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TABLE OF CONTENT
ABSTRACT
ACKNOWLEDGEMENT
INTRODUCTION
OBJECTIVE
METHODOLOGY
LITERATURE REVIEW
CONCLUSION
BIBLIOGRAPHY
ANNEXURE
ACKNOWLEDGEMENT
Through this acknowledgement I express my sincere gratitude towards all those people
This present study is an attempt to understand the relationship between the choice of
retail formats, based on products attributes, store attributes, consumers’ demography
and retail marketing strategies. The outcome of the study reveals that consumers’
choice for modern retail formats vary as their income level increases. Young
consumers’ are more inclined to shop from modern retail formats as compared to older
ones. Consumers’ prefer modern retail formats due to its significant product attributes
like improved quality, variety of brands and assortment of merchandise and store
attributes like parking facility, trained sales personnel and complete security. The
retention strategies, promotional strategies, growth and improvement strategies, pricing
strategies and competitive strategies are the major contributors for the growth of
organized retailing and play an important role in enhancing the sales of retail formats.
Further, the study helps in designing a framework for choice of modern retail formats
from Consumers’ and Retailers’ Perspective.
1 http://www.indiafdiwatch.org/fileadmin/India_site/10-FDI-Retail-more-bad.pdf.
INTRODUCTION
Retailing as simply defined is the end process of supply chain management where there
is a direct interaction with the end-user or the customer. Hence forth availability,
assortment, display, proper handling of product plays a vital role in a competitive
world1.
Presently, the Indian retailing sector is one of the world largest and known for
continues developed industries. So it’s in a permanent state of change and the rate of
this change has been accelerating over the period of time. From the marketing
perspective, retailers are closer to the consumer than manufacturing companies
(Reynolds 2004b, p.3). The Retailers symbolize as a culmination of the marketing
process and the contact point between manufactured products and consumers. Whereas
retailing has a long set of buying decisions due to its highest priority and focused more
on the product assortment, this sector is now follows more holistic approach on the
marketing. That was once a simple way of doing business is transforming into a highly
sophisticated form of management and marketing. (Mulhern 1997, pg.103)
Retailing involves those companies that are engaged primarily in the activity of
purchasing products from other organizations. The retailing process is considered as a
final step in the distribution of merchandise; where retailers are therefore organized to
sell the commodities in small quantities among general public. The services like
transportation and stock keeping added to the products to ensure that they are available
at the point of sale. How ever, the process also encompasses the selection of products
for a retail assortment, the provision of sales advice, after sales service and many other
functions. Further, number of developments is also responsible for bringing the
dynamic change in modern retail management. In developed countries, the dramatic
increase in the scale of operations and market concentration are experienced in
retailing. Due to the appearance of large scale retail chains have covered over more
market share than from independently owned small shops. These retail chains first
developed into provincial groups, then into countrywide and even worldwide active
retail operations.
The Organized retail stores are characterized into large proficiently managed stores
format. They provide an excellent ambience that is conducive for shopping.
The retail sector in India is witness of tremendous increase in the quality of life (urban
areas) and also changing demographics. Retail Sector is booming sector in the Indian
economy. With an improving income dynamics, growing economy and rising
awareness, due to this India will become one of the most potential markets for the
domestic and global retailers.
The retail industry in India gathered a new momentum with the establishment of
different international brand outlets, hyper or super markets, shopping malls and
departmental stores.
The organized retail segment in India is projected to be 9 per cent of total retail market
by 2015 and 20 per cent by 2020. Hypermarkets would be the largest retail segment
that account for 21 per cent of the total retail space by 2013–142.
Market Size
The BMI India Retail Report for the fourth quarter of 2011 forecasts that total retail
sales will grow from US$ 411.28 billion in 2011 to US$ 804.06 billion by 2015. The
key factors behind the forecasted growth of retail are robust economic growth, growth
in population and wealth of individuals and the speedy construction of retail
infrastructure. The franchise market in India is also started growing at a strong pace
over 40% per annum within Tier-2 &-3 cities gradually because this is getting attracted
to the network of retailers and franchisers due to Hugh disposable income.
2 http://www.ibef.org/industry/retail.aspx
OBJECTIVES OF THE STUDY
In India, there is a need to go in for a study to identify the attributes of modern retail
formats that attract consumers’ to shop from the formats like malls, specialty stores,
hyper/supermarkets, discount stores, convenience stores and department stores which
this study tries to cover. The study also considered the impact of important
demographic factors on consumers’ preferences across modern retail format. While
discussing about modern retail formats, the study seems incomplete without knowing
the retailers perspective. So the study has also covered the marketing strategies adopted
by retailers for enhancing the sales of their outlet. The present study has been taken
with the following broad objectives:
To study the factors that make India an attractive destination for retailers
Data Collection
Primary data was collected by questionnaire and interviewing the officials and
employees at selected retail outlets. The interview was structured and open-ended
questions based on literature survey, were asked.
The tools and methods of data collection identified earlier were employed to gather
data on the consumer perception of the three retail chains in Delhi – Stores in malls,
Independent Stores and Multibrand Outlets. The data accrued, especially from the
interviews and questionnaires circulated, are tabulated and depicted on graphs in the
following pages. The data thus gathered and tabulated has been analysed. The data was
then scrutinized and relevant interpretations are drawn.
Sampling
4. The study can help the companies get additional research information.
5. It facilitates evaluation of brand name and customer satisfaction.
The data collection plan, including procedures, instruments, and forms, was designed
and pre-tested to maximize accuracy. All data collection activities were monitored to
ensure adherence to the data collection protocol and to prompt actions to minimize and
resolve missing and questionable data. Monitoring procedures were instituted at the
outset and maintained throughout the study, since the faster irregularities can be
detected; the greater the likelihood that they can be resolved in a satisfactory manner
and the sooner preventive measures can be instituted.
Limitations
The study of this topic is extremely wide and analyzing period which is available is
very less.
The sample size was small and hence the results can have a degree of variation.
LITERATURE REVIEW
The Indian retail industry has strong linkages with the economic growth and
development of the economy. Liberalization of the economy, rise in per capita income,
improved infrastructure, growing consumerism, retail attributes and effective marketing
strategies of the retailers are the significant factors for the development of organized
retail in India. India has been identified as the third most attractive retail destination’
globally from among thirty emergent markets. As per this report Indian retail market is
worth about $410 billion, out of this 5% of sales are through organized retail. Though
the sale percentage of organized retail in India is less, but the modern retail formats are
showing very interesting trends due to changing lifestyles of consumers. Indian
consumer now prefers modern retail formats for shopping as it provides more value in
form of improved quality, pleasant shopping environment, entertainment facilities, trial
rooms for clothing products, return and exchange policies and competitive pricing,.
Customers are switching not only within formats but also across formats. There is a
drastic change in the consumer spending patterns due to the contribution of several
demographic factors namely rapid income growth, increasing urbanization, growing
young population, higher level of education etc.. Consumer spending has risen sharply
as the younger population (more than 47% of the country is below the age of 25) has
seen a significant increase in its disposable income.
The retail sector in India is considered as one of the largest industry (around 14 million
outlets) that generates various sources of employment in the country and contributes
10-11% of gross domestic product. Since, retail industry in India is basically considered
as unorganized and it’s primarily consists of owner managed, independent and small
shops. The modern retail format in India has provided a wide variety to the new and
existing customers and also offers best shopping experiences with an entertainment and
service under a single roof. The convenience stores, malls, specialty stores, department
stores, discount stores and hyper/supermarkets are the emerging retailing formats that
offer different shopping experience to various consumers. (Sinha and Kar 2007, Kotler
2006)
In this dynamic business environment, consumer behavior, trends and issues of retailing
are undergoing a sea change. This demands marketing approaches to be altered
accordingly. Kokatnur and Satish and Raju highlight that the organized market
comprises of large players such as Future group, Pantaloon, Tata, RPG, Reliance, Trent,
ITC, etc., having greater enforcement of taxation mechanisms and better labor law
monitoring systems. They have an efficient supply chain management, with superior
vender relationships, quality customer service, efficient merchandizing and timely
promotional campaigns. Though Indian retail is dominated by a large number of small
retailers, the last decade has witnessed the entry of a number of organized retailers,
opening stores in various modern formats in metros and other important cities.
Due to rapid growth in retail sector, global retailers like Wal-Mart, GAP, Tesco, J.C
Penney, Sears and Carrefour are trying to establish themselves in the Indian market. In
fact, Wal-Mart has already opened their stores in partnership with Bharti in Indian
market. In this competitive scenario, proper marketing strategies will hold the key.
Indian retailers are also focusing upon different retail strategies, i.e., pricing,
promotion, image improvement, competitive and retention strategies for enhancing the
sales of their retail outlet.
Overall Retail Scenario
Aggarwal (2007) Highlights the emergence of organized retailing in India and views
the Catalytic effects of retail on Indian Economy. Employment generation,
Development of retail ancillary market, Increase in disposable income and Growth of
real estate are the various catalytic effects on Indian economy.
Tusharinani (2007) noted the transformation of traditional formats into new formats,
viz., departmental stores, hypermarkets, supermarkets, specialty stores and malls taking
the lead in attracting consumers in the metro cities.
The consumer has multiple options to choose- ranging from the shopkeeper to the most
sophisticated supermarkets, departmental stores, plazas and malls which provide the
latest and better quality products and it made India the top spot among the favored
retail destination as observed by Gupta (2004), Jasola (2007) and India Retail Report
(2009).
Goyal and Aggarwal (2009) opine that In India, a consuming class is emerging as a
result of increasing income levels and dual career families with high disposable
incomes. With retailers eyeing their presence in the market, it is important to identify
the target shoppers as well as the prime factors of enjoyment in shopping. The results
reveal that a majority of the consumers are pro shoppers, feeling enjoyment while
shopping. Their key interests include getting product ideas or meeting friends. They
also view shopping from emerging retail formats as a means of diversion to alleviate
depression or break the monotony of daily routine.
The study by Mishra (2008) expose that mall space, demography, rising young
population, availability of brands, rising retail finance, changing lifestyle, modern retail
formats and foreign direct investment are the strengths and opportunities for modern
retail model. On the other hand, real estate cost, improperly developed mall, lack of
skilled personnel, underdeveloped supply chain and taxation hurdles are the
weaknesses and threats for modern retail formats.
Shukla (2007) and Goyal et al (2009) described that Food and Grocery; Health and
Beauty; Apparel; Jewellery and Consumer durables are the fastest growing categories
of organized retail and fashion sector in India commands lion’s share in the organized
retail pie. The most appropriate retail formats for various items are: Food and grocery-
Supermarket; Health and beauty care services-Supermarket; Clothing and Apparels’-
Mall; Entertainment-Mall; Watches-Hypermarket; Pharmaceuticals-Hypermarket;
Mobile, accessories & Services-Hypermarket; Foot wares-Departmental store.
The study by Satish and Raju (2010) throws light on the major Indian retailers which
highly contribute to the retail sector in India. Pantaloon, Tata Group, RPG Group,
Reliance Group and A V Birla group are some of the major Indian retailers.
Arshad et al (2007) and Ghosh et al (2010) stated that 47% of India’s population is
under the age of 20 and this will increase to 55% by 2015 and this young population
will immensely contribute to the growth of the retail sector in the country.
While the study by Ali and Kapoor (2010) indicate that a higher income and
educational level of consumers influences their decisions on product and market
attributes while gender and age seems to have no significant impact.
The young consumer seeks more and more information about the new products
available and retailers need to communicate them more effectively is emphasized by
kaur et al (2007).
Rajagopal (2008), Thang et al (2003) and Srivastava (2008) supported that consumers
choice of shopping malls over traditional market stores is influenced by various factors
like ambience, assortment, sales promotion schemes and in-store services. The facility
of one stop-shop had a positive response from the consumers, who found it more
convenient, time saving and satisfactory.
The changing retail structure has provided the consumers with more options in the form
of formats and services such as less travel time, large variety of products and quality
products etc, as observed by Popkowski et al (2001).
Aggarwal (2007) and Bhardwaj et al (2007) indicated that organized retail industry will
mean thousand of new jobs, increasing income level, standard of living, better
products, better shopping experience etc.
The study by Dash et al (2009) and CII (2008) depict that growing middle class, large
number of earning youth customers, increase in spending, and improvement in
infrastructure, Liberalization of Indian economy and India’s booming economy are the
various opportunities for organized retailing in India. On the other hand, complexity of
taxes, lack of proper infrastructure and high cost of real estate are the hurdles which
need to remove for retail success in India. Enjoyable pleasant and attractive in store
shopping environment increases the chances of impulsive buying among consumers,
Crispen et al (2009).
According to Jain and Bagdare (2009) Layout, ambience, display, self service, value
added services, technology based operations and many more dimensions with modern
outlook and practices are the major determinants of modern retail formats.
Robinson (1998) and Herper et al (2000) mentioned in study that there is a need for
consumer orientation rather than product orientation for future developments in
retailing.
The Economic liberalization in India has brought diverse changes in the life of people
staying in urban area. The income level of middle class group has started increasing at
constant rate in India. It also put positive impact on lifestyle and social culture in that
demographic region.
Following are the contributions by one or more parties to this growth saga.
Economic Growth: India is one of the largest economies of the world. The growth of
retailing is intrinsically linked to the Growth Rate of a country. In the Indian context
major growth in retailing has developed during the last one decade when the GDP
growth picked up.
Demographic Changes: The average disposable income of Indian’s will grow from
Rs.0.114 million in 2006 to Rs.0.319 million by 2015. It is estimated that India will
emerge as one of the world’s youngest nations as 54 per cent of its current population is
aged 24 years and less. By 2020, the country is expected to represent 17 per cent of the
world's working age population. With the availability of easy credit cards and a rise in
the aspirational class, the major beneficiary would be the retail industry – more
specifically the apparel segment of the business.
India’s middle and high-income population has notched up an impressive growth and
the country’s middle class will grow from about 5% of the population to more than
40% and create the world’s fifth largest consumer market. As a country with a high
percentage of youth (33% below the age of 15), consumer spending has risen sharply.
Increased awareness has resulted in a perceptible change in behavior and they are on
the lookout for convenience, speed, efficiency and a wide range of products,
simultaneously a one-stop shopping experience.
These proliferating satellite townships provide a big opportunity for retailers who open
outlets in order to target this captive consumer base. With a shift in family structure,
nuclear families have become a significant component of urban markets. Large
families’ fragmenting into nuclear families translates into increased footfalls and more
shopping baskets providing a great opportunity for the retailers.
Changing income levels and occupation have resulted in a change in the consumer’s
buying behavior. The focus shifts to convenience and comfort. The size and
composition of the shopping basket has changed over time. Today’s consumers are
looking for shopping convenience and want to have all their requirements under one
roof, coupled with speed in the retail store operations. Due to time constraints, families
are now looking for ‘shoppertainment’ – combining shopping with entertainment. This
is one of the causes of increased footfalls at malls with multiplexes.
Over 95% of the Indian retail stores are less than 500 sq. feet in size. Through the
1990s organized retail in India added just 1 million sq. feet. of space a year. From 2001
the pace has gathered great momentum and by the end of 2006, the total mall space
rose to 28 mn. sq. feet. with an average annual addition of 3.9 mn. sq. feet. Post 2006,
on an average 8 mn. sq. feet. retail space has been added annually, pan India, taking the
mall space to over 52 mn.sq.feet by the end of 2009.
Technological Advances
From bar code scanners to RFID, technology has been one of the most important
drivers of change in the retail industry. To leverage on the growth of internet usage,
online retailing is growing as an alternate channel. Mobile marketing is another
available tool. While Planogram software enables retailers in planning the store layout,
managing shelves and designing interiors, CRM software applications aid retailers in
developing a database of customers under different classifications. Global Positioning
Systems have been adopted to monitor the movement of merchandise.
Challenges Ahead
Despite all the frenzy associated with the business, retailing has still not been accorded
an industry status. According industry status will enable retailers’ access to cheaper
bank credit facilities. Another contentious issue relates to FDI in retail. Considering the
sensitivity of the issue, there is bound to be a lot of resistance to change.
ANALYSIS AND INTERPRETATION
Q1. From how many years you have been working in Indian retail sector?
Interpretations: 56% respondents mentioned that sales have been average while
44% said that they have been above average.
Q5. Please tell me how many employees are currently employed by your company.
Interpretations: The above pie-charts reflect that the consumer preference for
organized retail in comparison with past years has been increasing.
Q7. What initiatives currently you are taking for the improvement of organized
retail?
Q8. What would you say about the competitive position of the company?
Q9. What would you say about the company’s focus on improving customer
satisfaction?
Q10. What would you say about the quality of the promotional activities?
FINDINGS
Core product attributes like quality, branding, assortment may be more important
indicators of shopping from modern retail formats has been accepted.
The results highlight that young consumers and high tax payers prefer malls and
specialty stores more for shopping purposes. On the other hand, older consumers and
no tax payers have different preferences for shopping from the modern retail formats as
they prefer Convenience store, discount stores and department stores. Product attributes
and store attributes are the important drivers influencing consumers’ to visit these retail
formats. The results reveal that the trends toward modern retail formats are changing
and consumers prefer modern retail formats due to its significant product attributes like
improved quality and variety of brands and store attributes which enhance the shopping
experience of consumers like good parking facility and trained sales personnel. The
findings further support that the marketing strategies of retailers’ are very important
tool for improving the value of retail business and enhancing the sales of retail outlet.
Strategies of retailers’ like retention strategies (understanding the customers, customer
delight, store image, better environment, attractive merchandising, loyalty programs
and customized technology); promotional strategies (customer segmentation, personal
selling, advertisement, entertainment facilities, private label brands and after Sale
services); image improvement strategies (franchise/joint venture and training of sales
personnel); pricing strategies (free gifts, discount options and festival offers) and
competitive strategies (competitive pricing and public relations) are directly
contributing to the growth of modern retail formats in India.
BIBLIOGRAPHY
Aggarwal, V., 2008. The Era of Retail Revolution: Contribution to Economy in
Research in Management and Technology. Eds., Aneet and Ramanjeet Singh, Deep
and Deep Publications Pvt. Ltd., pp: 429-442.
Mishra, S., 2008. New Retail Models in India: Strategic Perspective Analysis. J.
Marketing & Communication, 4(2): 39-47.
Kearney, A.T., 2010. Expanding opportunities for global retailers, Global Retail
Development Index, No. 3M ATK.0610.136.
Kotler, P., 2006. Marketing Management, Prentice Hall of India Private Limited,
New Delhi.
Sinha, P.K. and D.P. Uniyal, 2007. Managing Retailing. Oxford University Press,
New Delhi.
Jasola, M., 2007. Emerging Trends in Retail Sector. J. IMS Group, 4(2): 22-28.
Anand, K.S. and P.K. Sinha, 2009. Store format choice in an evolving market: role
of affect, cognition and involvement. International Review of Retail, Distribution
and Consumer Research, 19(5): 505-534.
Talwar, S.L., 2010. Organized Retail in Northern and Western States. Retailer
Magazine, 5(7).
Kaur, P. and R. Singh, 2007. Uncovering retail shopping motives of Indian youth.
Young Consumers, 8(2): 128-138.
Bhardwaj, R.K. and U. Makkar, 2007. Retail Revolution- Emerging Challenges and
Issues. J. IMS Group, 4(2): 9-12.
ANNEXURE
Q1. From how many years you have been working in Indian retail sector?
Senior
Middle
Low
Consumer Demography
Retail Attributes
Q4. Please tell me your current year sales level as compared to previous two year
average.
Below Average
Average
Above Average
Unknown
Q5. Please tell me how many employees are currently employed by your company.
Less than 50
51 to 200
201 to 350
351 to 500
Q6. What will you say about consumer preference for organized retail in comparison
with past years?
Increasing
Similar
Decreasing
Q7. What initiatives currently you are taking for the improvement of organized retail?
Better Environment
Attractive Merchandising
Loyalty Programs
Store Image
Q8. What would you say about the competitive position of the company?
Q9. What would you say about the company’s focus on improving customer
satisfaction?
Excellent
Very Good
Good
Fair
Poor
Q10. What would you say about the quality of the promotional activities?
Excellent
Very Good
Good
Fair
Poor