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CHAPTER - I
INTRODUCTION
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Human psychology is supposed to be a very complex, the study of which is both science and an
art. Consumers being a subset of this human race exhibit the very same complexity. A
psychology of a consumer not only affects organizations profitability but also the economy of
the country. Different geographic consumers exhibit different buying behavior, based on their
culture, traditions, practices, ethics, lifestyle and earnings.
Consumer behavior is the study of when, why, how, and where people do or do not buy a
product. It blends elements frompsychology, sociology, socialanthropology and economics. It
attempts to understand the buyer decision making process, both individually and in groups. It
studies characteristics of individual consumers such as demographics and behavioral variables in
an attempt to understand people's wants. It also tries to assess influences on the consumerfrom
groups such as family, friends, reference groups, and society in general.
Customer behavior study is based on consumer buying behavior, with the customer playing the
three distinct roles of user, payer and buyer.
The study of consumer behavior focuses on how individuals make decisions to spend their
available resources (time, money, effort) on consumption-related items (Schiffman and Kanuk,
1997). The field of consumer behavior covers a lot of ground. According to Solomon (1996),
consumer behavior is a study of the processes involved when individuals or groups select,
purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires.
The official definition of consumer behavior given by Belch (1998) is the process and activities
people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of
products and services so as to satisfy their needs and desires. Behavior occurs either for the
individual, or in the context of a group, or an organization. Consumer behavior involves the use
and disposal of products as well as the study of how they are purchased. Product use is often of
great interest to the marketer, because this may influence how a product is best positioned or
how we can encourage increased consumption.
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http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Psychologyhttp://en.wikipedia.org/wiki/Sociologyhttp://en.wikipedia.org/wiki/Social_Anthropologyhttp://en.wikipedia.org/wiki/Anthropologyhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Demographichttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Psychologyhttp://en.wikipedia.org/wiki/Sociologyhttp://en.wikipedia.org/wiki/Social_Anthropologyhttp://en.wikipedia.org/wiki/Anthropologyhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Demographichttp://en.wikipedia.org/wiki/Consumer8/3/2019 Chapter Edited
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Characteristics Affecting Consumer Behavior
1. Cultural Factor
Culture is the fundamental determinant of a persons wants and behavior. The growing childacquires a set of values, perceptions, preferences and the behavior through his or her family and
other key institutions. A child grown in USA is exposed to the following values: achievements
and success, efficiency and practicality, progress, material comfort, individualism, freedom and
youthfulness. What about a child grown in Ghana?
Subculture Each culture consists of smaller group (subculture) of people with shared value
systems based on common life experiences and situations. These subcultures can be ethnic,
religious, racial or regional groups as well as those that form around music groups. Nestle Gh
Ltd (MaggieHomowoCooking contest) Guinness & MTN have been exploiting our festivals to
promote and build their brands and Corporate Image.
Social Class Virtually all human societies exhibit social stratification. It is a relatively
homogeneous and enduring division in a society, which is hierarchically ordered and whose
members share similar values, interests, and behaviors. Social classes reflect not only income but
also other indicators such as occupation, area of residence, education, and wealth. Social classes
show distinct product and brand preferences in many areas, including clothing, home furnishing,
leisure activities, automobiles, and media consumption.
2. Social Factors
Group Membership: Anyone who has ever gone along with the crowd" knows that people act
differently in groups than they do on their own. Since many of the things we buy are consumed
in the presence of others, group behaviors are important to marketers
Primary Groups: A person has continuous /informal interaction including family members,
friends, neighbors, and co-workers with these groups.Reference Group: These are groups that have direct/face-to-face or indirect influence on a
persons attitudes and behaviors. A set of people a consumer wants to please or imitate.
Consumers refer to these groups in evaluating their behavior i.e. what they wear, where they go
and what brands they buy
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Secondary Group: A person has formal relations and less continuous interaction including
religious organizations, professional associations, and trade unions with these groups.
Opinion Leader: Is a person who influences others' attitudes or behavior because others
perceive him/ her as possessing expertise about the product. Opinion leaders are often among the
first to buy new products, so they absorb much of the risk, reducing uncertainty for others who
are not as courageous. Marketers try to reach opinion leaders by identifying demographic and
psychographic characteristics associated with them and coaxing them especially the celebrities to
use their products sometimes before they are launched.
The Family: This is probably the most important consumer buying organization in society.
Family members constitute the most influential primary reference group. Marketers are
interested in the roles and relative influence of the husband, wife, and children in the purchase of
a large variety of products and services.
3. Psychological Factors
Psychology helps marketers understand the why and how of consumer behavior. In the
psychological situation, consumer buying behavior is influenced by four factors including:
Motivation, Perception, Learning, and Beliefs & Attitudes.
a. Motivation
Motivation is an inner state that energizes, activates, moves or channels behavior towards certain
goals (Assael). Motivation arises from perceived needs. These can be grouped
into biogenic and psychogenic needs:
Biogenic needs: arise from physiological state of tension e.g. thirst, hunger, discomfort
Psychogenic needs: arise from psychological state of tension such as esteem, belongingness.
Maslows theory of motivation states that needs are satisfied based on importance. He arguesthat a consumer will satisfy the most important need first.
Maslows Hierarchy of Needs
Physiological Needs (water, sleep, food)
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Safety Needs (security, shelter, protection)
Social Needs (love, friendship, acceptance by others, belongingness)
Ego Needs (Self-esteem, prestige, status, recognition, accomplishment)
Self- Actualization (self-fulfillment, realization, and enriching experience)
The theory helps marketers understand how various products fit into the plans, goals, and lives of
consumers.
b. Perception
A motivated person is ready to act. How the motivated person actually acts is influenced by his
or her perception of the situation. Perception is the process by which an individual selects,
organizes, and interprets information inputs to create a meaningful image of a situation.
Selective Attention- Listeners select part of the message that interests them. Sexual attraction isused to attract attention.
Selection distortion- here receivers distort the information they receive if the information does
not agree with their existing beliefs, opinions.
Amplification- the receiver adds things to the message that are not there.
Different people in the same motivated and objective situation may act quite differently because
each perceives the situation differently. For example, one person might perceive a fast talking
sales person as aggressive and insincere, another as intelligent and helpful. People can emerge
with different perceptions of the same object because of three perceptual processes: selective
distortion, selective attention, and selective retention. In marketing, people's perception are
important than the reality.
c. Learning
Learning involves changes in an individuals behavior arising from experience. Most human
behavior is learned. Learning theorists believe that learning is produced through:
Drive: Strong internal stimulus that compels a person to act in a particular way (motive) e.g.thirst, hunger, discomfort etc
Response: Action taken as a result of the cue, e.g. purchase of beer, soft drink or air-conditioner
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Reinforcement: If experience (from using the beer, soft drink, or air-conditioner) is rewarding
/satisfying, the person will continue to take same action anytime he feels thirsty / uncomfortable.
Habit is then formed which may result in brand loyalty.
d. Beliefs & Attitudes
Through doing and learning, people acquire beliefs and attitudes and these in turn influence
buying behavior. A persons belief is the descriptive thought that he/she holds about something.
His attitude is his/her enduring favorable or unfavorable evaluation, emotional feeling and action
tendencies toward some object (product/service) or idea, e.g. attitudes towards religion, politics,
music which may be positive or negative. Marketers need to decide which part of an attitude is
the most important driver of consumer preferences e.g. (Diet coke/Pepsi in blind/branded
test)
Lifestyle: Is a pattern of living that determines how people choose to spend their time, money,
and energy and that reflects their values, tastes, and preferences Consumers often choose goods,
services and activities that are associated with a certain lifestyle. Analysis of consumer lifestyles
(i.e. psychographics) is important in producing insights into consumer behavior. For instance,
lifestyle analysis is useful in segmenting and targeting consumer markets
Personality: Each person has personality characteristics that influence his or her buying
behavior, by personality; we mean a set of distinguishing human psychological traits that lead to
relatively consistent and enduring responses to environmental stimuli. Personality is often
described in terms of such traits as self-confidence, dominance, autonomy, deference, sociability,
defensiveness, aggression, and compliance.
Personality can be a useful variable in analyzing consumer brand choices. The idea is that brands
also have personalities, and that consumers are likely to choose brands whose personality
matches their own. We define Brand Personality as the specific mix of human traits that may be
attributed to a particular brand.
Self-Concept: Is an individuals self-image that is composed of a mixture of beliefs,
observations, and feelings about personal attributes. Self-image is how a person thinks of himself
or he thinks others think of him.
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4. Situational Factors
Some important situational cues are;
The Physical Environment: Marketers are aware that factors such as decor, smells, lighting,
music, crowding, and even temperature can significantly influence many purchases. Manyretailers are focusing on adequate packing, cyber-hangout and in-store display to influence the
consumer decision-making process.
Time: Marketers know that the time of day, the season of the year, and how much time one has
to make a purchase affect decision-making. Time is one of consumers' most limited resources.
The sense of time poverty makes consumers responsive to marketing innovation that allow them
to save time including such services as drive-through lanes at fast food restaurants and ordering
products on the web.
Social Surrounding: Including the other people present when the purchase decision is made,
may affect what is actually purchased. Thus, a playboy who went to a pharmacy to buy condoms
late in the night ended up buying a bottle of tricilicate when he came face to face with an elderly
man he had woken up from sleep.
Purchase Task: Is the reason underlying the consumers decision to buy which may be as a gift
or for the buyers own consumption or consumption by the members of the household
THE CONSUMER DECISION PROCESS
Need identification/Problem awareness
Information gathering
Evaluation of alternative solutions (products)
Selection of an appropriate solution (product)
Post-purchase evaluation of decision
TYPES OF BUYING BEHAVIOR
1. Compulsive buying behavior
2. Impulsive buying Behavior
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1. Compulsive buying behavior
Buying usually serves utilitarian needs. For some adults, shopping is also a leisure activity, a
means of managing emotions, or a way to establish and express self-identity. For others, the
inability to control buying urges brings significant adverse consequences. Uncontrolledproblematic buying behavior has been referred to as uncontrolled buying, compulsive buying,
compulsive shopping, addictive buying, excessive buying, and spendaholism.
All the above are characterized by the following behavior - being frequently preoccupied with
buying or subject to irresistible, intrusive, and/or senseless impulses to buy; frequently buying
unneeded items or more than can be afforded; shopping for periods longer than intended; and
experiencing adverse consequences, such as marked distress, impaired social or occupational
functioning, and/or financial problems.
The adverse consequences of the above include guilt or remorse, excessive debt, bankruptcy,
family conflict, divorce etc,
2. Impulsive buying Behavior
Marketing and consumer researchers over the period of forty years have tried to grasp the
concept of impulse buying and defined this terminology in their own perspectives, of which
some research findings are discussed here.
In a research conducted by Cobb and Hoyer (1986), impulse buying was defined as an unplanned
purchase and this definition can also be found in the research of Kollat and Willett (1967).
In another research by Rook (1987) reported that impulse buying usually takes place, when a
consumer feels a forceful motivation that turns into a desire to purchase a commodity instantly.
Beatty and Ferrell (1998) defined impulse buying as instantaneous purchase having no previous
aim or objective to purchase the commodity. Stern (1962) found that products bought on impulse
are usually cheap.
OBJECTIVES OF THE STUDY
To analyze the buying behavior of Mall (Retail Outlet) shopper
To identify the factors that affects the impulsive buying behavior of Mall shopper.
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To identify any unique impulsive factor affecting buying behavior.
To study the effect of wider assortment of products on the impulsive buying behavior of a
shopper.
RESEARCH METHODOLOGY
This section deals with the research design to be used, data collection methods used,
Sampling techniques to be used, field work to be carried out, analysis and interpretation
to be done, limitations inherent in the project and finally, coverage (Scope) of the
research work.
Sample Size: A Random convenience sampling was chosen in this study as this
study was carried-out in an area in Hyderabad in two retail outlets namely FOOD
WORLD and RELIANCE FRESH the respondents were already segmented as Retail
outlet visitors.
Source of Data Collection: The proposed study is undertaken with the help of
both primary and secondary data.
Primary Data: A precise structured questionnaire was prepared which containedquestions that were open ended as well as questions with likert ranking between 1 to 5 (1
being least favorable and 5 being extremely favorable). Personal information was also
collected that was used in demographic interpretations.
Secondary Data: Secondary data constitute the published articles on the topic, internet,
and few text books on marketing and consumer behavior.
Interpretation: For the purpose of data analysis, tabulation and simple averages,
percentages have been used and interpretation is done.
SCOPE OF THE STUDY
Sales maximization is the ultimate goal of any organization. To capture a larger
market share and sales volume, the organization is required to consider its customers.
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They should analyze their needs, wants, preferences and intentions. For achieving the
goal, the organization should know about customers buying behavior. This study will try
to focus on the buying behavior of Mall shopper in Hyderabad.
Many studies have been carried out in different parts of the world on the everchanging nature of the customer; in line, this study will try to evaluate Mall shoppers in
Hyderabad with the results of already studied factors of impulsive buying behavior.
This study will try to pin point the factors of impulsive buying specific to the
geographic location of Hyderabad so that retail outlets can customize their marketing
programs to suit their local mall shoppers.
LIMITATIONS OF THE STUDY Some of the respondents were unwilling to answer certain questions.
There may be personal bias on the part of the respondents while answering to the
questions.
The conclusions cannot be generalized since the study is carried out only at one outlet of
FoodWorld and RelianceFresh situated next to each other in Mehdipatnam area in
Hyderabad.
CHAPTERISATION
The study is structured into five chapters.
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Chapter 1: deals with the basic introduction and the related concepts of the topic such as
consumer behavior, characteristics effecting consumer behavior, consumer decision process,
types of buying behavior, objectives of the study, research methodology, scope of the study and
its limitations.
Chapter 2: reviews the literature on consumer behavior and in particular the impulsive buying
behavior. Literature survey is presented as case studies so that it gives oneself a clear picture of
the past research done on the subject.
Chapter 3: delve into the retailing sector in India. Types of retailing formats, types of retailing
sectors in India, current trends and issues in retailing, Indias major retailers, India as emerging
markets, challenges for Indian retailers, future trends and GAPs.
Chapter 4: Brief profiles of FoodWorld and RelianceFresh, the two companies choosen for the
study.
Chapter 5: is about the analysis and interpretation of data with suitable graphs.
Chapter 6: provides a summary and recommendations.
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CHAPTER II
REVIEW OF LITERATURE
Literature Survey
CASE STUDY ONE
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According to a study on Estimated Prevalence of Compulsive Buying Behavior in the United
States carried out by Lorrin M. Koran, M.D., Ronald J. Faber, Ph. D., Elias Aboujaoude, M.A.,
M.D., Michael D. Large, Ph.D., Richard T. Serpe, Ph.D. - (Am J Psychiatry 2006; 163:1806
1812)
Compulsive buyers were younger, and a greater proportion reported incomes under $50,000.
They exhibited more maladaptive responses on most consumer behavior measures and were
more than four times less likely to pay off credit card balances in full.
Some studies, for example, have asserted that compulsive buying results from the conditions of
modern life, including the easy availability of credit cards; increased and more effective
advertising; the ease of shopping in malls, through TV, and the Internet; the dilution of family
structure; and a breakdown in the sense of community (2, 1821).
Finally, preliminary evidence suggests that compulsive buyers suffer from abnormally high
levels of depression and anxiety (12) and experience higher rates of comorbid mood and anxiety
disorders than comparison groups (12,25).
CASE STUDY TWO
According to An Empirical Study of Consumer Impulse Buying Behavior in Local Markets
- European Journal of Scientific Research ISSN 1450-216X Vol.28 No.4 (2009), pp.522-532
The major findings of the study demonstrated an overall weak association of the set of
independent variables with the dependent variable but, the in-depth analysis found that pre-
decision stage of consumer purchase behavior is the only variable that resulted into strong
association with the impulse buying behavior.
Its true that young people more often get attracted to products displayed on store shelves and
has greater tendency of impulse buying behavior but results of this paper showed no association
of impulse buying in higher income group of young people having prevalent impulse buying
tendencies. This study reported new evidences in the field of impulse buying behavior of
consumers pertaining to the local markets of the twin cities of Pakistan.
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The phenomena of this Impulsive buying behavior can easily be understood with the help of two
principles/forces as a part of psychological review of literature, which interprets impulses as the
consequences of these competing principles/forces. These principles are well presented in the
papers of Freud (1956) and Mai,et al.(2002). These principles are stated below:
First,
a. The pleasure principle
b. Second, the reality principle
The pleasure principle is related to immediate satisfaction felt by consumer whereas the reality
principle is related to delayed gratification. There is always an ongoing competition between
these two forces represented as principles within the buyer when they enter a shopping store withthe intention to buy. As a consequence impulse related behavior overcomes them because
impulses are usually difficult to resist and involve premeditated pleasurable experiences, as of
study of Rook (1987).
CASE STUDY THREE
How Does Shopping With Others Influence Impulsive Purchasing?
Xueming Luo - University of Texas at Arlington
JOURNAL OF CONSUMER PSYCHOLOGY, 15(4), 288294
Stern (1962) argued that impulse buying largely depends on resources such as money, time, and
physical and mental effort. Persons moods could also influence their impulse buying (Rook &
Gardner, 1993). In particular, people who feel happy may be disposed to reward themselves
more generously and to feel as if they have more freedom to act.
Baumeister (2002) suggested that impulsive buying and self-control personality are just two
sides of the same coin; impulsive buying is simply the loss of ones self-control or the surrender
to temptation. Thus, individual-level analyses have dominated research on the nature and
antecedents of impulsive buying.
Rook and Fisher (1995), however, investigated impulsive buying beyond the individual level.
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Rook and Fisher distinguished between the impulsive urge to buy (the spontaneous and sudden
desire that is experienced upon encountering an object; Beatty & Ferrell, 1998, p. 172) and the
behavior that results fulfills this urge (Rook, 1987; Rook & Gardner, 1993). Their findings
indicate that when acting on impulse is socially appropriate and rational, consumers tend to have
both a greater impulsive
Urge to buy and a greater likelihood of doing so. The presence of other persons in a purchasing
situation is also likely to influence the decision to make a purchase. In some instances, the mere
presence of others can influence behavior.
Zajonc (1965), for example, suggested that the presence of others is likely to magnify whatever
behavioral disposition exists a priori. This effect could occur regardless of whether the others are
peers or family members. In other instances, however, consumers may believe that othersopinions and behaviors are credible. Alternatively, they may take others buying behavior as a
justification for their own, thus releasing their inhibitions about buying. Finally, they may use
others behavior and their purchases as visible indicators of socially desirable activities. This last
influence is reflected in Fishbein and Ajzens (1975) theory of reasoned action, which assumes
that behavioral intentions are determined not only by attitudes toward the behavior but also by
the motivation to comply with social norms.
The nature of this influence, however, may depend on the norms and values of the group. As
noted earlier, family members (e.g., parents) may foster a sense of responsibility to both the
family and others and consequently may discourage wastefulness and extravagance. To this
extent, they may consider impulsive buying to be undesirable (Abrams, Marques, Bown, &
Henson, 2000; Baumeister, 2002; Heckler, Childers, & Arunachalam, 1989). The presence of
family members may activate this normative value and therefore decrease the urge to purchase.
In contrast, peer group members may encourage spontaneity and the pursuit of hedonic goals
independently of their long-range consequences. Therefore, although the presence of familymembers may decrease the likelihood of individual impulsive purchasing, the presence of peers
may increase it.
The effects of the presence of others are likely to be greater when the group to which they belong
(peers or family) is cohesive than when it is less so. Group cohesiveness (i.e., the attractiveness
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of the group to its members; Forsyth, 2000) is likely not only to induce a clearer normative
expectation but also to increase the motivation to comply with it. Thus, if the peer group norms
encourage impulsive buying, then the tendency to engage in this behavior in the presence of
peers should increase with the cohesiveness of the peer group in question. In contrast, if the
familys norms are antagonistic to impulsive purchasing, then the tendency for the presence of
family members to inhibit impulsive purchasing should be greater when the family is cohesive.
Individual differences in susceptibility to influence may further affect the disposition to conform
to normative expectations and, therefore, the impact of these expectations on impulsive
purchasing. Susceptibility to influence is defined as an individuals willingness to accept
information from other people about purchase decisions (Bearden & Etzel, 1982).
The opposing effects of peers presence and family members presence on impulsive purchasing
will be greater when people are susceptible to influence than when they are not. Furthermore,
susceptibility to influence may increase the impact of group cohesiveness on these effects; that
is, peers presence should have its greatest positive effect on individuals impulsive buying when
the peers are cohesive and the individuals are susceptible to influence, whereas the presence of
family members should have its greatest negative effect under these conditions.
CASE STUDY FOUR
Determinants of Planned and Impulse Buying:
The Case of the Philippines
Ben Paul B. Gutierrez*
Asia Pacific Management Review 2004 9(6), 1061-1078
According to Narasimhan et al. [28] bath products are high-impulse products, it is predicted that
purchases in the below six categories would be impulsive.
(1) Hair styling: Gels, mousse, sprays
(2) Hair care: Shampoo, conditioner, treatments and coloring
(3) Facial skin care: cleansers, toners, moisturizers and treatments
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(4) Hand and body care: Bar and liquid cleansers, moisturizers, lotion, deodorant, nail polish,
body powder and feminine wash
(5) Perfumes: Alcohol-based fragrances and concentrates
(6) Make-up: Lipstick, foundation, blush-on, eye makeup, eye liner, mascara
In Philippines, Most respondents are very deliberate in their choice of personal care products.
They have already decided on what product category and what brand to buy before going to their
shopping trips. Based on self-reports level of planned purchase is high at 82 percent and most of
the shoppers have decided on a brand to buy beforehand (82.8%). These two variables are
correlated (Pearson r= .605, p < .001, 2-tailed).
The degree of planned versus impulse buying was further analyzed using the Antonides and vanRaaij [3] framework. Responses for product category and the brand purchased were cross
tabulated. It showed that only 76.6 percent of the shoppers have completely planned purchases,
buying the intended product category and the brand decided on before the purchase. The
remaining 23.4 percent are impulsive purchases. The proportion of completely impulse buying
(no intention of buying the category and the brand) is 11.9 percent. Occurrence of impulsive
brand choice, where product category was planned but the brand was unplanned, is 5.3 percent.
Impulsive product choice (18.1%) encompasses unplanned purchase in a product category
regardless of the selected brand. Incidence of impulsive product choice, when the brand chosen
was the usual brand, is 6.2 percent.
The finding on the extent of impulsive purchases is consistent with previous researchers such as
Hausman who obtained between 30 percent to 50 percent of impulse purchases among
consumers. The finding that a majority of the purchases are planned is similar to the results of
Agee and Martin [2].
Most of the shoppers (93%) were previous patrons of the store they visited. Such store
familiarity could make it easier to find the toiletries needed and increase shopping efficiency.
Less than half of the respondents found the beauty consultants helpful (43.4%) or polite and
welcoming (48.2%). Retailers can take these findings to maintain trained beauty consultants and
provide adequate signs whenever some relocation of products took place. The prevalent practice
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of hiring temporary salespeople in most department stores is contributing to some of these
problems.
Among the demographic variables, only age appeared to be a factor influencing the
planned/impulse purchases. As predicted in H9, younger people are more likely to becomeimpulsive shoppers (p
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and in many cases it is hard to focus their attention on something they did not intend to buy. On
the other hand, they buy necessities much quicker than women, they do not find pleasure in
searching, choosing and trying, and also they are more suggestible to the pleas of children and
sales promotions (Underhill, 2000, p.101). Sulima (2000, p.177) noted ironically that, (...)
during family shopping, men are used mainly for moving a shopping trolley, and for
authenticating with word or with gesture the consumptive ideas of their wives. Checkout and
door are their most desired places in shops. Women euphoria is usually accompanied by men
worry. Men usually do not engage in habitual shopping for necessities, but are quite skilled at
buying durable goods, like cars, tools, stereos or computers, while women traditionally care
about more temporary things, like cooking a dinner, decorating a cake, proper haircut or makeup.
For women, shopping is a kind of transforming experience, a method of becoming better, more
ideal version of person; it has emotional and psychological factors that hardly exist for men
(Underhill, 2000, p.116). Thus, women have higher tendency to shop in emotional manner, and
also to shop impulsively (Verplanken, Herabadi, 2001; Bellenger, Robertson, Hirschman,
1978; Dittmar, 1992, 1989; Dittmar, Beattie, 1998; Dittmar, Beattie, Friese, 1995, 1996; Dittmar,
Drury, 2000), while men are more impulsive and more prone to act in impulsive way in general.
These differences also suggest that there is yet another mechanism of impulsive buying behavior
for men and women. As previous research showed (Gsiorowska, 2003) the structure of
impulsive buying tendency determinants differ among men and women. For women, this
tendency is of stimulative character, thus it is connected to emotions derived from the process of
shopping or from the possessing new goods. Impulsive buying tendency in this group is
associated with high level of desired stimulation and high level of materialism, and also with
aspects of money attitudes that are anchored both in present and future (Gsiorowska, 2003). For
men, impulsive buying tendency is more of instrumental character. They want to find what they
need with a minimal level of engagement and finish it fast, so impulsive buying for them means
quick decision with not too much thinking, and also the fastest possible consumption of the
purchased goods. In this group, impulsive buying tendency is associated with present temporal
orientation, demand for immediate gratification and focus on utility that is derived from what
they bought. Moreover, for men impulsive buying tendency is more connected with aspects of
money attitudes that are anchored in the present and are connected with current actions
(Gsiorowska, 2003).
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CASE STUDY SIX
According to a study on Consumer Behavior for Food Products in India Submitted to
International Food & Agribusiness Management Association For 19th Annual World
Symposium held at Budapest, Hungary it was observed that, Freshness, cleanliness and goodfor health are the three most important parameters for relatively more perishable products like
fruit, vegetable and milk product. It seems that safety from health perspective is the prime
concern while buying these products. For processed food items, apart from cleanliness and
freshness, free from pesticides and clean place of sale are the most important criteria.
But, for food grains-pulses, which generally people buy in large quantity, only two parameters
cleanliness (4.34) and free from pesticides (4.31) have mean rating higher than 4. Value for
money (3.67) is the third important criteria for food grains-pulses.
Unlike for more perishable products, health and freshness are not the major parameters for food
grain-pulses purchasing decisions.
Store quality (good display of products, good ambience, clean place of sale and variety of
products availability at same place) appeared as the most important factor in purchasing
decisions followed by marketing mix (explained the maximum variance in nearby availability,
locally produced, overall quality and advertising) and taste-flavor (taste and flavor).
Respondents agreed that there is definitely some change in the way they purchase food items
now. They strongly feel that they now look for more number of options available for food items.
Both husband and wife take joint decisions about type of food items to be purchased and children
also influence their decision to a great extent. People prefer going and buying food items from
such places where they can get most of the items at one place and where the display of the
product is better. This may be one of the reasons for people preferring to go to organized retail
shops.
Despite several changes people, however, somewhat disagreed that their food purchase decision
is now heavily dependent on advertisement. They also disagreed to the statements like price is
now not an important criterion compared to earlier period or they visit less frequently to local
grocery stores to buy food items.
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CASE STUDY SEVEN
In a study presented at 2009 EABR & TLC Conference Prague, Czech Republic on Role of
Children in Family Purchase Decision Making by Blent zsamac, ankaya University,
Turkey and Nurettin Parlt, Gazi University, Turkey; it was noted that
The top reason parents let the kids make choices is because they want to make them happy.
Many parents also let their kids rule the choices simply due to feeling guilty about the time spent
away from them due to formal commitments. Empowering the children, preventing them from
feeling inferior among their peers seems to be other factors in this dilemma.
The main hypothesis of the study analyzed the role children play on family purchasing decisions.
H1 was tested with regression analysis and the result yields p=0,000
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In researches conducted by Cha (2001); Han et al., (1991); Ko (1993) it is reported that impulse
buying behavior regarding fashion products are associated with patterns like chaste, repeated
emotions as well as fashion-oriented impulse buying behaviors. These facts were also quoted by
Park et al. (2006). The definition of fashion involvement basically relates to apparel associated
with fashionable outfits. The findings of Han et al. (1991) quoted in response to fashion
involvement of consumers, that it might enhance fashion-oriented impulse buying behaviors
among those who habitually wear fashion outfits. Fairhurst et al. (1989) and Seo et al. (2001)
found a direct association among fashion involvement and apparels purchase. Positive emotions
are defined as affects and moods, which determine intensity of consumer decision-making
reported by Watson and Tellegen (1985). Park (2006) found a positive relationship of positive
emotions, fashion involvement and fashion-oriented impulse buying with the overall impulse
buying behavior of the consumers. Ko (1993) reported that positive emotions may result into
fashion related impulse purchase. The researches of Beatty and Ferrell (1998); Husman (2000);
Rook and Gardner (1993); Youn and Faber, (2000) found that emotions strongly influence
buying behaviors, which result into consumer impulse buying. Babin and Babin (2001) found
that in stores consumers purchasing intentions and spending can largely be influenced by
emotions. These emotions may be specific to certain things for example, the features of the
items, customer self interest, consumers gauge of evaluating items and the importance they give
to their purchasing at a store.
Piron (1993) found that the total of nine items, a combination of pre-decision and post-decision
stages indicators, resulted into high significant differences and the values of correlations for
unplanned purchases done by consumers resulted into higher value as compared to purchases
done by consumers on impulse.
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CHAPTER - III
INDUSTRY REVIEW
Introduction to Retailing
Retailing is the transaction between the seller and consumer for personal consumption. It does not
include transaction between the manufacturer, corporate purchase, government purchase and other
wholesale purchase. A retailer stocks the goods from the manufacturer and then sells the same to the
end user for a marginal profit. In the supply chain that also consists of manufacturing and distribution,
retailing is the last link before the product reaches the consumer.
The word retailing has its origins in the French verb retailer, which means to cut up, and
refers to one of the fundamental retailing activities which is to buy in larger quantities and sell
in smaller quantities. For example, a convenience store would buy tins of beans in units of two
dozen boxes, but sell in single-tin units. However, a retailer is not the only type of business
entity to 'break bulk'. Wholesalers also buy in larger quantities and sell to their customers in
smaller quantities. It is the type of customer, rather than the activity, that distinguishes a
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retailer from other distributive traders; the distinction being that a retailer sells to final
consumers, unlike a wholesaler who sells to a retailer or other business organizations. A
generally accepted definition of a retailer is 'any establishment engaged in selling
merchandise for personal or household consumption and rendering services incidental to the
sale of such goods'.
The term retailing applies not only to the selling of tangible products like loaves of bread or
pairs of shoes, but also to the selling of service products. Companies who provide meals,
haircuts and aromatherapy sessions are all essentially retailers, as they sell to the final
consumer, and yet customers do not take goods away from these retailers in a carrier bag. The
consumption of the service offering coincides with the retailing activity itself.
From a traditional marketing viewpoint, the retailer is one of many possible organizations
through which goods produced by the manufacturer flow on their way to their consumer
destiny. These organizations perform various roles by being a member of a distribution
channel. For example, a chocolate producer like Cadbury's will use a number of distribution
channels for its confectionery, which involves members such as agents, wholesalers,
supermarkets, convenience stores, petrol stations, vending machine operators and so on.
Channel members, or marketing intermediaries as they are sometimes referred to, take onactivities that a manufacturer does not have the resources to perform, such as displaying the
product alongside related or alternative items in a location that is convenient for a consumer to
access during shopping Intermediaries facilitate the distribution process by providing points
where deliveries of merchandise are altered in their physical state (such as being broken down
into smaller quantities, or being repackaged) and are made available to customers in convenient
or cost-effective locations.
Moving away from the role of retailing in the marketing activity of an individual producer,
retailing activity can also be viewed as a significant contributor to the economy in general. In
the last two decades of the twentieth century, the UK and many other developed nations have
seen their economies change from being manufacturing-led to being service-led, in terms of
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wealth creation, employment and investment. Around one-third of consumer expenditure takes
place through retail outlets, and the retail industry employs one in nine workers.
The retail price index is a frequently referred to economic indicator. It is a measure that is based
on a 'basket' of products across all retail sectors and compares prices over time in order to reveal
the changes in the cost to households of typical purchase needs. According to ICRIER report, the
retail business in India is estimated to grow at 13% from $322 billion to $590 billion by 2011-12.
In the same time the unorganized retail sector is expected to grow at about 10% per annum with
sales turnover rise from $309 billion in 2006-07 to $496 billion in 2011-12. Retailing is one of
the pillars of economy in India and accounts for 35% of the GDP.
Types of retail formats
Mom-and-pop stores: These are generally family-owned businesses catering to small
sections of society. They are small, individually run and handled retail outlets.
Category killers: Small specialty stores have expanded to offer a range of categories.
They have widened their vision in terms of the number of categories. They are called
category killers as they specialize in their fields, such as electronics (Best Buy) and
sporting goods (Sport Authority).
Department stores: These are the general merchandise retailers offering various kinds of
quality products and services. These do not offer full service category products and some
carry a selective product line. K Raheja's Shoppers Stop is a good example of department
stores. Other examples are Lifestyle and Westside. These stores have further categories,
such as home and dcor, clothing, groceries, toys, etc.
Malls: These are the largest form of retail formats. They provide an ideal shopping
experience by providing a mix of all kinds of products and services, food and
entertainment under one roof. Examples are Sahara Mall, TDI Mall in Delhi.
Specialty Stores: The retail chains, which deal in specific categories and provide deep
assortment in them are specialty stores. Examples are RPG's Music World, Mumbai's
bookstore Crossword, etc.
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Discount stores: These are the stores or factory outlets that provide discount on the MRP
items. They focus on mass selling and reaching economies of scale or selling the stock
left after the season is over.
Hypermarkets/ Supermarkets: These are generally large self-service outlets, offering avariety of categories with deep assortments. These stores contribute 30% of all food and
grocery organized retail sales. Example: Big Bazaar.
Convenience stores: They are comparatively smaller stores located near residential
areas. They are open for an extended period of the day and have a limited variety of stock
and convenience products. Prices are slightly higher due to the convenience given to the
customers.
E-tailers: These are retailers that provide online facility of buying and selling products
and services via Internet. They provide a picture and description of the product. A lot of
such retailers are booming in the industry, as this method provides convenience and a
wide variety for customer. But it does not provide a feel of the product and is sometimes
not authentic. Examples are Amazon.com, Ebay.com, etc.
Vending: This kind of retailing is making incursions into the industry. Smaller products
such as beverages, snacks are some the items that can be bought through vending
machines. At present, it is not very common in India.
Retail Sector in India
Retailing in India is driven by the transformation and the modernization of the
consumers. It is important to identify the key drivers of change, which are continuing to affect
the retail environment, and therefore attracting foreign retailers to India.
Hemendra Mathur & Bhavna Surtani, KSA Technopak, explain the Indian consumerschanging needs by stating that:
The Consumer is rising up Maslows need hierarchy and their aspirations are
rising from basic needs to esteem needs. While earlier their needs and aspirations were
basic and simple, they are now becoming more complex and specific. (Images Retail;
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Winds ofChange)
Demographically India is one of the youngest nations in the world in terms of the median age
of its general public, which is 24 years. Over 890 million people are below 45 years of age
and some 300 million middle class consumers are likely to increase to over 600 million by2010, making it one of the biggest consumer markets in the world (IMAGES Business of
Fashion, 2006). Since India is one of the youngest countries in the world and also India has
more English speaking people than in the whole of Europe combined together.
Over the years, India has undergone certain fundamental changes in its political,
economic and social structure. Each of these has brought about changes in the mannerby
which consumers perceive, select and finally purchase products. Over the years theIndian
consumer has come of age. Due to the increasing literacy in the country, the exposure todeveloped nations via satellite television and due to many Indians traveling abroad on
holidays or gaining overseas work experiences, the consumer awareness has increased on the
quality and the price of the products/services that is expected. The corporate salaries rose by
an average of 10% in 2003, compared with 7% in China and 3.5% in the US (A.T.
Kearney, 2005). Due to a rise in salaries, Indians have morepersonal disposable income
and people are using credit cards more than ever, hence demonstrating a willingness to spend
more and save less. With the total Consumer Spend growing over 5 percent annually
(Musgrave, 2005), the Indian consumer is in for rapid transformation. Indian consumers are
spending and literally living by the saying of shop till you drop. This is definitely a good
sign for retailers who have mastered the act ofselling. Gradually, more and more consumers
are becoming increasingly demanding on the quality of the products/services that they expect
from the market. This awareness has made the consumer seek more dependable sources for
purchases and hence the logical shift to purchases from the organized retail chains that
has a corporate backdrop and where the accountability is more prominent. The consumers
are value-driven and seeking cheaper options. Younger people particularly are becoming more
fashion conscious andbrand aware.
India has emerged as one of the most dynamic and fast paced industries with a number of
foreign players entering the market. According to Miller, L. (2005), the retail salesreached
about $169.2 billion in 2002, and grew at an average annual rate of 7% between 1999 and29
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2002. According to A.T. Kearneys 2005 Global Retail Development Index, India is
becoming a richer country as the GDP per capita is expected to rise to 4 percent a year for the
next 10 years out of which 10 percent is accounted for its retail industry, making its way to the
next boom industry (A.T. Kearney, 2005). A report by the Mckinsey Quaterly (2005) states
that the retail sales in Indias consumer goods market are expected to grow to $400 billion by
2010, making it one of the worlds fivebiggest.
India is sometimes described as the land of shopkeepers because of the huge numberofretail
activities in the country. There are an astonishing 12 million retail shops in the country,
roughly 78 percent of which are family run businesses says Miller, L. (2005). However
retailing in India is completely unorganized. There is no supply chain management viewpoint.
Kishore Biyani, head of the dynamic Pantaloon Group (the pace setter in food, clothing and
home concepts in India) says: Some 96% of Indian retailers trade off less than 200 sq. ft
(Drapers, p. 39).
Abhay Singh and Subramaniam Sharma explain that:
For the moment, Indians do as much as 97 percent of their shopping in small,
independently owned neighborhood shops. Indians follow the trend ofpurchasing
lentils in one spot, towels in another and sandals in a third. They make their way along
streets crowded with cars, scooters and cycles, and jam into tiny stores ornarrow stalls
packed to the beam, bargaining with the owner to complete theirdaily shopping.
(Singh, A. & Sharma, S., 2006)
But this scenario is changing rapidly as the last few years have seen a huge
transformation by enhancing scalable and profitable retail models across categories.
Specialized retailers in India are coming up increasingly and Indian retailing is enduring a
slow but deep-rooted shift away from total dependence on myriad small family-run stores
towards larger, more modernized retail outlets. The structure of retailing is developing rapidly
with malls becoming increasingly widespread in large cities, and development plans
being projected at 150 new shopping malls by 2008 (Drapers, p.49). Also successful
development of value based concepts as well as development of retail space in smaller cities
and towns shall drive the organized retail into the next levels ofcities.
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Although the top ten retailers account for just 2 percent of the total market today,
modern retail is expected to enter a boom phase, with the major players capturing up to 10
percent of the total market share within the next five years (A.T. Kearney, 2005). Mr Arvind
Singhal, Chairman, KSA Technopaksays:
The size of the organized retailing market stood at INR 280 billion (approx. 3.5 billion
pounds) 2004, thereby, making up a mere 3 percent of the total retailing market. Moving
forward, organized retailing is projected to grow at the rate of 25-30 percent p.a. and is
estimated to reach an astounding INR 1000 billion (approx. 11.6 billion pounds) by 2010.
Further, its contribution to total retailing sales is likely to rise to 9% by the end of the
decade. (Images Retail)
The apparel industry is a promising sector, preparing for a growth spurt in India.
According to A.T. Kearney (2005), the industry will grow 4 to 5 percent a year in volume and
13% a year in value. The report goes on to explain that the branded apparel market is the
largest source of growth with luxury brands having already entered the Indian market. Also
the market for mens branded apparel is growing roughly at 22 percent per year, farhigher
than the 6 percent growth rate of the overall menswear segment. The market for womens
branded apparel, which represents 35 percent growth of the total branded apparel
market, is growing at 23 percent a year (A.T. Kearney, 2005).
Images Retail talks about the stocks in the retail sector becoming ever more attractive from an
investors point of view and explains that the quantum of investments is expected to shoot up as
the inherent attractiveness of the segment draws in more and more investors to earn hefty
profits. Investments into the sector are estimated at INR 2025 (approx. 23.82 billion pounds) in
the next 2-3 years and over INR 200 billion (approx12.35 billion pounds) by the end of 2010
(Images Retail, 26/2/2005).
Types of Retail Sectors in India
Post liberalization the Retail sector in India is heralded as one of the sunrise industries. It has
never been better for the retail sector in India. Today within the booming service sector,
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retailing is the single biggest contributor in terms of GDP to the National Income. Retailing
itself can be further divided into organized and unorganized sector.
Organized Sector
Organized retailing came into its own in tandem with the retail boom. Indian corporate like
Reliance, ITC and Pantaloon have made foray into this segment along with several foreign
brands changing the landscape of retailing in India. It coincided with the high growth in the
Indian economy, resulting in greater purchasing power amongst the middle class, which in turn
went on a purchasing spree. Other factors like consumer awareness, investments by venture
capitalists and private equity firms have also contributed to the growth of organized retail. The
growth in the organized retailing has resulted in the establishment of departmental stores,
supermarkets, rural retailing, e-retailing and luxury retailing. Each one of these formats has aunique advantage and the scale of operation depends upon factors like average footfalls, sales
per sq ft etc. However the process of acquiring license is still a bottleneck for the development
of Indian retailing.
Unorganized sector
The unorganized sector is still dominant in India, since it has the advantage of low investment
need. Since retailing is the process of connecting the supplier and consumer, pricing of
products is very important in a price conscious market like India. Unorganized retailers play an
important role in this regard and are a vital part of the supply chain. If unorganized retail
segment positions itself correctly, it can carve a niche for itself in India's booming retail sector.
Rural Retailing
India's huge rural market has also attracted retail investments and is seen as a viable
opportunity for growth by corporate India.ITC launched the countries first rural mall "Chaupal
Sagar" with diverse products being offered ranging from FMCG to electronics appliance to
automobiles, with a view to provide farmers a one stop center for all their consumption
requirements. Many more new trends could possibly be tried in rural markets to unearth the
huge potential.
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Modern retail has entered India as seen in extensive shopping centers, multi-storeyed
malls and vast complexes offering the customers shopping, entertainment and food all
under one roof. These modern shopping centres or malls is still a new concept in India,
although the pace is quickening; some 220 large malls are due to open in India by 2006
(WGSN, 2004), thats 50 million sq ft of space in more than 50 cities. Another 500 to 600
malls, covering 120m sq ft, are supposedly at various stages of planning with a view to being
operational by 2010 (Drapers). According to RS Roy, retail sales of INR 50,000 Crore
(approx. 5.88 billion pounds) are going to be generated by 2007-08, half of which is
expected to come from the fashion sector (Roy, RS. 2006).
The developers responsible for developing over 375 shopping malls across the
country, pointed out that over 40% of the development still under construction had, in fact,
already been sold out; which is off-course a good sign for the industry. (Roy, RS.2006,
p.29)
Lifestyle Centre, the specialty shopping destination catering to a niche customerbase for
luxury retail, is soon to be launched in the capital, New Delhi in 2006. The
destination retail outlet aims to address only international and Indian luxury brand
outlets, with fashion consisting of nearly 30 percent of the shopping experience. The
shopping centre is spread over 108000 sq ft, with 85000 sq ft of shopping space, a
4500 sq ft central atrium and a 5000 sq ft fine dining area. This will be comparable to
most luxury retail malls around the world. (IMAGES Business of Fashion, 2006,p.55)
An hours drive from central Delhi lays the satellite town of Gurgaon, which has become the
centre for an extraordinary boom in mall development. According to Sunil Bedi, MD, JMD
Group, the entire street in Gurgaon starting from Sikanderpur will be like Londons Oxford
Street (Drapers).
Indias major retailers
1. Pantaloon Retail
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feet of retail space, has over 1000 stores across 73 cities in India and employs over 30,000
people. It can boast of launching the first hypermarket Big Bazaar in India in 2001. The
companies also operates in other retail segments such as - Food & grocery (Big bazaar, Food
bazaar), Home solutions (Hometown, furniture bazaar, collection-i), consumer electronics
(e-zone), shoes (shoe factory), Books: music & gifts (Depot), Health & Beauty care services
(Star, Sitara and Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment
(Bowling co.) The turnover this year was 12500 crores.
2. K Raheja Group
They forayed into retail with Shoppers Stop, Indias first departmental store in 2001. It is
the only retailer from India to become a member of the prestigious Intercontinental Group of
Departmental Stores (IGDS). They have signed a 50:50 joint venture with the Nuance Group
for Airport Retailing. Shoppers Stop has a national presence, with over 2.05 million square
feet area across 39 stores in 17 cities. It has also introduced new formats in the market viz
HomeStop the exclusive home furnishings, dcor as well as furniture store and
HyperCity a premium shopping destination for Foods, Homeware, Home Entertainment,
Hi-Tech Appliances, Furniture, Sports, Toys & Fashion. Other format of the company
includes -- Crossword Book Store, Mothercare & Early Learning Centre (ELC), Estee
Lauder group , Airport Retailing, TimeZone Entertainment. The turnover this year was 1570
crores.
3. Tata group
Established in 1998, Trent - one of the subsidiaries of Tata Group - operates Westside, a
lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of
products at the lowest prices. In 2005, it acquired Landmark, India's largest book and music
retailer. Tatas has also formed a subsidiary named Infiniti retail which consists of Croma, a
consumer electronics chain. Another subsidiary, Titan Industries, owns brands like Titan,
the watch of India and Tanishq, the jewellery brand. Sales turover was 197.13 crore in
December 2010.
4. RPG group
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One of the first entrants into organized food & grocery retail with Foodworld stores in 1996
and then formed an alliance with Dairy farm International and launched health & glow
(pharmacy & beauty care) outlets. Now the alliance has dissolved and RPG has Spencers
Hyper, Super, Daily and Express formats and Music World stores across the country.
5. Landmark group
Landmark Group was launched in 1998 in India; currently owning 100 stores across various
retail formats. The retail ventures of Landmark Group includes - Home Centre, Centrepoint,
Babyshop, Splash, Shoe Mart, Lifestyle, Max, Lifestyle Department Stores, SPAR
hypermarkets, Foodmark, Fun City, Fitness First, Citymax India etc. It is a 3.8 billion dollar
company.
6. Bharti-Walmart
Bharti have signed a 50:50 percent joint venture agreement with Walmart in which Wal-
Mart will be taking care of cash & carry and Bharti will do the front-end. Further they plan
to invest US$ 7 bn in creating retail network in the country including 100 hypermarkets and
several hundred small stores.
7. Reliance
The company owns more than 560 Reliance Fresh stores and recently it has also launched
Reliance Mart Hypermart. The company further plans to launch its hypermart in Delhi /
NCR, Hyderabad, Vijaywada, Pune and Ludhiana region. The turnover was 4500 crore for
this year.
8. AV Birla Group's brand portfolio includes brands such as Louis Phillipe, Van Heusen,
Allen Solly, Peter England, Trouser town. Also, Madura garments is subsidiary of Aditya
Birla Nuvo Ltd. The recently acquired food and grocery chain of south, Trineth, has further
increased their number of store to 400 stores in the country. The company also own More
supermarkets and hypermarkets. Currently it runs 600 supermarket and nine hypermarkets
across India. The turnover this year was 1700 crores.
9. Metro
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Metro Cash & Carry, the first company to introduce cash and carry business, started its
operations in India in 2003 with two Distribution Centres in Bangalore. Metro offers
assortment of over 18000 articles across food and non food at the best wholesale prices.
Currently Metro operates six cash and carry centres in Banglaore, Hyderabad, Kolkata and
Mumbai.
India as an Emerging Market
According to the management consultancy AT Kearneys 2005 Global Retail
Development Index, India is ranked as the number one emerging market for foreign retailers.
The report outlines that India has progressively risen on the GRDI, with its $330 billion
(2approx 176.55 pounds) retail market growing by 10 percent on average per yearover the
past five years. Its economy is the fourth largest in the world, after US, China and Japan.
Its GDP is $3.1 trillion (11.7 tr), the UKs being 943.4 billion (A.TKEARNEY,
The 2005 Global Retail Development Index).
Over 65 percent of the population (thats 75 million) is below 35 years old; 54 percent
(594 million) is below 25 years old and Abhay Singh and Subrahmanium Sharma (2006)
wrote in the International Herald Tribune that:
The annual income per person has risen 62 percent over the past six years, the
government has estimated it to be 25,778 rupees, or $580(approx 309.43 pounds).
(Singh, B. & Sharma, S. 2006).
The countrys middle class, estimated to include 216 million people, is demanding the
latest in flavored toothpaste and flat-panel televisions and by 2010, there will be 351
million of those middle-income Indians in 65 million households, up from 40 million
households now, the New York-based consulting firm McKinsey predicted (Singh,B. &
Sharma,S. 2006). Spending by Indians on products and services besides education,
housing, health care and transportation rose 5 percent to an estimated $219 billion
(approx 116.83 billion pounds) in 2005. Of that amount, retail chains took in just $8.2billion
(approx.4.37 billion pounds), according to Technopak Advisors, a research firm. Retailers
share of consumer spending may rise to $25 billion (approx 13.33 billion pounds) by
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2010, Technopak estimated (Singh,B. & Sharma,S. 2006).
India is clearly a country that is very attractive, said Beth Keck, director of
international corporate affairs at Wal-Mart (Singh,B. & Sharma,S. 2006).
Domestic retailers and foreign entrants are stepping up to gain profits from Indias
shopping spree. The numbers clearly explain the companys enthusiasm. Marks and
Spencer, Lee, Guess, Tommy Hilfiger, Levis, Morgan, Mango, Benetton, Pepe Jeans London
and Lacoste are some of the high street brands that have already entered the Indian
market through franchises.
Meanwhile, industry sources say that a queue to enter India is already in formation, with such
blockbuster global brands as Gap, Zara, Guess and Ikea formulating theirentry strategies
(Kumar, K. (2005).
There is no doubt that India offers a huge retail opportunity. In spite ofIndiaspopulation of
more than one billion, of which more than 30 percent of the population falls below thepoverty
line, its spending power is reflected by the fact that the countrys 300 million middle- class
spenders, which is roughly the size of the total population of the United States, has spent
more than $2.5 billion (approx 1.325 billion pounds) on luxuryproducts in 2005, a figure that
could potentially grow by more than 50%. A report prepared by McKinsey and Co and the
Confederation of Indian Industry has even predicted that the retail trade holds the potential
of becoming a $300-billion-a-year market by 2010, provided the sector is opened
significantly. (Kumar, K. 2005).
But ever since the new FDI laws set by the Indian Government at the beginning of this
year, many more foreign retailers will be entering the Indian market. The United Progressive
Alliance government (February, 2006) permitted foreign direct investment in retail businesses
up to 51% through the Foreign Investment Promotion Board (FIPB). Although easing thecontentious retail FDI loop to some extent, by allowing only single branded foreign retailers
to invest in the country. However, this move is expected to attract greater curiosity from
global brands eager to make an entry into a market that has the fastest growing middle-class
population.
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Darshan Mehta, the Indian partner of Tommy Hilfiger states that: Everyone who hadnt
thought of India before because the door was shut will now move India up from the back
burner. (Basu, I. 2006).
Arvind Singhal, chief executive officer of retail consultancy firm KSP Technopaksays: Itis not really creating a ground for additional foreign investments. (Basu, I. 2006).
Andrew Levermore, a South African who has worked as the head of buying for house of
fraser, describes India as: The most exciting place in the world for retailing. Where else can
you plan to build a $1 billion business in five years? The Indian consumers want value for
money and aspire fora better lifestyle. They love browsing and organized retailing provides
a leisure activity. In First World retail, you can expect 60% to 80% conversion of people
in your store,but in India 25% conversion is good. (Drapers, 2005).
Despite Indias stiff regulatory environment, it shines as the star of the year, offeringpotential
similar to that revealed by China 15 years ago. Nothing seems to signify Indias
transformation from a stagnant Third World country into an emerging economic powerhouse
as much as the dazzling new malls. India is gradually lurching its way towards
modernization as the Indian consumers, who once relegated to sorting through mom-and-pop
retailers and roadside markets, are rapidly evolving and accepting modern formats
overwhelmingly, making their way to new malls and hypermarkets.
The message for retailers on India is clear: move now or forego prime locations and
market positions that will become saturated quickly, A.T. Kearneys Vice President
Mike Moriarty said, adding retailers that missed the chance to capture first-mover
benefits in China can make up for it in India, after all international expansion is an important
strategy for fashion retailers (ATKEARNEY, 2005).
Challenges For Indian Retailers
Even though India has well over 5 million retail outlets of different sizes and styles, it
still has a long way to go before it can truly have a retail industry at par with International
standards. This is where Indian companies and International brands have a huge role to play.
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Indian retailing is still dominated by the unorganized sector and there is still a lack of
efficient supply chain management. India must concentrate on improving the supply chain
management, which in turn would bring down inventory cost, which can then be passed on to
the consumer in the form of low pricing.
Most of the retail outlets in India have outlets that are less than 500 square feet in area.
This is very small by International Standards.
India's huge size and socio economic and cultural diversity means there is no established
model or consumption pattern throughout the country. Manufacturers and retailers will have to
devise strategies for different sectors and segments which by itself would be challenging.
The drawbacks provide a huge opportunity for the retail industry. The entry of foreign
majors like Benetton, Dairy Farm and Levis underline the opportunity for the industry in India.
Other Challenges facing Indian retail industry being
The tax structure in India favors small retail business
Lack of adequate infrastructure facilities
High cost of real estate
Dissimilarity in consumer groups Restrictions in Foreign Direct Investment
Shortage of retail study options
Shortage of trained manpower
Low retail management skill
Future trends
The retail industry in India is currently growing at a great pace and is expected to go up to US$
833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at
a CAGR of 10%. As the country has got a high growth rates, the consumer spending has also
gone up and is also expected to go up further in the future. In the last four year, the consumer
spending in India climbed up to 75%. As a result, the India retail industry is expected to grow
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further in the future days. By the year 2013, the organized sector is also expected to grow at a
CAGR of 40%.
Organized retailing is dominated by large conglomerates like TATA's, ITC, RPG group,
Piramals and Rahejas apart from the various MNC's. This trend is expected to continue in future.
Textile and Garment companies like Raymond, Madura Garments and Arvind Denims
have achieved forward integration by opening their own retail outlets for their branded garments.
This gives them a huge advantage by reducing the role of intermediaries, increase profit margin
and enables them to be close to the end user.
Inflation and the global meltdown have had an effect on the growth of retailing in India.
Experts believe the retail industry should focus on distinction, branding, after sales service,
exploring commoditization, share of purchasing power and innovation to tide over the crisis. The year 2009 is seen as a year of consolidation for Indian retail sector. By ushering in
best practices and restructuring business models, the retail industry in India is expected to adjust
to the changing market conditions and ensure new opportunities for growth.
Filling the Gap in the retail market
Indians are becoming more and more aware of brands, and demand high quality
products at reasonable prices. India is said to be the youngest country in the world,and there is a new interest in fashion, which has led to a spike in the ready to wear
market andbrands. The A.T KEARNEYs report states:
Private labels are also becoming more popular. Along with the international brands,
private labels are a way to fill the value gap between the national brands and customers
demands for a wide spectrum of quality, price, shapes and sizes. (AT KEARNEY,
The 2005 Global Retail Development Index: Destination India)
Arvind Singhal suggests that there is a gap in the market for young- focused
relatively low cost retail brands such as Zara and H&M (Singhal, A. 2004). This gap
is apparent due to the international fashion luxury brands that have been expanding
into India over the past few years as compared to the high street brands. With brands
like Louis Vuitton, Hugo Boss, Chanel, Gucci, Bulgari, Prada and Armani, as well
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as the Indian designerwear brands such as Ritu Kumar, Suneet Verma etc, and on the
opposite end there are the unorganised local stores, selling their products in small
family run retail outlets, hence leaving very few fashion brands operating in the middle
end of the market. There are not many options for young people who want fast
fashion at affordable prices. Drapers (2002) had assured that there is no big brand in
womens wear, which may be viewed as an opportunity by foreign retailers. In
absence of strong brands in the womens wear segment, for women who are looking
for stylized garments, be it casual orformal at affordable prices, the current scenario
unbalanced with either the price element or the style element being put to the sword
to integrate the other. Hence there is a need for brands for women, which can balance the
two aspects (mens and womens wear) as the need be. Mango, Morgan, Guess, Esprit and
Tommy Hilfiger are the first comers who have opened stores in India via franchises.
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CHAPTER - IV
COMPANY PROFILE
Foodworld
Foodworld, previously known as Spencer's Daily, is a chain of supermarket stores. It was started
in May 1996 as a division of Spencer & Co, a part of the RPG Group. In August 1999 it became
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a separate company. Currently it operates 73 stores in Bangalore, Hyderabad,
Coimbatore & Chennai.
Key People
Mr.Henry Neilson CEO
Mr.Venkatesh.P Chief Operation Officer
Mr.Ramakrishnan.N Chief Financial Office
Mr.VachaliHR Director
Mr.Venkata SubbaiahHead of Legal
Mr.Ajith Kumar Singh Senior IT Director
The FoodWorld brand currently operates in four store formats.
Foodworld Supermaket store
Foodworld Gourmet store
Foodworld Superstore
Foodworld Express store
Foodworld Supermaket store
FoodWorld Supermaket store is the Main format store with 3000-5000 sq ft size. It Operates as a
regularsupermarket.
Foodworld Gourmet store
Foodworld Gourmet store is a new concept store with 2,800 sq ft (260 m 2) size in Bangalore,
India. The Store caters to customers seeking a selection ofgourmet products. Available in-store
are produce and a selection of international food and beverage items sourced both from domestic
and international suppliers.
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Foodworld Superstore
Foodworld Superstore is the company's Large store format. Spanning over 15,000 sq ft
(1,400 m2), currently only one store exists in the city of Hyderabad. Along with the extensive
grocery range and bakery products, the store also offers for sale common household goods andbaby products (including toys and clothes).
Foodworld Express store
Foodworld Express is a convenience store and mini-marts with 1000-1500 sq ft. It carries basic
Fresh range offers, wider ranges in drinks, snacks, bakery, confectionery and impulse products.
Locations and store numbers
The Company has a presence in the following cities.
City Supermarket/Express Gourmet Store Superstore Total
Bangalore 39 1 0 40
Hyderabad 20 0 1 21
Chennai 6 0 1 7
Coimbatore 5 0 0 5
Total 70 1 1 73
Reliance Fresh
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Reliance Fresh is the convenience store format which forms part of the retail business of
Reliance Industries ofIndia which is headed by Mukesh Ambani. Reliance plans to invest in
excess of Rs 25000 crores in the next 4 years in their retail division. The company already has in
excess of 560 reliance fresh outlets across the country. These stores sell fresh fruits and
vegetables, staples, groceries, fresh juice, bars and dairy products.
A typical Reliance Fresh store is approximately 3000-4000 square feet and caters to a catchment
area of 23 km
Key people
Mukesh D. Ambani - Chairman & Managing Director
Nikhil R. Meswani - Executive Director
Hital R. Meswani - Executive Director
H.S.Kohli - Executive Director
Ramniklal H. Ambani
Mansingh L. Bhakta
Yogendra P. Trivedi
Dr. D. V. Kapur
M. P. Modi
S. Venkitaramanan
Prof. Ashok Misra
Prof. Dipak C Jain
Dr. Raghunath Anant Mashelkar
Growth of Reliance Fresh
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The first ever a Reliance Fresh store was established in Hyderabad, wherein the company,
mainly focused on the fresh produced vegetables and fruits at comparatively low price alongwith an introduction of farm to fork theory.
This was the idea, which was anticipated by the company was to take the supply direct from the
farmers and then sell straightaway to the consumers removing the middle-men off the beatentrack. Reliance introduced several formats in the marketplace to cater to needs of commonpeople, which includes Reliance Fresh, Reliance Super, Reliance Footprint, Reliance Timeout,
Reliance Jewels, Reliance wellness, Reliance Mart and Reliance Digital, to name a few.
In addition to this, the Reliance Retail also entered into a treaty with Apple, which is a leading
Information Technology company, to set up a series of Apple Specialty Outlets branded asIStore, with its first ever store in Bangalore.
With an idea to produce inclusive prosperity and growth for farmers, consumers, small
shopkeepers and vendor partners, Reliance Retail was set up in order to lead the foray ofReliance Group into an organized retail.
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CHAPTER - V
DATA ANALYSIS AND INTERPRETATION
TABLE 5.147
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Gender Wise
Response No. of Respondents % of Respondents
Male
Female
120
80
60%
40%
Total 200 100%
Source : Questionnaire
The table 4.1 reveals the gender analysis of buying behavior. It is evident from the table that
60% of the sample constitute male and 40% of the sample are female. By and large males visit
the shopping malls more frequently than the females. The same is shown in the graph below.
Gender
Male, 120,
60%
Female, 80,
40%
Fig.5.1
TABLE 5.2
Age Wise48
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Response No. of Respondents % of Respondents
18-25 Years
26-35 Years
36-45 Years
>=46 Years
33
49
88
30
17%
25%
43%
15%
Total 200 100%
Source : Questionnaire
The sample size of 200 was well distributed in terms of age. 18-25 years respondents were 33 in
number which amounts to 17%. 26-35 years respondents were 49 in numbers which amounts to
25%. 36-45 years respondents were 88 in numbers which amounts to 43% and >46 years
respondents were 30 in number which amounts to 30% of the overall respondents. The same is
shown in the graph.
Age
33, 17%
49, 25%
88, 43%
30, 15%
AGE 18 25 Yrs AGE 26 35 Yrs AGE 36 45 Yrs AGE > = 46
Fig.5.2
TABLE 5.3
Qualification Wise
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Response No. of Respondents % of Respondents
Under Graduate
Graduate
Post Graduate
21
95
84
11%
47%
42%
Total 200 100%
Source : Questionnaire
Among the 200 respondents 21 i.e. 11% were Undergraduate, 95 i.e. 47% were Graduate and 84
i.e. 42% Post Graduate. The same is depicted in the graph below.
Qualification
Graduate, 95,
47%
Post graduate,
84, 42%
Undergraduate
21, 11%
QUALIFICATION Undergraduate QUALIFICATION Graduate
QUALIFICATION Post graduate
Fig.5.3
TABLE 5.4
Income Wise
Response No. of Respondents % of Respondents
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Rs.30,000
32
68
63
37
16%
33%
32%
19%
Total 200 100%
Source : Questionnaire
Among the 200 respondents 32 i.e. 16% respondents monthly income was
30,000. It is evident from the above data that a sizeable 65% of the respondents have monthly
income between Rs.10,001 and Rs.30,000. The same is represented the graph below.
Income
32, 16%
68, 33%63, 32%
37, 19%INCOME Rs.30,000
Fig.5.4
TABLE 5.5
Marital Status Wise
Response No. of Respondents % of Respondents
Single 30 15%
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Married
Divorced
Widowed
154
4
12
77%
2%
6%
Total 200 100%
Source : Questionnaire
Among the 200 respondents 30 i.e.15% were Single or Unmarried, 154 i.e. 77% were Married, 4
i.e. 2% were Divorced and 12 i.e. 6% widowed. An alarming 77% of the respondents are
married. The above data is shown in the graph below.
Marital status
30, 15%
154, 77%
4, 2%
12, 6%
Single Married
Divorced Widowed
Fig.5.5
TABLE 5.6
Children Wise
Response No. of Respondents % of Respondents
Nil 20 10%
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1
2
3
>4
48
69
32
27
24%
36%
16%
14%
Total 200 100%
Source : Questionnaire
Among the 200 respondents 20 i.e.10% respondents had no children (here most of the
respondents were unmarried and few were married but had no children), 48 i.e. 24% respondents
were had one child, 69 i.e. 36% respondents had 2 children, 32 i.e. 16% respondents had 3
children and 27 i.e. 14% respondents had > 4 children.
No. of Children
20, 10%
48, 24%
69, 36%
32, 16%
27, 14%
Nil
1
2
3
>4
Fig.5.6
TABLE 5.7
Oc