Documente Academic
Documente Profesional
Documente Cultură
Punjab
Authors
Dr. K.C. Mittal
PSMS, Punjabi University PATIALA
Anupama Prashar
Research Scholar
Punjabi Univesrity PATIALA
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Abstract:
Retail is hailed as India’s industry of the future, incited by the country’s huge urban
middle class population. ‘Food and grocery’ is the second-largest segment of the retail
industry and carries in itself enormous potential, particularly in untapped rural and
semi-rural markets, for new entrants. Growing at the rate of 30%, Indian food retail is
going to be the major driving force for the retail industry. The paper maps the
performance of various retail formats in ‘Food & grocery’ segment in selected cities of
Punjab on the basis of parameters that are governed by consumer perception and
operational efficiency
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1. Introduction
‘Food and grocery’ is the second-largest segment of the retail industry and is the least
organized. According to a recent report by Ernst & Young, ‘food and grocery’ accounts
for almost 54% (USD 152 billion) of the total Indian annual retail business1. However,
food retail continues to be dominated by small local stores in the unorganized sector.
Fuelled by the large disposable incomes, the food sector is now witnessing a remarkable
change in consumption patterns, especially in case of food. Food retailing is undergoing a
transformation from selling of food items in grocery shops & mandis, haats and bazzars
to selling of processed food and grocery in supermarkets where consumers inspect and
select the products in a comfortable ambience and still pay a fair price for the product and
the merchandise. Sometimes it happens that one pays less than the price one would pay at
the nearest food store. Shopping for groceries is no longer a strenuous and uncomfortable
affair. Instead, it has become a pleasant experience.
Food retailing is now an industry in itself. According to one of the recent reports on Food
Retailing Scenario in India by Technopak, food & beverages is the major segment, worth
Rs 8,97,000 crore.2 This is contrary to the belief that fashion is the largest segment of
organized retail in India. India’s food retail industry has been the main focus of MNCs
looking to grow with the economy. The industry has been rated as the fifth most
attractive emerging market for retail by the International Council of Shopping Centers
(ICSC). Currently, the food retail sector is valued at US $70 billion and the valuation is
expected to rise to US $150 billion by 20253
Broadly, five forces are affecting the organised food retail industry in India. The first
force affecting the organized food retail industry in a big way is small grocery stores that
still tend to dominate the industry. The growing bargaining power of average Indian
1
The Great Indian Retail Story- Ernst & Young
2
Food Retailing in India(2009)-Technopak adviser
3
McKinsey & Co in Food Forum 2009
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buyer due to increased purchasing power is another force. Organised food retailers
purchase directly from producers and wholesalers and pass on major portion of the
savings to the customer. Retailers could possess a great bargaining power with
manufacturers due to recent consolidations in the industry. So, bargaining power of
suppliers is an important consideration. Threat of substitutes and new entrants (foreign
players) are other forces affecting the Indian retail industry. Figure 1 shows the five force
model of organized food retail industry in India.
As a result of these forces, changing food consumption patterns, consumers’ need for
convenience, choice and value for money the set-up of retail formats is changing. The
Indian consumers do visit about eight to ten outlets to purchase various food products,
which make up the daily consumption basket. These outlets include neighborhood kirana
stores, bakeries, fruit and vegetable outlets, dairy booths and chakkies (small flour mills),
which offer very time-consuming and unproductive way of shopping for food. With
changing lifestyle there is growing scarcity of time, and convenience in food shopping is
emerging as an important driver for the growth of one-stop retail formats that can offer
consumer 'value for time' in addition to 'value for money'.
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Modern state of the food retailing is not a demand led but the supply led one. Major
spending on food and increasing out of home food consumption represent a significant
opportunity for food retailers and food service companies. The organised food retailers
deploy a number of formats ranging from gigantic hypermarkets at one end of the
spectrum to the no-frills discount stores at the other end. They are distinguished by size,
number of items carried, strategic pricing and customer segments targeted among others.
In India about 90% of food purchases are made within a distance of 1.5 km from the
customer's home. This means that an organised retailer would need to have a
'neighbourhood store' close to customers in order to capture the share of wallet that is
spent on food. These stores would cater to the consumer's daily and weekly needs. The
outlets closest to a neighbourhood store in India are 'Safal' outlets operated by Mother
Dairy in Delhi, Margin Free in Kerala and Subhiksha. Another popular format in Food
retailing is supermarkets. This format caters to the consumers' need for choice and
variety. These needs translate into 'more width' and 'more depth' in each category. These
stores cater to the consumers in a catchment area with a radius of 3 to 4 km and therefore
need to be destination stores. A supermarket can cater to the consumers' weekly, monthly
and occasional needs. Examples of supermarkets already in India are Reliance fresh,
Food World, Trinetra and Nilgiri's4.Hypermarket is another popular format.
Hypermarkets are essentially destination stores catering to the consumers' bulk shopping
needs in both food and non-food categories. The key added values for the customer are
'choice' and 'value for money' because products are sold at a discounted price. The
hypermarkets model of food retailing is new to India. Spencers (RPG), Big Bazaar
(Pantaloons), Star India Bazaar are some examples. Cash & Carry (C & C) Stores sell
their products to their members only. The typical area of a C & C store is 70,000 to
100,000 sq. ft. and both food and non-food products are stocked. The members are
typically retailers and institutions. The key added value is a wide range of products under
one roof, available at wholesale prices. So far, only four (three foreign and one domestic)
companies operate in this space: Metro (German), Shoprite (South African), and SPAR
(Dutch) are the foreign players while Wal-Mart has recently set up a joint venture with
4
Kearney 2005
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Bharti retail with the first cash and carry store in Amritsar under the brand name of “Best
Price” .Table 1 summarizes the various companies operating in different retail formats.
FORMAT KEY SIZE TARGET PRICING ITEMS
COMPANIES POPULATION CARRIED
Hypermarket RPG’s Giant, 25,000- Middle income Lower Most
Pantaloons, Big 50,000 group than MRP categories
bazaar, sq ft
Vishal,Amartex
Supermarkets Reliance fresh, 3000- Everyone MRP Processed
More stores, 5000 ft foods and
Easy day, Food groceries
world, Food
bazaar
Discount Subhiksha, Varies Middle income Everyday Processed
stores Margin but less group lowest foods and
free,Apna than price groceries
Bazaar 3,000
sq ft
Convenience 6-Ten, Spencers Varies Everyone MRP Varies –
stores but
specialized
in each
store
Table1: Organised Retail formats in food segment
Source: Survey
Punjab is a prosperous state with highest level of per-capita SDP (State Domestic
Product) in the country. The state has a sound economic policy that has nourished the
agriculture sector and has actively promoted key investments in other allied sectors like
agro-processing, diary farming and poultry. Punjab is the second largest milk producing
state in India, producing around 10% of the country’s total milk production i.e. 8 million
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tones annually. The state is served by 44 milk plants and 2424 veterinary institutions.
Poultry farming is also adopted on scientific lines in the state. Punjab ranks first in
average per hectare yield of rice, wheat and cotton in the country. Punjab has earned the
rare distribution of being called the “food basket” of the whole country5. The state
produces 1 percent of rice, 2 percent of wheat and 2 percent of cotton of the world. Thus,
there is a clear opportunity in Punjab in the foods and beverages category, but more
importantly, and strategically, retailers can effectively utilize Punjab as their major
sourcing hub for their nationwide chain of stores in the food and grocery sector. Figure 2
shows a comparison of per capita SDP in the country
With the highest per capita income in the country, that is nearly three-and-a-half times
the all-India average, an excellent infrastructure to promote new industries and support
the existing ones, coupled with high percentage of employment, Punjab stands second to
none in fast becoming a favored destination for the retail industry6. This state provides a
grand opportunity to all the retailers at large to exploit its huge consumption potential.
Punjab will possibly be the largest gainer in the process of retail evolution in the country.
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www.punjabgovt.nic.in
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Retailing in Punjab 2010 and beyond
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Figure 3 depicts the growth in retail space in Punjab.
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Retailing in Punjab 2010 and beyond (2008),
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big cities of Ludhiana, Jalandhar, Chandigarh, Amritsar, Patiala and Mohali also provide
ample opportunity for growth. Figure 4 shows private consumption expenditure in
Punjab.
3. Review of Literature
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• According to a report by ETIG Economic Times Intelligence Group,
(2002), concerning food category, the most important attribute looked for while selecting
a store is quality, which is followed by the price.
• Chintagunta, Chintagunta, Pradeep K. (1993) in their study “Investigating
purchase incidence, brand choice and purchase quantity decisions of households,”
proposed that, while specialized and traditional stores are preferred for fresh products,
hypermarkets are preferred for general shopping, and that for frozen food, groceries and
beverages in particular.
• Bawa K and Ghosh, A. (1999)proposed that in the case of hypermarkets,
the main factors for developing preferences in decreasing order are low prices, possibility
of buying everything in the same place and general appearance of the store.
• Baker, J., Parasuraman, A., Grewal, D. and Voss, G. B. (2002) propose a
comprehensive store choice model that includes , three types of store environment cues
i.e social ,design and ambient. they empirically examine the extent to environmental
cuesinfluences consumer’s assessment of store.
• Dick and Basu (1994), conceptualized consumer loyalty as the relationship
between the relative attitude towards a brand or service or store or vendor and patronage
behavior. Two dimensions, the degree of attitudinal strength (weak or strong) and the
degree of attitudinal differentiation (existent or not) seem to influence an individual’s
relative attitude towards a store.
• The Indian Consumer - Outlook 2005, KSA Technopak India Pvt. Ltd.,
believes that India, being one of fastest growing economies in the world, is witnessing
some pretty sweeping changes at the home turf. With consumerism in India reaching new
heights, the gap between the Indian consumer in her new avatar and her global
counterpart is gradually diminishing. The 105 million strong Indian urban rich & middle
class, with spending power growing at a double digit rate every year, has evolved from a
'Hindustic self denial' existence to an 'indulgence' mode. The boom in retail sector,
marked by entry of international brands & developing mall culture, is further fueling the
consumer spending. The changing attitude towards credit and the EMI phenomenon has
lowered the age of big-ticket acquisitions such as cars, durables and homes. All these
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brands trends put together have changed the consumption patterns & attitude of the
Indian urban consumer - leading to Changed Paradigms.
Organised food retailing is booming in not only metros but in tier I and tier II cities as
well. Therefore, five major cities of Punjab viz. Ludhiana, Jalandhar, Patiala, Mohali, and
Amritsar were selected for the present study where different types of retail stores are
rapidly developing.
According to Retailing in Punjab 2010 and beyond (2008) report, there were over 900
different organized retail formats which include malls, hypermarkets, specialty stores,
chain stores etc. in Punjab in 2007. Out of these, over 500 are chains of supermarkets,
convenience and hypermarkets with ‘Food &Grocery’ as the major retail category. For
sampling of organised food retail outlets, an exhaustive list of total number of organised
retailers in ‘Food & grocery’ segment is obtained from each of the selected cities by
using secondary sources.
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From the above list, a sample size of 10% of organized food retail outlets was selected
following the stratified random sampling method. The retail outlets were categorized into
three formats on the basis of their area in Sq. Ft. as follows:
Convenience stores 500- 1000 sq ft
Supermarkets 1000-10000 sq ft
Hypermarkets Above 10000 sq ft
The review of literature revealed a number of parameters which affect the performance of
‘Food & grocery’ retail outlets. Some of the parameters are related to consumer
perception like customer service, variety & value, pricing, displays etc. Other parameters
are related to operational efficiency of store like sales, inventory days, infrastructure etc.
Two questionnaires were designed to study the performance of different retail formats in
the ‘Food & grocery’ segment on the basis of consumer perception and operational
efficiency related parameters. The first questionnaire consists of seven sections; first
section address to the demographic details of the respondent, for rest of the six sections
respondents were asked to indicate their level of agreement (1 = strongly disagree to 5 =
strongly agree).The second questionnaire rates various retail formats on the basis of
operational efficiency. The questionnaire consists of four sections; first section address
the details of store (location, ownership, area etc.);section two and three focus of sales
and inventory related parameters( inventory days, footfall, conversion rate, sales per sq ft
etc); the fourth section addresses the obstacles to organized food retailing in the state of
Punjab.
The questionnaires were first tested within the academic group of fellow researchers and
faculty for errors and on their valuable suggestions the questionnaires were modified. The
modified questionnaires were tested for internal consistency through a pilot survey
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involving respondents in the proposed sampling frame. The value of cronbach alpha was
found to be 0.889. This exercise was mainly done to test the degree of understanding the
meaning of the questions, the difficulty in understanding the questions by the respondents
if the meaning of the questions are conveyed correctly and to check the relevance of the
questions with respect to the interest of the respondent. After the pilot survey the
questionnaire was further modified.
5. Statistical Analysis
In the present study different types of food retail formats have been studied for their
performance on the basis of consumer perception and operational efficiency related
parameters. The different types of retail formats are Convenience stores, Supermarkets
and Hypermarkets. These stores are classified on the basis of their area in sq. ft. The area
of convenience stores is 500- 1000 sq. ft., supermarkets is 1000- 10000 sq. ft. and
hypermarkets above 10000 sq. ft. These retail stores have been studied for the ‘Food &
grocery’ segment in five selected cities of Punjab.
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Variables Frequency %
Out of a total of 50 questionnaires completed for organised retailer store owner,6 were
found to be incomplete . Out of 44 organised store surveyed, 33(75%) of the retail stores
were found to be company owned and only 11(25%) were franchises. As far as the area
of store is concerned, 11(25%) stores fall under the category of convenience stores (500-
1000 sq. ft), 29(69%) stores falls in the category of supermarkets is 1000- 10000 sq. ft
and only 4(6%) stores fall in the category of hypermarkets(above 10000 sq. ft).Table 3
represents the details of sampled stores.
Table 3: Details of sampled organized stores
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Variables Frequency %
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Table 4 represents the overall rating of selected organized retail formats (convenience
stores, supermarkets, hypermarkets) in ‘Food & grocery’ segment on the basis of selected
consumer performance perception parameters.
Table 4: Rating of selected organized retail formats
Parameter Convenience store Supermarket Hypermarket
s Mean Standard Mean Standard Mean Standard
Deviatio Deviatio Deviatio
n n n
Consumer 3.15 0.56 4.25 0.71 4.65 0.65
service
Variety & 2.69 0.62 3.81 1.08 4.24 0.98
value
Pricing 3.68 0.57 4.52 0.73 4.25 0.69
Display 2.05 1.09 3.31 0.91 4.35 0.86
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two sample means is greater than 0.15, then the difference between these two normal
population means is significant at the5% level. The same results hold in the case of
horizontal comparison.
It was found that hypermarkets and supermarkets are rated better than convenience stores
for all the consumer perception parameters. However, consumer rated price levels of
supermarkets better than price levels of hypermarkets.
Table 5 represents the influence of type of retail format on inventory days which have
been divided into quartiles.
Table 5: Influence of type of retail format on inventory days
Inventory Days 17-61 61-128 128-235 235-745 TOTAL
Type of Retail Format
Convenience stores 5 2 3 1 11
Supermarkets 9 5 5 10 29
Hypermarkets 2 0 1 1 4
The calculated value of Chi Square is 22.46848 which is higher than the table values of
Chi Square at 5% level of significance (12.592) for 6 Degrees of freedom, the alternative
hypothesis is accepted at 5% level of significance. It could be concluded that type of
retail format has significant influence on operational efficiency (Inventory Days) of retail
stores. Therefore, the types of retail format & inventory days are dependent on each
other. The value of coefficient of contingency (C) is equal to 0.32. This value indicates
that the association between format of retail outlet and operational efficiency is
moderate and is not very strong. Therefore, retail format may not influence the
operational efficiency of retailers to a great extent.
Table 5 represents the influence of location of retail store on inventory days.
Table 6: Influence on location of store on inventory days
Inventory Days 17-61 61-128 128-235 235-745 TOTAL
Location
Suburb
2 4 4 1 11
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Main market 12 6 2 6 26
In a mall 3 1 2 1 7
As the calculated value of chi-square (14.614) is higher than the table value at 5%
significance level (12.592) but not at 1% significance level (16.812) for 6 degrees of
freedom, the alternative hypothesis is accepted at 5% significance level but not at 1%
significance level. It could be concluded that location of retail outlet has significant
influence (at α = 0.05) on the operational efficiency. The value of coefficient of
contingency (C) is equal to 0.261 which is quite low. This indicates that the location &
inventory days have low degree of association.
Conclusion:
As discussed above, six consumer perception factors have been extracted with the help of
exploratory factor analysis. Confirmatory factor analyses successfully validated the items
used to measure the performance. Consumer performance perception parameters
identified were consumer service, variety & value, pricing, displays, promotion and store
loyalty.
From the data analysis it is observed that there is significant influence of format of retail
stores and location on the operational efficiency. However, the degree of association is
not very high. This shows that the operational efficiency of the firm is affected by the
size of the firm i.e., retail stores will have higher efficiency if they utilize their retail store
space rationally.
References:
Kearney, A T (2005): Emerging Market Priorities for Global Retailers, Sector View.
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Bech Larsen, Tino & Esbjerg, Lars(2007). Study of Customer Perceptions of the Fruit
and Vegetable Department's Influence on Store Image.Journal of Food Products
Marketing.
Baker, J., Parasuraman, A., Grewal, D. & Voss, G. B. (2002). The influence of multiple
store environment cues on perceived merchandise value and patronage intentions. Journal
of Marketing, 65, 120-141.
Dick & Basu. (1994). Customer loyalty: Toward an integrated conceptual framework.
Customer loyalty. Journal of the Academy of Marketing Science
Sharma, S.R., Tiwari, Prakash & Verma, Hemraj(2008).An Empirical Study on Customer
Perceptions about Vishal Mega Mart and its Impact on Shopping Behavior in Dehradun
City. SSRN eLibrary
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http://punjabgovt.nic.in/economy/ECOFINAL.HTM
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