offer.

In India , one must understand not only the culture but also the ethnic andreligious diversity of the place. Both these aspects have a great influence on theconsumer behavior. Consumer buying behavior is the manner in which consumers act


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and react to various situations involving the purchase of a good or service or theacceptance of an idea. Effective retailing requires an appreciation of the buying

behavior of consumers. Retailers need to better understand their customers so thatthey can both respond to as well as anticipate their needs.

Consumer behavior isnt constant, but varies not only from country to countryand culture to culture but also from region to region.There is such greatdiversity incustomer behavior where even Hyderabad and Bangalore are as different as chalk andcheese. On one side Hyderabad is conservative, male dominated, where customerslike loud colors and shop in groups and on the other side Bangalore is modern, wherecustomers want subtle shades and shop on their own. In India the culture is moretowards being thrift conscious and wanting value for money . The customer needs to

be convinced that the malls are giving him good value for his money. In fact,KishoreBiyani, managing director, Pantaloon Retail has turned the study of community

behavior into a fine science through a specialized regional diversity tracking system.

He goes personally to people's homes, talks to local community leaders and spendsweeks walking streets of bazaars to get a feel of what products should be stacked in anew store. Thus a proper understanding of the consumer behavior is a necessary

prerequisite to facilitate a smooth transition of the Indian consumers to the malls.

The Indian Consumer has for long relied upon the local kirana store forpurchasing their groceries and other daily requirements and are used to having their purchases delivered home. The local kirana store is usually run by someone withwhom the consumer is familiar and friendly with; this adds the personal touch to theirdaily shopping experience. The greatest advantage of the kirana stores is theirlocation, being located within or near the residential area makes it convenient for theresidents to shop from them. Another reason is that consumers feel that they can

bargain easily with the local shopkeepers which they believe is not possible in thelarge retail malls. The malls must focus on adapting to the needs of the Indianconsumer rather than change their habits.

Design of the stores interiors are also of critical importance. The interiorsshould be designed so that their interiors closely match the aspirations of their corecustomers. The interiors of the malls must adapt to the culture and environment inwhich they are functioning and be dynamic in this regard. An example of suchflexible and dynamic interiors can be seen in the Gateway Mall in Durban which has

successfully encouraged retailers to show their product in creative ways, and dissolvethe boundary between mall and shop. The same is true of the covered street format ofBugis Junction in Singapore, where shops display their wares in a market-type setting.Retailers must respond to consumer expectations with what's been called "masscustomization."

The essential premise of localised retailing is about creating "my kind of store" an environment where customers can feel completely at home, relate with ease to


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the shopping experience, and see themselves reflected in the marketing. Appealingdirectly and individually to customers, though, requires a strong awareness of thelocal customer base and a firm grasp of what will catch customers' attention. Thelocation of new malls should be strategic and locate them in local catchment areasthereby reducing the distance and commuting time of the customer.

The retail model should be customer-centric. This involves not only adaptingthe ambience of the malls to make the shopper feel comfortable but also to customizethe products being sold to the consumers. They should thus create modified versionsof their brand by targeting smaller and more specific market segments. Such storesshould first determine the demographics of the local market, identify their needs/preferences and typical behavior and then respond to them. The retailer must focus onthe following aspects of his market:

y Consumer populationy Consumer requirementsy Consumer potential Ability to buy and disposable incomey Willingness to buy - Budgety Authority to buy

Not only this, the retailers must also be sensitive to the constantly changingexternal environment and should respond accordingly.

The malls must market themselves as offering the customer better qualityproducts and also a greater variety of products to choose from. Further the organizedretailers have the advantage of large scale operations. This can be used to eliminate

intermediaries and offer better prices to the customers by passing on the middlemensmargins to them. The retailers are able to get better bargains with suppliers andmanufacturers by offering business scales higher than the local kirana. Thuscustomization and localization of the malls is the norm of today. It is said that thoseretail chains are most successful that come and change for a particular city and reactto it.

It is in this setup that the Indian shopping malls could be likened to the beautiful Snow White from our childhood fairytale, who learns to live and adaptherself to the life and surroundings of the seven dwarfs. The seven dwarfs in this

context would be the kirana stores (local mom n pop stores), to whose surroundingsthe fancy malls of the west must come and adapt to.

FUTURE RECOMMENDATIONS

As was earlier stated in the hypothesis,

The failure of numerous retail formats was due to the wrong blend betweeninternational retailing concepts and those adopted in India. It is to avoid such


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situations that it is often said that a careful selection of the correct genes of both theparents is the single most important factor in setting up an overseas retail operation.Adoption of the features and practices of either partner without a proper study of thespecific situation existing on the ground, usually leads to such failures. In this context, the new retail formats in India not only need to adopt some features of the local

kirana store but also provide greater value for money to the customer throughdifferentiation and lower costs. This offering of the malls needs to be effectivelycommunicated to the Indian masses , who perceive the malls to be a place for prestigeshopping and to be more costly as compared to products in the local kirana stores. Inthis regard the retailers need to choose an appropriate marketing mix and henceestablish the correct retail image of the malls in the mind of the consumers. Till thishappens it is not possible for them to compete with the local kirana stores. As has

been said about Nanz, the first organized retail venture (supermarket) in India Itfailed as it was ahead of its time, the Indian consumer was not yet ready to change and that they did not plan their entry into the market.

After careful study, we have been able to gauge that the major factor that hashelped the kirana stores retain a competitive advantage against malls has been that ofconvenience: the location of kirana stores, services like home delivery, longassociation with the owner of the family run Kirana shop, ability to bargain on pricesetc. Against this backdrop, instead of trying to pick up one or two features of thekirana stores and competing against them on their areas of strength, the malls woulddo well to adopt a model of co optetion.Co-opetitionis a business strategy based on acombination of cooperation and competition, derived from an understanding that

business competitors can benefit when they work together. The co-opetition business

model is based ongames theory, a scientific approach (developed during the secondWorld War) to understanding various strategies and outcomes through specificallydesigned games.

In our context, this means the malls and the kirana stores working togethertowards maximizing customer satisfaction. Since the malls cannot offer theconvenience of a kirana store and a kirana store cannot match a mall for the shoppingexperience , the possible solution could possibly be to retain the consumer friendlyfeatures of both formats and to develop a hybrid format. Miniature malls , covering 3to 4 localities and their households would be ideal. These smaller versions of the mall

, would have efficient supply chain management , discounts on bulk purchases, lower prices and better display of products, they would provide the consumer with ashopping experience to look forward to. These malls would have to base theirmarketing and inventory decisions based on an analysis of the tastes and preferencesof their target customers. Based on such surveys , they would choose the right mix ofgoods and services to provide their customers with. These miniature malls would thenhave the convenience factor offered by the kirana stores and by providing additional


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services like home delivery , credit facilities , computerized bills, in store activities forchildren and adults. Concentrating on local people and their needs would help create aloyal customer base (repeat customers which the malls at present donot have). Suchflexibility on the part of the organized retailers is essential for them to be able to tapthe buy as and when the need arises segment , adopt the convenience features of the

local kirana stores and thus provide the Indian consumer with a new and morewholesome shopping experience.

The table below shows the current retail formats in India, which tells us howall the existing retail formats are being used in India , but not being very effective inattracting , convincing and retaining the Indian consumer.

Table 12

With the increased interest in the Indian retail segment, the malls will soon be

able to successfully capture the massive Indian market. This successful adaptation ofthe western shopping mall concept to the Indian context will not be the end of all

problems. As has been observed the changes of yesterday become the norm oftoday. The next question facing these malls will be, to make the shopping malls atime saving shopping offer for the Indian families. Fast growth, greater income tothe middle class, working couples; nuclear families etc are factors that will make thefuture nuclear families look for ways to save their time and work within their budget


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while shopping. Thus to adapt to the needs of this new generation of young workingcouples, the malls would have to look at acquiring some special features. These wouldinvolve opening crches for children so that these young and time pressed couples canshop easily and quickly. Also stores must be customized to display their products in amanner that facilitates easy and quick decisions. Such kind of ideas targeted at

flexibility must be kept in mind for the future Indian malls.AUTHORS PROFILE

y Rajan Johri (Johre), 47, holds a PGDM in Management (AU,Washington), PostGraduate in Organization Behavior MSU), Post Graduate in Labour Law & Practice(MSU) and Fellow of National Institute of Training and Development (UK.). His doctoralwork in Management at the Indian Institute of Technology (IIT), New Delhi is referred toas the Flexible Competency Maturity Model (fCMM).

y Ruhbani Singh is a PGPHRM Intern at International Management Institute, New Delhiand collaborates with Rajan Johre in consulting and research based assignments.

y Karan Makhania is a PGPHRM Intern at International Management Institute, New Delhiand collaborates with Rajan Johre in consulting and research based assignments.

kiranization of indian malls

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