LETTER OF TRANSMITTAL

May 7, 2017.

Usama Abdul Rehman

Lecturer English
Sukkur Institute of Business Administration

Subject: LETTER OF TRANSMITTAL

Dear Sir:

With due respect we the undersigned student of BBA-VIII have written a long report on “Consumer
Switching Behavior from Un-organized to Organized Retailing in Semi-urban Cities.” Under the
course: Business Communication.

Working on this report has added a greater value in our learning and understanding the facts and logic
primary responsible in expediting the researched behavior. We are very much thankful to you for
showing your serious concerns throughout the process of our task; your contribution is worth praising.

Lastly we owe you great thanks for all this, we request you to please have in-depth look on our report
and suggest anything that we need to work on.

Yours Sincerely,
Aiman Tufail
Ali Hasnain
Abdul Basit
Abdul Sattar
ACKNOWLEDGEMENT

We have taken serious efforts in writing this report. However, it would not have been possible
without the kind support and help of many people. We would like to extend our sincere thanks
to all of them.

We would first like to thank our worthy instructor Sir Ussama Abdul Rehman. We are highly
indebted to him for his guidance and constant supervision as well as for his support in completing
this term report. He always welcomed and steered us in the right direction whenever we ran into
a trouble spot or had a question about our report.

We would also like to express our gratitude towards the course facilitator Madam Surhan Fatima
for her untiring efforts in communicating what is required from this report.

We hope that this report serves the purpose for which it is written, which is to analyze the reasons
behind the switching behavior from unorganized retailing to organized retailing

Ali Hasnain

Aiman Tufail

Abdul Basit

Abdul Sattar
ABSTRACT

The retail industry in Pakistan is emerging as one of the largest growing industries. According to statistics
from the Pakistan Bureau of Statistics for the years 2014-15, the retail sector is worth $4.2 Billion, which
is estimated to account for more than 18 percent of the country’s GDP and around 8 percent of the
employment. This study is conducted with a purpose of understanding the shift from traditional
unorganized retailing like Kiryana shops, departmental and convenience stores towards modern
organized retailing like supermarkets, specialty stores and other one stop solutions (malls) and also the
factors that have influenced that shift in the consumers’ minds. It is observed that due to the changing
demographics, urbanization, and growing consciousness (through media especially internet) - the
customers have got multiple options to choose from modern retail outlets in comparison to neighborhood
shops. Based on a constraint- and dedication-based model, this study inspected that majority of the
consumers are visiting organized stores for variety, ease, availability, cleanliness, perceived price and
quality, experiential buying and enjoyment with additional facility of entertainment for children and
convenient parking facility. However in case of unorganized outlets- immediacy of the store, credit,
proximity to customers and bargaining facility balance the tilt. Unlike higher age groups who prefer to
visit Kiryana stores, the younger generation has more inclination towards organized retail stores. Both
organized as well as unorganized retailers need to offer value-added services to customers to make their
shopping experience more comfortable and value oriented. This report is helpful for both the unorganized
and organized retailers because it provides useful recommendations in their respective areas.
 Table of Contents
EXECUTIVE SUMMARY ................................................................................................................................ 6

INTRODUCTION ......................................................................................................................................... 7

Purpose ........................................................................................................................................................... 7

Scope ............................................................................................................................................................... 7

Definition of Terms ......................................................................................................................................... 7

Research Objective.......................................................................................................................................... 8

Background ..................................................................................................................................................... 8

ORGANIZED RETAILING: EMERGING TREND IN PAKISTAN ..................................................... 9

RETAILING SCENARIO IN SEMI-URBAN AREAS OF PAKISTAN: A FUTURE OPPORTUNITY

......................................................................................................................................................................... 9

GLOBAL PHENOMENON OF ORGANIZED RETAILING ..................................................................... 10

METHODOLOGY...................................................................................................................................... 11

RESULTS & FINDINGS............................................................................................................................ 11

CONCLUSION............................................................................................................................................ 12

RECOMMENDATION .............................................................................................................................. 12

APPENDIX .................................................................................................................................................. 13

REFERENCES ............................................................................................................................................ 15

Appendices………………………………………………….…………………………………………………….16
EXECUTIVE SUMMARY

The retail industry in Pakistan is largely unorganized and consists of small, independent shops, Most of
the Pakistani consumer’s needs are fulfilled by local Kiryana stores and other unorganized shops. A
recent trend has been witnesses in which Pakistani consumers are shifting from unorganized to more
organized and modern retail formats. Retail should continue to grow rapidly up to US $ 535 billion in
2013, with 10 per cent coming from organized retail, reflecting a fast – growing middle class, demanding
higher quality shopping environments and stronger brands, according to the report “Expanding
Opportunities for Global Retailers”, released by A T Kearney.

The core purpose of our study is to know the factors which shift the behavior of people from unorganized
retailing to organized retailing, with that study will also focus on characteristics in organized retailing
that are appealing to people. The study was conducted from semi-urban cities and we have selected
Sukkur City as our sample. The survey instrument was developed by adapting existing validated
questions to the context of this study. The survey instrument along with the source of items is shown in
the appendix. All the items were measured on a 5-point Likert scale. Since the target sample were not
too educated therefore 5-point Likert scale was more appropriate than 7-point Likert Scale. The data were
collected from general customers from near the malls so as to obtain the opinions of actual shoppers who
go to organized retailers as well as kiryana shops (unorganized retailers). The enumerators personally
explained the questions for those who were not fully conversant with English, total of 150 responses
were collected from the sample group.

In Semi-Urban cities, people have more social life style so they may not consider shopping as a great
source of enjoyment as compared to people in urban cities, where people hardly find any time for
socializing, the quality of product is perceived to be higher in organized retail, but in reality it may be
same as sold by unorganized retail shops. The results indicate that the influence of alternative
attractiveness and commitment on intention to switch is substantial, the influence of perceived
convenience and perceived quality on alternative attractiveness is weighty, and in the same way Price
and enjoyment have minimal impact in determining alternative attractiveness.

INTRODUCTION

Purpose

This study is conducted to thoroughly investigate the switching behavior of customer from unorganized
to organized retailing in semi-urban cities. The report specifically focuses on revealing the factors which
cause the shift in consumer behavior from un-organized retailing to organized retailing. Particularly, the
report purports to find out the characteristic of organized retail shops which are more appealing to people
in comparison to unorganized ones.

Scope

The study is conducted for semi-urban areas of Pakistan in general and we have selected Sukkur and its
vicinity as a sample. The information for the purpose of research is gathered from customers who visit
organized retail shops like Icon by Ghouris, Friends mart and Seven-Eleven (in Sukkur). The time period
for gathering this information was one week. Since the nature of study is quite clear and straightforward,
people happily responded to whatever we asked them through our questionnaire (see appendix below).

Definition of Terms
Retailer: Originates From a French – Italian word. Retailer is a person/agent/agency/
company/organization who is instrumental in reaching the goods or merchandise to the end- user or
ultimate consumer.

Retailing: Retailing is the set of business activities that adds value to the products and services sold to
consumers for their personal or family use. Often people think of retailing only as the sale of products in
stores, but retailing also involves the sale of services.

Organized retailing: It refers to trading activities undertaken by licensed retailers.

Unorganized retailing: This refers to the traditional form of low-cost retailing, for example, the local
kiryana shops (mom and pop shops), general stores, paan/beedi shops, convenience stores, discount
stores, mini marts, departmental stores, medical-cum-general stores etc.

Specialty stores are retail businesses that focus on specific product categories, such as office supplies,
men's or women's clothing, or carpet. It isn't the product they sell that determines if a company is a
specialty store, but rather the breadth of their product offering.

Kiryana stores: Unorganized retails shops usually found in villages and small towns.

Consumer-switching behavior: This refers to customers abandoning a product, service, brand or a

store in favor of a competitor's.

Research Objective

The objective of this research is to know about the factors that have influenced the shift in consumers’
minds from traditional retailing towards modern organized retailing.

Background

Retailing is an intermediate through which the goods and merchandize reaches the end user. Typically
in a business set up like retailing, the retailer purchases the large quantity of goods make it available at a
common platform and people buy relatively in small amounts. Broadly the retail industry is comprised
of two structures one we call it organized retailing; like corporate backed hypermarkets and retail chains
like Wal-Mart, this structure of retailing is supposed to be accounted for sales tax, income tax etc. On the
other side we have unorganized retailing, typically we call them Kiryana stores, mini marts, paan-beedi
shops etc. They set up a fair sized shop and sell products directly to customers. The most common type
of unorganized retailing is Kiryana stores and usually every small town and village have these stores.
The fundamental characteristics of Kiryana store includes, the unpacked products in bulk containers and
these are taken and weighted in paper packets by the shop owner and then to customers, the other is credit
which is also considered as the significant characteristic as well because this is responsible for higher
demand of Kiryana stores.

The retail industry in Pakistan is largely unorganized and predominantly consists of small, independent,
owner-managed shops. The Pakistan consumer’s shopping needs- largely are and traditionally have been
fulfilled by Kiryana sores (unorganized), Kiosks, street vendors, weekly bazaars and high-street shops
for consumer durables and luxury goods. Traditional unorganized retailing has a low cost structure, a
negligible real estate and labor costs and little or no taxes to pay. Consumer familiarity that runs from
generation to generation is one big advantage for the unorganized retailing sector. However this is set
to change with the entry of the corporate sector into the retail domain. The retail industry continued in
Pakistan in the form of Kiryana till 1980s. But currently consumers of middle-class Pakistanis have
broken off their love for traditional stand-alone shops that have no ACs, organized parking lots and other
public amenities, according to a study by fashion magazine Image.

The significance of retail sector in Pakistan’s economy can be gauged from the data published by Pakistan
Bureau of Statistics according to which retail and wholesale sector worth is RS. 3.6 trillion Representing
around 18% of GDP 2011-12. Further, there are around 2 million retail outlets in a country of 180 million
people (India: 15 million outlets for 1.2B people). Out of these retail outlets, approximately 800,000
outlets represent FMCG channels including 'kiryana' stores (mom & pop), 'pan' shops, department stores,
medical-cum-general stores etc.
Rapid transformation has been witnessed in recent years, in retail stores across various categories. This
can be contemplated as a result of changing attitudes of consumers and their overwhelming response
acceptance to modern retail formats. It is quite convenient for consumers to attain their necessities under
one roof. Along with that, organized retail stores such as shopping malls and specialty stores bring
entertainment opportunities for the consumers.

In fiscal year 2011-12, retail sector contributed to almost 18% of Pakistan’s GDP. (Source: Report
published by Pakistan Bureau of Statistics). In addition to that, there are around 2 million retail outlets
in the country, of which 800,000 are unorganized retail stores. Majority of such retail stores (Kiryana
stores) are owned by a single person. Such growth in retail industry is bounds the retailers to maintaining
their competitiveness, and brings the best value for their products.

ORGANIZED RETAILING: EMERGING TREND IN PAKISTAN

A rapid transformation has been witnessed in recent years, in retail stores across various categories. This
can be contemplated as a result of changing attitudes of consumers and their overwhelming response
acceptance to modern retail formats. It is quite convenient for consumers to attain their necessities under
one roof. Along with that, organized retail stores such as shopping malls and speciality stores bring
entertainment opportunities for the consumers.

In fiscal year 2011-12, retail sector contributed to almost 18% of Pakistan’s GDP. (Source: Report
published by Pakistan Bureau of Statistics). In addition to that, there are around 2 million retail outlets
in the country, of which 800,000 are unorganized retail stores. Majority of such retail stores (Kiryana
stores) are owned by a single person. Such growth in retail industry is bounds the retailers to maintaining
their competitiveness, and bring the best value for their products.

RETAILING SCENARIO IN SEMI-URBAN AREAS OF PAKISTAN: A

FUTURE OPPORTUNITY

The cities of semi-urban includes Jhang, Kohat, Jhelum, Abbodatab, Okara, Gujrat, Sahiwal and many
more. This segment contain of mid-scale, mid-aged singles and couples, who had white-collar jobs and
have own house. Globally urban population was in its peak in 1950s, with a population expansion of 3%
each year. In the mid of 21st century, the urban population became double, increasing from 3.4 billion in
2009 to 6.4 billion in 2050. On the global scale, urban population grew at the pace of 1.5% per year from
2025 to 2030.

In Pakistan, the situation is same. People do migrate from rural to semi-urban and urban cities as in semi-
urban and urban cities, more facilities and job opportunities are there and people opt for more comfortable
life, better health and better education. The population of Pakistan is increasing 2% per year. Pakistan
population is about 180 Million but will become 300 million in 2030 and more than 450 million in 2050.

GLOBAL PHENOMENON OF ORGANIZED RETAILING

The global retail industry has travelled a long way from a small beginning to an industry where the world
wide retail sales alone is valued at $ 7 trillion (Source: 2003 Global Retail Report, Deloitte Touche
Tohmatsu).

The invention of the bar code allowed a store to manage thousands of items and their prices and led to
'just-in-time' store replenishment and the ability to carry tens of thousands of individual items. Computer-
operated depots and logistical systems integrated store replenishment with consumer demand in a single
electronic system. The superstore was born.

Retail should continue to grow rapidly up to US $ 535 billion in 2013, with 10 per cent coming from
organized retail, reflecting a fast – growing middle class, demanding higher quality shopping
environments and stronger brands, according to the report “Expanding Opportunities for Global
Retailers”, released by A T Kearney.

In particular, regional players are flexing their muscles, using their proximity as a competitive advantage
to steal share in neighboring markets. Chile’s Falabella and Cencosud have begun aggressive growth
plans to widen their footprint across Latin America, and UAE-based LuLu
Hypermarkets and Majid Al Futtaim have begun expanding in the Gulf region. South African retailers
Shoprite and Woolworths have spearheaded Sub-Saharan Africa’s shift to modern retail, with expansion
into Nigeria, Botswana, and Namibia. (The 2014 Global Retail Development Index™ by A T Kearney)

METHODOLOGY

A survey method was used in this study as it is useful for collecting responses from a large number of
people. A survey method is also applied when it is important to establish generalizability. The survey
was conducted in Sukkur, a semi-urban city of Pakistan in Sindh Province. The survey questionnaire was
developed by adapting existing questionnaire used in the context of this study. The survey questionnaire
is presented in the appendix. All the questions were measured on a 5-point Likert scale. The data were
collected from general customers from near the malls so as to obtain the opinions of actual shoppers who
go to organized retailers as well as kiryana shops (unorganized retailers). The enumerators personally
explained the questions for those who were not fully conversant with English. A total of 150 responses
was collected via the questionnaire survey. Table 3 shows the demographic characteristics of the
customers.

Table shows that the distribution of respondents is

fairly heterogeneous. In terms of gender, there are
slightly more females than males. Most of the
nonearning respondents fall into the age group of
20–29. The representatives from student and house
wives constitutes majority of the respondents
because of low female education ratio. Since malls
are near colleges therefore students were 2nd
largest group in our survey. In terms of annual
income, respondents are spread fairly equally, with
fewer respondents having an income greater than
60,000 (Rs) per month. This is normal, as business-
class people constitute a lesser percentage of the
population as compared to employed and
nonearning members in the society.

RESULTS & FINDINGS

The influence of attractiveness of Malls and Super Stores and commitment to continue purchasing from
kiryana shops on intention to switch is substantial, and the major factors of mall attractions were
perceived convenience and perceived quality. In other word, we discovered from this study that
attractiveness of organized retailing is mainly due to quality and convenience. In the same way, price and
enjoyment have minimal impact in determining attraction of organized retailing. One possible
explanation of this can be that customers’ perceived difference in prices across independent retailers and
organized retail stores is too shallow and they also do not care much about enjoyment. The result seems
to have logic in real world as well.
Since in semi-urban cities, people have a more social lifestyle so they may not consider shopping as a
great source of enjoyment as compared to people in urban cities, where people hardly find any time for
socializing. The quality of the product is undeniably perceived to be higher in organized retail, although
in reality it may be the same as that sold by an independent retailer. One reason for this perception of
customers is because of the sophisticated ambiance and well-worked layout of the organized retailing
store. Convenience is also high because of the variety and assortment of products available in a single
space. One doesn’t have to wander very far to purchase various products. The results of this study also
show that individual characteristics (resistance to change) do not have a significant influence on the
customer’s intention to switch. Resistance to change has been found significant in decisions where a
significant amount of mental and physical effort is required. In this study, the object of study is shopping
at an organized retail store, where a significant amount of physical and mental effort is not required
because the products are neither expensive nor expressive in nature. Therefore, in the case of grocery
shopping, the effect of individual characteristics may not be a significant predictor of switching intention.

CONCLUSION

Keeping in account the growth and emergence of organized retailing and the declining business of
unorganized retailers, the study was conducted to understand the reasons which push consumers to switch
buying from unorganized to organized retail shops. The body of this report covered organised retailing
as global and national phenomenon. It is also highlighted that how this modern retailing is going to be a
lucrative opportunity for current and potential organized retailers and threat for unorganized retailers.
Also the report covered the methodology of how the research was conducted to know customers’ insights.
There were many variables under consideration like price-value perception, convenience, quality, time
saving, availability of products etc. while gathering customer insights. The results of survey showed that
customers perceive products of organized retailers to be high priced, high quality, time saving sopping
(because supermarkets are one stop solutions) and hence convenient to buy.

RECOMMENDATION

The unprecedented rise of supermarkets has led to a slowdown in the growth rate of small unorganized
stores. The rising modern retailing trend has affected and is going to affect the sales of unorganized
sector. Considering this, we the authors of this report, recommend the unorganized retailers to try and
add value and convenience oriented services for the customers to make them stay with unorganized
shops. Offering them with quality products, providing them ease of shopping by making all products
(category related) can appeal customers. As far as the organized retailers who are going to enter this fast
paced retail industry in the future are concerned, they are recommended not to ignore the fact that huge
population of semi-urban areas like Sukkur etc. is price sensitive and would resist leaving old
unorganized sellers, therefore a critical analysis should be done before entering into organized retailing.
APPENDIX

SURVEY FORM

Gender Male Female

Age 15-20 21-30 31-40 41-50 50+
Occupation _____________
Education _____________
Income 10,000-20,000 20,000-40,000 40,000-60,000 60,000+
Strongl
Strongl
y Disagr Neutra
Agree y
disagre ee l
Agree
e
Question 1 2 3 4 5
1 1. I am planning to switch to
organized retail stores for my
daily purchases within next 3
months.
2 My intention is to switch to an
organized retail store for my
daily purchases within next 3
months.
3 If I could, I would like to
discontinue purchasing from
local retail stores.
4 2. I am committed to purchasing
from local retail stores.
5 I care about long-term success of
local retail stores
6 I actively make purchases from
local retail stores
7 3. I am proud to conduct purchases
from local retail stores.
8 I would not willingly change my
preference to purchase from
local retail stores
9 I would not substitute the local
store with an organized retail
store
104. Even if my close friends were to
recommend purchasing from an
organized retail
store, I would not change my
preference for purchasing from a
local store
115. To change my preference for
local stores would require major
rethinking.
12 Compared to shopping at local
retail stores, shopping from an
organized retail store would be
more satisfactory to me
 Strongl
Strongl
y Disagr Neutra
Agree y
disagre ee l
Agree
e
Questions 1 2 3 4 5
13 Compared to shopping at local
retail stores, shopping from an
organized retail store is more
appealing to me
14 Compared to shopping at local
retail stores, I would happier to
shop from an organized retail
store
15 Compared to shopping at local
retail stores, shopping at the
organized retail store would give
me better value
16 It is possible to get a better
discount from organized retail
stores
17 It is cheaper to buy products
from organized retail stores
18 I will save more money buying
products from organized retail
stores
196. I may need to pay less for
buying products from organized
retail stores than from any other
local store
20 The products sold in organized
retail stores are of good quality
21 The products sold in organized
retail stores are reliable
22 The products sold in organized
retail stores are durable
23 The products sold in organized
retail stores are fresh
24 Purchasing from organized retail
stores saves me time
25 Purchasing from organized retail
stores minimizes my effort in
shopping
26 Purchasing from organized retail
stores is easy for me.
27 Purchasing from organized retail
stores minimizes personal stress
in shopping
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