Post on 02-Apr-2015
Table of Content
Acknowledgement helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip2
Prefacehelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip3
Abstracthelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip4
An introductionhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip5
The global retail industryhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip6
Retail scenario in Indiahelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip8
Different forms of retailing helliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip15
Classification of Indian retail sectorhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip21
FDI in retailhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip23
Indian middle class peoplehelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip25
Opportunity challenges and emerging trendshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip27
Retail as an employment generatorhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip38
Objective of the surveyhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip39
Research methodologyhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip40
Analysaishelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip42
Conclusionhelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip53
Limitationshelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip54
Bibliographiehelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip55
Annexurehelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphelliphellip56
Total no of Tables------7Total no of Figure------10
MUKESH KUMAR ITS PGDM (2006-2008) 1
Acknowledgement
n the completion of the dissertation report I owe a great deal too many
people at the very outset I would like to express my profound sense of
gratitude to Mr Manoj Dash Professor Of Institute of Technology amp Science
Ghaziabad For providing me opportunity and valuable time he gave me during
my Dissertation from his busy schedule I do acknowledge courtesy during my
stay there
O
I would like to pay my special thanks to Prof Shekhar Ghose He had
contributed to this being a much better project that it couldnrsquot possibly have been
without his guidance
I express my sincere thanks to all the respondents who filled up the
questionnaire because of only them this report has been made possible
With a deep sense of reverence I would like to express my wholehearted thanks
and deep gratitude to my parents who have always been a source of inspiration
of mine Their everlasting cooperation and smiling affection inspired me to rise up
to what I am today
So many others who have been associated with this work directly or indirectly all
have many sincere thanks
The greatest achievement of the project was the realization of the fact that
HUMAN BEING MAKES THINGS POSSIBLE
Mukesh Kumar
PGDM (2006-2008)
(Mukesh_38yahoocom)
MUKESH KUMAR ITS PGDM (2006-2008) 2
Preface
rogress is a continuous process It is relative and absolute We cannot stop
at a certain destination and declare that target has been achieved and we
need not go further
PThe Dissertation programs are designed to give managers the future of the
corporate happenings and work culture These real life situations are entirely
different from the stimulated exercises enacted in an artificial environment inside
the Dissertation are designed so that the managers of tomorrow do not feel ill
case when the times comes to shoulders responsibilities
The experience that I have gathered during this period has certainly provide me
with an orientation which I believe will help me to shoulder my assignment
successfully in near future During this period I have collected all the information
regarding organized retail industry their effect on the Preference of middle class
for purchase of daily need items
On the basis of my Dissertation program I tried my best to arrange the work in
the systematic and chronological way However the cover every detailed
information of organized retail industry in such a short period was not possible
Despite the inherent shortcomings of the study a genuine was made on my part
to see that study was carried in the right respective
MUKESH KUMAR ITS PGDM (2006-2008) 3
Abstract
he Indian retail industry is now beginning to evolve in the line with the
transformation that has swept other large economies The liberalization of
the consumer goods industry initiated in the mid-80 and accelerated through the
90rsquos has begun to impact the structure and conduct of the retail industry
T
The concept retail which includes the shopkeeper to customer interaction has
taken many forms and dimensions from the traditional retail outlet and street
local market shops to upscale multi brand outlets especially stores or
departmental stores
The objective being to assess the various parameters that influences a buyer to
visit or shop at departmental store thereby contributing to its turnover (in terms of
sales and profits) hence leading to its overall success
The extensive research brought me to conclude that departmental stores are
soon emerging on the top priority lists amongst the shopping spree in Delhi and
NCR as they seem to derive immense pleasure of convenience and exposure to
variety under one roof in their extremely busy lives when they donrsquot have time
for things
Though some of the customers perceive departmental stores to be expensive
and only high income categoryrsquos cup of tea the stores make constant efforts to
induce them to at least visit the store at once during the sale period or discount
offers
Hence this document entails me through these aspects in great detail helping
me to understand the concept of retail marketing through departmental stores in
Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 4
Introduction
etail comes from the French word retailer which refers to cutting off clip
and divide in terms of tailoring (1365) It first was recorded as a noun with
the meaning of a sale in small quantities in 1433 (French) Its literal meaning for
retail was to cut off shred paring Like the French the word retail in both Dutch
and German (detail Handel and Einze handle respectively) also refer to sale of
small quantities or items
R
Retailing consists of the sale of goods or merchandise from a fixed location such
as a department store or kiosk in small or individual lots for direct consumption
by the purchaser Retailing may include subordinated services such as delivery
Purchasers may be individuals or businesses In commerce a retailer buys
goods or products in large quantities from manufacturers or importers either
directly or through a wholesaler and then sells smaller quantities to the end-user
Retail establishments are often called shops or stores Retailers are at the end of
the supply chain Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategies
Shops may be on residential streets or in shopping streets with few or no
houses or in a shopping center or mall Shopping streets may or may not be for
pedestrians only Sometimes a shopping street has a partial or full roof to protect
customers from precipitation Retailers often provided boardwalks in front of their
stores to protect customers from the mud Online retailing also known as e-
commerce is the latest form of non-shop retailing (cf mail order)
Shopping generally refers to the act of buying products Sometimes this is done
to obtain necessities such as food and clothing sometimes it is done as a
recreational activity Recreational shopping often involves window shopping (just
looking not buying) and browsing and does not always result in a purchase
MUKESH KUMAR ITS PGDM (2006-2008) 5
Organized retailing in India is alluring all the big players (corporate houses) India
has approximately 300 million middle class people and this group is growing
rapidly One of the important reasons for rapid growing of organized retail in India
is malls There are malls manias in Indian market Each amp every real estate
developers are constructing world class malls in India Malls in India are a
relatively new format for retailing While this format may have existed in the
Western economies for several decades in India this phenomenon could be
estimated to be only about fifteen odd years old
One of the earliest large floor-area retailers in India was Shoppers Stop
However the first of the current format of the malls was the Crossroads mall in
Mumbai which was established by the Primal in period around 2000-01
Crossroads then had the highest rent per sq meter of establishment that the
vendors had to bear Due to the exorbitant rent Crossroads initially had a rough
ride Also the mall format was new and was a novelty for most Indian
consumers This led several visitors to the mall but never converted to actual
purchases since most were visiting the place out of curiosity
However the situation had changed drastically now Malls seem to be springing
up across several cities in India Notable among these is Gurgaon an upcoming
city near Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 6
The Global Retail Industry
An Overview
etail has played a major role world over in increasing productivity across a
wide range of consumer goods and services The impact can be best
seen in countries like USA UK Mexico Thailand and more recently China
Economies of countries like Singapore Malaysia Hong Kong Sri Lanka and
Dubai are also heavily assisted by the retail sector
R
Retail is the second-largest industry in the United States both in number of
establishments and number of employees It is also one of the largest worlds
wide The retail industry employs more than 22 million Americans and generates
more than $3 trillion in retail sale annually Retailing is a US $7 trillion sector
Wal-Mart is the worldrsquos largest retailer Already the worldrsquos largest employer with
over 1million associates Wal-Mart displaced oil giant Exxon Mobil as the worldrsquos
largest company when it posted $219 billion in sales for fiscal 2001 Wal-Mart
has become the most successful retail brand in the world due its ability to
leverage size market clout and efficiency to create market dominance Wal-Mart
heads Fortune magazine list of top 500 companies in the world Forbes Annual
List of Billionaires has the largest number (45497) from the retail business
MUKESH KUMAR ITS PGDM (2006-2008) 7
Global Retail
1999 2002 2005
Total Retail (US$
Billion)
150 180 225
Organized Retail
(US$ Billion)
11 33 7
Share of
Organized retail
07 18 32
Table no -1 Source CSO MGI Study
Top Retailers Worldwide
Rank Retailer Home Country
1 Wal-Mart Stores Inc USA
2 Carrefour Group France
3 The Kroger Co USA
4 The Home Depot Inc USA
5 Metro Germany
MUKESH KUMAR ITS PGDM (2006-2008) 8
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Acknowledgement
n the completion of the dissertation report I owe a great deal too many
people at the very outset I would like to express my profound sense of
gratitude to Mr Manoj Dash Professor Of Institute of Technology amp Science
Ghaziabad For providing me opportunity and valuable time he gave me during
my Dissertation from his busy schedule I do acknowledge courtesy during my
stay there
O
I would like to pay my special thanks to Prof Shekhar Ghose He had
contributed to this being a much better project that it couldnrsquot possibly have been
without his guidance
I express my sincere thanks to all the respondents who filled up the
questionnaire because of only them this report has been made possible
With a deep sense of reverence I would like to express my wholehearted thanks
and deep gratitude to my parents who have always been a source of inspiration
of mine Their everlasting cooperation and smiling affection inspired me to rise up
to what I am today
So many others who have been associated with this work directly or indirectly all
have many sincere thanks
The greatest achievement of the project was the realization of the fact that
HUMAN BEING MAKES THINGS POSSIBLE
Mukesh Kumar
PGDM (2006-2008)
(Mukesh_38yahoocom)
MUKESH KUMAR ITS PGDM (2006-2008) 2
Preface
rogress is a continuous process It is relative and absolute We cannot stop
at a certain destination and declare that target has been achieved and we
need not go further
PThe Dissertation programs are designed to give managers the future of the
corporate happenings and work culture These real life situations are entirely
different from the stimulated exercises enacted in an artificial environment inside
the Dissertation are designed so that the managers of tomorrow do not feel ill
case when the times comes to shoulders responsibilities
The experience that I have gathered during this period has certainly provide me
with an orientation which I believe will help me to shoulder my assignment
successfully in near future During this period I have collected all the information
regarding organized retail industry their effect on the Preference of middle class
for purchase of daily need items
On the basis of my Dissertation program I tried my best to arrange the work in
the systematic and chronological way However the cover every detailed
information of organized retail industry in such a short period was not possible
Despite the inherent shortcomings of the study a genuine was made on my part
to see that study was carried in the right respective
MUKESH KUMAR ITS PGDM (2006-2008) 3
Abstract
he Indian retail industry is now beginning to evolve in the line with the
transformation that has swept other large economies The liberalization of
the consumer goods industry initiated in the mid-80 and accelerated through the
90rsquos has begun to impact the structure and conduct of the retail industry
T
The concept retail which includes the shopkeeper to customer interaction has
taken many forms and dimensions from the traditional retail outlet and street
local market shops to upscale multi brand outlets especially stores or
departmental stores
The objective being to assess the various parameters that influences a buyer to
visit or shop at departmental store thereby contributing to its turnover (in terms of
sales and profits) hence leading to its overall success
The extensive research brought me to conclude that departmental stores are
soon emerging on the top priority lists amongst the shopping spree in Delhi and
NCR as they seem to derive immense pleasure of convenience and exposure to
variety under one roof in their extremely busy lives when they donrsquot have time
for things
Though some of the customers perceive departmental stores to be expensive
and only high income categoryrsquos cup of tea the stores make constant efforts to
induce them to at least visit the store at once during the sale period or discount
offers
Hence this document entails me through these aspects in great detail helping
me to understand the concept of retail marketing through departmental stores in
Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 4
Introduction
etail comes from the French word retailer which refers to cutting off clip
and divide in terms of tailoring (1365) It first was recorded as a noun with
the meaning of a sale in small quantities in 1433 (French) Its literal meaning for
retail was to cut off shred paring Like the French the word retail in both Dutch
and German (detail Handel and Einze handle respectively) also refer to sale of
small quantities or items
R
Retailing consists of the sale of goods or merchandise from a fixed location such
as a department store or kiosk in small or individual lots for direct consumption
by the purchaser Retailing may include subordinated services such as delivery
Purchasers may be individuals or businesses In commerce a retailer buys
goods or products in large quantities from manufacturers or importers either
directly or through a wholesaler and then sells smaller quantities to the end-user
Retail establishments are often called shops or stores Retailers are at the end of
the supply chain Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategies
Shops may be on residential streets or in shopping streets with few or no
houses or in a shopping center or mall Shopping streets may or may not be for
pedestrians only Sometimes a shopping street has a partial or full roof to protect
customers from precipitation Retailers often provided boardwalks in front of their
stores to protect customers from the mud Online retailing also known as e-
commerce is the latest form of non-shop retailing (cf mail order)
Shopping generally refers to the act of buying products Sometimes this is done
to obtain necessities such as food and clothing sometimes it is done as a
recreational activity Recreational shopping often involves window shopping (just
looking not buying) and browsing and does not always result in a purchase
MUKESH KUMAR ITS PGDM (2006-2008) 5
Organized retailing in India is alluring all the big players (corporate houses) India
has approximately 300 million middle class people and this group is growing
rapidly One of the important reasons for rapid growing of organized retail in India
is malls There are malls manias in Indian market Each amp every real estate
developers are constructing world class malls in India Malls in India are a
relatively new format for retailing While this format may have existed in the
Western economies for several decades in India this phenomenon could be
estimated to be only about fifteen odd years old
One of the earliest large floor-area retailers in India was Shoppers Stop
However the first of the current format of the malls was the Crossroads mall in
Mumbai which was established by the Primal in period around 2000-01
Crossroads then had the highest rent per sq meter of establishment that the
vendors had to bear Due to the exorbitant rent Crossroads initially had a rough
ride Also the mall format was new and was a novelty for most Indian
consumers This led several visitors to the mall but never converted to actual
purchases since most were visiting the place out of curiosity
However the situation had changed drastically now Malls seem to be springing
up across several cities in India Notable among these is Gurgaon an upcoming
city near Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 6
The Global Retail Industry
An Overview
etail has played a major role world over in increasing productivity across a
wide range of consumer goods and services The impact can be best
seen in countries like USA UK Mexico Thailand and more recently China
Economies of countries like Singapore Malaysia Hong Kong Sri Lanka and
Dubai are also heavily assisted by the retail sector
R
Retail is the second-largest industry in the United States both in number of
establishments and number of employees It is also one of the largest worlds
wide The retail industry employs more than 22 million Americans and generates
more than $3 trillion in retail sale annually Retailing is a US $7 trillion sector
Wal-Mart is the worldrsquos largest retailer Already the worldrsquos largest employer with
over 1million associates Wal-Mart displaced oil giant Exxon Mobil as the worldrsquos
largest company when it posted $219 billion in sales for fiscal 2001 Wal-Mart
has become the most successful retail brand in the world due its ability to
leverage size market clout and efficiency to create market dominance Wal-Mart
heads Fortune magazine list of top 500 companies in the world Forbes Annual
List of Billionaires has the largest number (45497) from the retail business
MUKESH KUMAR ITS PGDM (2006-2008) 7
Global Retail
1999 2002 2005
Total Retail (US$
Billion)
150 180 225
Organized Retail
(US$ Billion)
11 33 7
Share of
Organized retail
07 18 32
Table no -1 Source CSO MGI Study
Top Retailers Worldwide
Rank Retailer Home Country
1 Wal-Mart Stores Inc USA
2 Carrefour Group France
3 The Kroger Co USA
4 The Home Depot Inc USA
5 Metro Germany
MUKESH KUMAR ITS PGDM (2006-2008) 8
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Preface
rogress is a continuous process It is relative and absolute We cannot stop
at a certain destination and declare that target has been achieved and we
need not go further
PThe Dissertation programs are designed to give managers the future of the
corporate happenings and work culture These real life situations are entirely
different from the stimulated exercises enacted in an artificial environment inside
the Dissertation are designed so that the managers of tomorrow do not feel ill
case when the times comes to shoulders responsibilities
The experience that I have gathered during this period has certainly provide me
with an orientation which I believe will help me to shoulder my assignment
successfully in near future During this period I have collected all the information
regarding organized retail industry their effect on the Preference of middle class
for purchase of daily need items
On the basis of my Dissertation program I tried my best to arrange the work in
the systematic and chronological way However the cover every detailed
information of organized retail industry in such a short period was not possible
Despite the inherent shortcomings of the study a genuine was made on my part
to see that study was carried in the right respective
MUKESH KUMAR ITS PGDM (2006-2008) 3
Abstract
he Indian retail industry is now beginning to evolve in the line with the
transformation that has swept other large economies The liberalization of
the consumer goods industry initiated in the mid-80 and accelerated through the
90rsquos has begun to impact the structure and conduct of the retail industry
T
The concept retail which includes the shopkeeper to customer interaction has
taken many forms and dimensions from the traditional retail outlet and street
local market shops to upscale multi brand outlets especially stores or
departmental stores
The objective being to assess the various parameters that influences a buyer to
visit or shop at departmental store thereby contributing to its turnover (in terms of
sales and profits) hence leading to its overall success
The extensive research brought me to conclude that departmental stores are
soon emerging on the top priority lists amongst the shopping spree in Delhi and
NCR as they seem to derive immense pleasure of convenience and exposure to
variety under one roof in their extremely busy lives when they donrsquot have time
for things
Though some of the customers perceive departmental stores to be expensive
and only high income categoryrsquos cup of tea the stores make constant efforts to
induce them to at least visit the store at once during the sale period or discount
offers
Hence this document entails me through these aspects in great detail helping
me to understand the concept of retail marketing through departmental stores in
Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 4
Introduction
etail comes from the French word retailer which refers to cutting off clip
and divide in terms of tailoring (1365) It first was recorded as a noun with
the meaning of a sale in small quantities in 1433 (French) Its literal meaning for
retail was to cut off shred paring Like the French the word retail in both Dutch
and German (detail Handel and Einze handle respectively) also refer to sale of
small quantities or items
R
Retailing consists of the sale of goods or merchandise from a fixed location such
as a department store or kiosk in small or individual lots for direct consumption
by the purchaser Retailing may include subordinated services such as delivery
Purchasers may be individuals or businesses In commerce a retailer buys
goods or products in large quantities from manufacturers or importers either
directly or through a wholesaler and then sells smaller quantities to the end-user
Retail establishments are often called shops or stores Retailers are at the end of
the supply chain Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategies
Shops may be on residential streets or in shopping streets with few or no
houses or in a shopping center or mall Shopping streets may or may not be for
pedestrians only Sometimes a shopping street has a partial or full roof to protect
customers from precipitation Retailers often provided boardwalks in front of their
stores to protect customers from the mud Online retailing also known as e-
commerce is the latest form of non-shop retailing (cf mail order)
Shopping generally refers to the act of buying products Sometimes this is done
to obtain necessities such as food and clothing sometimes it is done as a
recreational activity Recreational shopping often involves window shopping (just
looking not buying) and browsing and does not always result in a purchase
MUKESH KUMAR ITS PGDM (2006-2008) 5
Organized retailing in India is alluring all the big players (corporate houses) India
has approximately 300 million middle class people and this group is growing
rapidly One of the important reasons for rapid growing of organized retail in India
is malls There are malls manias in Indian market Each amp every real estate
developers are constructing world class malls in India Malls in India are a
relatively new format for retailing While this format may have existed in the
Western economies for several decades in India this phenomenon could be
estimated to be only about fifteen odd years old
One of the earliest large floor-area retailers in India was Shoppers Stop
However the first of the current format of the malls was the Crossroads mall in
Mumbai which was established by the Primal in period around 2000-01
Crossroads then had the highest rent per sq meter of establishment that the
vendors had to bear Due to the exorbitant rent Crossroads initially had a rough
ride Also the mall format was new and was a novelty for most Indian
consumers This led several visitors to the mall but never converted to actual
purchases since most were visiting the place out of curiosity
However the situation had changed drastically now Malls seem to be springing
up across several cities in India Notable among these is Gurgaon an upcoming
city near Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 6
The Global Retail Industry
An Overview
etail has played a major role world over in increasing productivity across a
wide range of consumer goods and services The impact can be best
seen in countries like USA UK Mexico Thailand and more recently China
Economies of countries like Singapore Malaysia Hong Kong Sri Lanka and
Dubai are also heavily assisted by the retail sector
R
Retail is the second-largest industry in the United States both in number of
establishments and number of employees It is also one of the largest worlds
wide The retail industry employs more than 22 million Americans and generates
more than $3 trillion in retail sale annually Retailing is a US $7 trillion sector
Wal-Mart is the worldrsquos largest retailer Already the worldrsquos largest employer with
over 1million associates Wal-Mart displaced oil giant Exxon Mobil as the worldrsquos
largest company when it posted $219 billion in sales for fiscal 2001 Wal-Mart
has become the most successful retail brand in the world due its ability to
leverage size market clout and efficiency to create market dominance Wal-Mart
heads Fortune magazine list of top 500 companies in the world Forbes Annual
List of Billionaires has the largest number (45497) from the retail business
MUKESH KUMAR ITS PGDM (2006-2008) 7
Global Retail
1999 2002 2005
Total Retail (US$
Billion)
150 180 225
Organized Retail
(US$ Billion)
11 33 7
Share of
Organized retail
07 18 32
Table no -1 Source CSO MGI Study
Top Retailers Worldwide
Rank Retailer Home Country
1 Wal-Mart Stores Inc USA
2 Carrefour Group France
3 The Kroger Co USA
4 The Home Depot Inc USA
5 Metro Germany
MUKESH KUMAR ITS PGDM (2006-2008) 8
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Abstract
he Indian retail industry is now beginning to evolve in the line with the
transformation that has swept other large economies The liberalization of
the consumer goods industry initiated in the mid-80 and accelerated through the
90rsquos has begun to impact the structure and conduct of the retail industry
T
The concept retail which includes the shopkeeper to customer interaction has
taken many forms and dimensions from the traditional retail outlet and street
local market shops to upscale multi brand outlets especially stores or
departmental stores
The objective being to assess the various parameters that influences a buyer to
visit or shop at departmental store thereby contributing to its turnover (in terms of
sales and profits) hence leading to its overall success
The extensive research brought me to conclude that departmental stores are
soon emerging on the top priority lists amongst the shopping spree in Delhi and
NCR as they seem to derive immense pleasure of convenience and exposure to
variety under one roof in their extremely busy lives when they donrsquot have time
for things
Though some of the customers perceive departmental stores to be expensive
and only high income categoryrsquos cup of tea the stores make constant efforts to
induce them to at least visit the store at once during the sale period or discount
offers
Hence this document entails me through these aspects in great detail helping
me to understand the concept of retail marketing through departmental stores in
Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 4
Introduction
etail comes from the French word retailer which refers to cutting off clip
and divide in terms of tailoring (1365) It first was recorded as a noun with
the meaning of a sale in small quantities in 1433 (French) Its literal meaning for
retail was to cut off shred paring Like the French the word retail in both Dutch
and German (detail Handel and Einze handle respectively) also refer to sale of
small quantities or items
R
Retailing consists of the sale of goods or merchandise from a fixed location such
as a department store or kiosk in small or individual lots for direct consumption
by the purchaser Retailing may include subordinated services such as delivery
Purchasers may be individuals or businesses In commerce a retailer buys
goods or products in large quantities from manufacturers or importers either
directly or through a wholesaler and then sells smaller quantities to the end-user
Retail establishments are often called shops or stores Retailers are at the end of
the supply chain Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategies
Shops may be on residential streets or in shopping streets with few or no
houses or in a shopping center or mall Shopping streets may or may not be for
pedestrians only Sometimes a shopping street has a partial or full roof to protect
customers from precipitation Retailers often provided boardwalks in front of their
stores to protect customers from the mud Online retailing also known as e-
commerce is the latest form of non-shop retailing (cf mail order)
Shopping generally refers to the act of buying products Sometimes this is done
to obtain necessities such as food and clothing sometimes it is done as a
recreational activity Recreational shopping often involves window shopping (just
looking not buying) and browsing and does not always result in a purchase
MUKESH KUMAR ITS PGDM (2006-2008) 5
Organized retailing in India is alluring all the big players (corporate houses) India
has approximately 300 million middle class people and this group is growing
rapidly One of the important reasons for rapid growing of organized retail in India
is malls There are malls manias in Indian market Each amp every real estate
developers are constructing world class malls in India Malls in India are a
relatively new format for retailing While this format may have existed in the
Western economies for several decades in India this phenomenon could be
estimated to be only about fifteen odd years old
One of the earliest large floor-area retailers in India was Shoppers Stop
However the first of the current format of the malls was the Crossroads mall in
Mumbai which was established by the Primal in period around 2000-01
Crossroads then had the highest rent per sq meter of establishment that the
vendors had to bear Due to the exorbitant rent Crossroads initially had a rough
ride Also the mall format was new and was a novelty for most Indian
consumers This led several visitors to the mall but never converted to actual
purchases since most were visiting the place out of curiosity
However the situation had changed drastically now Malls seem to be springing
up across several cities in India Notable among these is Gurgaon an upcoming
city near Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 6
The Global Retail Industry
An Overview
etail has played a major role world over in increasing productivity across a
wide range of consumer goods and services The impact can be best
seen in countries like USA UK Mexico Thailand and more recently China
Economies of countries like Singapore Malaysia Hong Kong Sri Lanka and
Dubai are also heavily assisted by the retail sector
R
Retail is the second-largest industry in the United States both in number of
establishments and number of employees It is also one of the largest worlds
wide The retail industry employs more than 22 million Americans and generates
more than $3 trillion in retail sale annually Retailing is a US $7 trillion sector
Wal-Mart is the worldrsquos largest retailer Already the worldrsquos largest employer with
over 1million associates Wal-Mart displaced oil giant Exxon Mobil as the worldrsquos
largest company when it posted $219 billion in sales for fiscal 2001 Wal-Mart
has become the most successful retail brand in the world due its ability to
leverage size market clout and efficiency to create market dominance Wal-Mart
heads Fortune magazine list of top 500 companies in the world Forbes Annual
List of Billionaires has the largest number (45497) from the retail business
MUKESH KUMAR ITS PGDM (2006-2008) 7
Global Retail
1999 2002 2005
Total Retail (US$
Billion)
150 180 225
Organized Retail
(US$ Billion)
11 33 7
Share of
Organized retail
07 18 32
Table no -1 Source CSO MGI Study
Top Retailers Worldwide
Rank Retailer Home Country
1 Wal-Mart Stores Inc USA
2 Carrefour Group France
3 The Kroger Co USA
4 The Home Depot Inc USA
5 Metro Germany
MUKESH KUMAR ITS PGDM (2006-2008) 8
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Introduction
etail comes from the French word retailer which refers to cutting off clip
and divide in terms of tailoring (1365) It first was recorded as a noun with
the meaning of a sale in small quantities in 1433 (French) Its literal meaning for
retail was to cut off shred paring Like the French the word retail in both Dutch
and German (detail Handel and Einze handle respectively) also refer to sale of
small quantities or items
R
Retailing consists of the sale of goods or merchandise from a fixed location such
as a department store or kiosk in small or individual lots for direct consumption
by the purchaser Retailing may include subordinated services such as delivery
Purchasers may be individuals or businesses In commerce a retailer buys
goods or products in large quantities from manufacturers or importers either
directly or through a wholesaler and then sells smaller quantities to the end-user
Retail establishments are often called shops or stores Retailers are at the end of
the supply chain Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategies
Shops may be on residential streets or in shopping streets with few or no
houses or in a shopping center or mall Shopping streets may or may not be for
pedestrians only Sometimes a shopping street has a partial or full roof to protect
customers from precipitation Retailers often provided boardwalks in front of their
stores to protect customers from the mud Online retailing also known as e-
commerce is the latest form of non-shop retailing (cf mail order)
Shopping generally refers to the act of buying products Sometimes this is done
to obtain necessities such as food and clothing sometimes it is done as a
recreational activity Recreational shopping often involves window shopping (just
looking not buying) and browsing and does not always result in a purchase
MUKESH KUMAR ITS PGDM (2006-2008) 5
Organized retailing in India is alluring all the big players (corporate houses) India
has approximately 300 million middle class people and this group is growing
rapidly One of the important reasons for rapid growing of organized retail in India
is malls There are malls manias in Indian market Each amp every real estate
developers are constructing world class malls in India Malls in India are a
relatively new format for retailing While this format may have existed in the
Western economies for several decades in India this phenomenon could be
estimated to be only about fifteen odd years old
One of the earliest large floor-area retailers in India was Shoppers Stop
However the first of the current format of the malls was the Crossroads mall in
Mumbai which was established by the Primal in period around 2000-01
Crossroads then had the highest rent per sq meter of establishment that the
vendors had to bear Due to the exorbitant rent Crossroads initially had a rough
ride Also the mall format was new and was a novelty for most Indian
consumers This led several visitors to the mall but never converted to actual
purchases since most were visiting the place out of curiosity
However the situation had changed drastically now Malls seem to be springing
up across several cities in India Notable among these is Gurgaon an upcoming
city near Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 6
The Global Retail Industry
An Overview
etail has played a major role world over in increasing productivity across a
wide range of consumer goods and services The impact can be best
seen in countries like USA UK Mexico Thailand and more recently China
Economies of countries like Singapore Malaysia Hong Kong Sri Lanka and
Dubai are also heavily assisted by the retail sector
R
Retail is the second-largest industry in the United States both in number of
establishments and number of employees It is also one of the largest worlds
wide The retail industry employs more than 22 million Americans and generates
more than $3 trillion in retail sale annually Retailing is a US $7 trillion sector
Wal-Mart is the worldrsquos largest retailer Already the worldrsquos largest employer with
over 1million associates Wal-Mart displaced oil giant Exxon Mobil as the worldrsquos
largest company when it posted $219 billion in sales for fiscal 2001 Wal-Mart
has become the most successful retail brand in the world due its ability to
leverage size market clout and efficiency to create market dominance Wal-Mart
heads Fortune magazine list of top 500 companies in the world Forbes Annual
List of Billionaires has the largest number (45497) from the retail business
MUKESH KUMAR ITS PGDM (2006-2008) 7
Global Retail
1999 2002 2005
Total Retail (US$
Billion)
150 180 225
Organized Retail
(US$ Billion)
11 33 7
Share of
Organized retail
07 18 32
Table no -1 Source CSO MGI Study
Top Retailers Worldwide
Rank Retailer Home Country
1 Wal-Mart Stores Inc USA
2 Carrefour Group France
3 The Kroger Co USA
4 The Home Depot Inc USA
5 Metro Germany
MUKESH KUMAR ITS PGDM (2006-2008) 8
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Organized retailing in India is alluring all the big players (corporate houses) India
has approximately 300 million middle class people and this group is growing
rapidly One of the important reasons for rapid growing of organized retail in India
is malls There are malls manias in Indian market Each amp every real estate
developers are constructing world class malls in India Malls in India are a
relatively new format for retailing While this format may have existed in the
Western economies for several decades in India this phenomenon could be
estimated to be only about fifteen odd years old
One of the earliest large floor-area retailers in India was Shoppers Stop
However the first of the current format of the malls was the Crossroads mall in
Mumbai which was established by the Primal in period around 2000-01
Crossroads then had the highest rent per sq meter of establishment that the
vendors had to bear Due to the exorbitant rent Crossroads initially had a rough
ride Also the mall format was new and was a novelty for most Indian
consumers This led several visitors to the mall but never converted to actual
purchases since most were visiting the place out of curiosity
However the situation had changed drastically now Malls seem to be springing
up across several cities in India Notable among these is Gurgaon an upcoming
city near Delhi
MUKESH KUMAR ITS PGDM (2006-2008) 6
The Global Retail Industry
An Overview
etail has played a major role world over in increasing productivity across a
wide range of consumer goods and services The impact can be best
seen in countries like USA UK Mexico Thailand and more recently China
Economies of countries like Singapore Malaysia Hong Kong Sri Lanka and
Dubai are also heavily assisted by the retail sector
R
Retail is the second-largest industry in the United States both in number of
establishments and number of employees It is also one of the largest worlds
wide The retail industry employs more than 22 million Americans and generates
more than $3 trillion in retail sale annually Retailing is a US $7 trillion sector
Wal-Mart is the worldrsquos largest retailer Already the worldrsquos largest employer with
over 1million associates Wal-Mart displaced oil giant Exxon Mobil as the worldrsquos
largest company when it posted $219 billion in sales for fiscal 2001 Wal-Mart
has become the most successful retail brand in the world due its ability to
leverage size market clout and efficiency to create market dominance Wal-Mart
heads Fortune magazine list of top 500 companies in the world Forbes Annual
List of Billionaires has the largest number (45497) from the retail business
MUKESH KUMAR ITS PGDM (2006-2008) 7
Global Retail
1999 2002 2005
Total Retail (US$
Billion)
150 180 225
Organized Retail
(US$ Billion)
11 33 7
Share of
Organized retail
07 18 32
Table no -1 Source CSO MGI Study
Top Retailers Worldwide
Rank Retailer Home Country
1 Wal-Mart Stores Inc USA
2 Carrefour Group France
3 The Kroger Co USA
4 The Home Depot Inc USA
5 Metro Germany
MUKESH KUMAR ITS PGDM (2006-2008) 8
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
The Global Retail Industry
An Overview
etail has played a major role world over in increasing productivity across a
wide range of consumer goods and services The impact can be best
seen in countries like USA UK Mexico Thailand and more recently China
Economies of countries like Singapore Malaysia Hong Kong Sri Lanka and
Dubai are also heavily assisted by the retail sector
R
Retail is the second-largest industry in the United States both in number of
establishments and number of employees It is also one of the largest worlds
wide The retail industry employs more than 22 million Americans and generates
more than $3 trillion in retail sale annually Retailing is a US $7 trillion sector
Wal-Mart is the worldrsquos largest retailer Already the worldrsquos largest employer with
over 1million associates Wal-Mart displaced oil giant Exxon Mobil as the worldrsquos
largest company when it posted $219 billion in sales for fiscal 2001 Wal-Mart
has become the most successful retail brand in the world due its ability to
leverage size market clout and efficiency to create market dominance Wal-Mart
heads Fortune magazine list of top 500 companies in the world Forbes Annual
List of Billionaires has the largest number (45497) from the retail business
MUKESH KUMAR ITS PGDM (2006-2008) 7
Global Retail
1999 2002 2005
Total Retail (US$
Billion)
150 180 225
Organized Retail
(US$ Billion)
11 33 7
Share of
Organized retail
07 18 32
Table no -1 Source CSO MGI Study
Top Retailers Worldwide
Rank Retailer Home Country
1 Wal-Mart Stores Inc USA
2 Carrefour Group France
3 The Kroger Co USA
4 The Home Depot Inc USA
5 Metro Germany
MUKESH KUMAR ITS PGDM (2006-2008) 8
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Global Retail
1999 2002 2005
Total Retail (US$
Billion)
150 180 225
Organized Retail
(US$ Billion)
11 33 7
Share of
Organized retail
07 18 32
Table no -1 Source CSO MGI Study
Top Retailers Worldwide
Rank Retailer Home Country
1 Wal-Mart Stores Inc USA
2 Carrefour Group France
3 The Kroger Co USA
4 The Home Depot Inc USA
5 Metro Germany
MUKESH KUMAR ITS PGDM (2006-2008) 8
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Table no -2 (Source STORES Deloitte Touche
Tomahatsu)
Retail Scenario in India
s the corporate ndash the Piramals the Tatas the Rahejas ITC SKumarrsquos
RPG Enterprises and mega retailers- Crosswords Shopperrsquos Stop and
Pantaloons race to revolutionize the retailing sector retail as an industry in India
is coming alive
A
Retail sales in India amounted to about Rs7400 billion in 2002 expanded at an
average annual rate of 7 during 1999-2002 With the upturn in economic
growth during 2003 retail sales are also expected to expand at a higher pace of
nearly 10 Across the country retail sales in real terms are predicted to rise
more rapidly than consumer expenditure during 2003-08 The forecast growth in
real retail sales during 2003- 2008 is 83 per year compared with 71 for
consumer expenditure Modernization of the Indian retail sector will be reflected
in rapid growth in sales of supermarkets departmental stores and hypermarts
Sales from these large-format stores are to expand at growth rates ranging from
24 to 49 per year during 2003-2008 according to a latest report by
Euromonitor International a leading provider of global consumer-market
intelligence
AT Kearney Inc places India 6th on a Global Retail Development Index The
country has the highest per capita outlets in the world - 55 outlets per 1000
population Around 7 of the population in India is engaged in retailing as
compared to 20 in the USA
In a developing country like India a large chunk of consumer expenditure is on
basic necessities especially food-related items Hence it is not surprising that
MUKESH KUMAR ITS PGDM (2006-2008) 9
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
food beverages and tobacco accounted for as much as 71 of retail sales in
2002 The share of food related items had however declined over the review
period down from 73 in 1999 This is not unexpected because with income
growth Indians like consumers elsewhere have started spending more on non-
food items compared with food products Sales through supermarkets and
department stores are small compared with overall retail sales Nevertheless
their sales have grown much more rapidly at almost a triple rate (about 30 per
year during the review period) This high acceleration in sales through modern
retail formats is expected to continue during the next few years with the rapid
growth in numbers of such outlets due to consumer demand and business
potential
The factors responsible for the development of the retail sector in India can be
broadly
Summarized as follows
bull Rising incomes and improvements in infrastructure are enlarging consumer
markets and accelerating the convergence of consumer tastes
Looking at income classification the National Council of Applied Economic
Research (NCAER) classified approximately 50 of the Indian population as low
income in 1994- 95 this is expected to decline to 178 by 2006-07
bull Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg Unilever
Nestle etc to make significant inroads into the vast consumer market by offering
a wide range of choices to the Indian consumers
bull Shift in consumer demand to foreign brands like McDonalds Sony Panasonic
etc
bull The internet revolution is making the Indian consumer more accessible to the
growing influences of domestic and foreign retail chains Reach of satellite TV
MUKESH KUMAR ITS PGDM (2006-2008) 10
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
channels is helping in creating awareness about global products for local
markets About 47 of Indiarsquos population is under the age of 20 and this will
increase to 55 by 2015 This young population which is technology-savvy
watch more than 50 TV satellite channels and display the highest propensity to
spend will immensely contribute to the growth of the retail sector in the country
As India continues to get strongly integrated with the world economy riding the
waves of globalization the retail sector is bound to take big leaps in the years to
come
bull Retailers direct procure the products amp services in bulk through manufacturers
so they eliminate the middleman and save the cost They offer the product amp
services on the discount prices or on a wholesaler rate to the consumer
Country Malaysia Thailan
d
Philippine
s
Indonesia South
Korea
China Indi
a
Organize
d
Retailing
55 50 35 30 15 20 3
Tradition
Retailing
45 50 65 70 85 80 97
Table no -3
The Indian retail sector is estimated to have a market size of about $ 180 billion
but the organized sector represents only 3 share of this market Most of the
organized retailing in the country has just started recently and has been
concentrated mainly in the metro cities India is the last large Asian economy to
liberalize its retail sector In Thailand more than 40 of all consumer goods are
sold through the super markets and departmental stores A similar phenomenon
MUKESH KUMAR ITS PGDM (2006-2008) 11
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
has swept through all other Asian countries Organized retailing in India has a
huge scope because of the whole urban and rural and the growing
consciousness of the consumer about product quality and services
A study conducted by Fitch expects the organized retail industry to continue to
grow rapidly especially through increased levels of penetration in larger towns
and metros and also as it begins to spread to smaller cities and B class towns
Fuelling this growth is the growth in development of the retail-specific properties
and malls According to the estimates available with Fitch close to 25mn sq ft of
retail space is being developed and will be available for occupation over the next
36-48 months Fitch expects organized retail to capture 15-20 market share
by 2010 A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities and would help
in achieving higher GDP growth At 6 the share of employment of retail in India
is low even when compared to Brazil (14) and Poland (12)
MUKESH KUMAR ITS PGDM (2006-2008) 12
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
The Organized Retail Pie of Daily need items
The Organised Retail Pie
2
3
7
7
9
13
19
40
Beauty Products
Books Music ampGifts
Home Decore
Jewellery ampwatches
Footwear
Durables
Food amp Grocery
Cloathing Textilesamp FashionAccessories
(Business Today December 312006)Category wise share in organized retail Source CII
Kearney Report
Figure no-1
Fact and Figures
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles) the country sorely lacks anything that can
MUKESH KUMAR ITS PGDM (2006-2008) 13
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
resemble a retailing industry in the modern sense of the term This
presents international retailing specialists with a great opportunity
It was only in the year 2000 that the global management consultancy put
a figure that Rs 400000 crore (1 crore = 10 million) which will increase
more than Rs 800000 crore by the year 2007 ndash an annual increase of
20 per cent
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States)
Indias per capita retailing space is thus the lowest in the world (source
KSA Technopak (I) Pvt Ltd the India operation of the US-based Kurt
Salmon Associates)
Just over 8 per cent of Indias population is engaged in retailing
(compared to 20 per cent in the United States) There is no data on this
sectors contribution to the GDP
From a size of only Rs20 000 crore the organized retail industry will
grow more than Rs 160000 crore by 2007 The TOTAL retail market
however as indicated above will grow 20 per cent annually from Rs
400000 crore in 2000 to Rs 800000 crore by 2005
Given the size and the geographical cultural and socio-economic
diversity of India there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context
The first challenge facing the organized retail industry in India is
competition from the unorganized sector Traditional retailing has
established in India for some centuries It is a low cost structure mostly
owner-operated has negligible real estate and labor costs and little or no
MUKESH KUMAR ITS PGDM (2006-2008) 14
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
taxes to pay Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector
In contrast players in the organized sector have big expenses to meet
and yet have to keep prices low enough to be able to compete with the
traditional sector High costs for the organized sector arises from higher
labor costs social security to employees high quality real estate much
bigger premises comfort facilities such as air-conditioning back-up
power supply taxes etc Organized retailing also has to cope with the
middle class psychology that the bigger and brighter sales outlet is the
more expensive it will be
The above should not be seen as a gloomy foreboding from global retail
operators International retail majors such as Benetton Dairy Farm and
Levis have already entered the market Lifestyles in India are changing
and the concept of value for money is picking up
Indias first true shopping mall ndash complete with food courts recreation
facilities and large car parking space ndash was inaugurated as early as in
1999 in Mumbai (This mall is called Crossroads)
Local companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organized Indias retailing industry The foreign Retail players has
knowledge amp experience about Retail at the same local players has
knowledge about Indian culture ampsociety setup
These drawbacks present opportunity to international andor
professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it
The prospects are very encouraging The first steps towards
sophisticated retailing are being taken and Crossroads is the best
MUKESH KUMAR ITS PGDM (2006-2008) 15
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
example of this awakening More such malls have been planned in the
according to that retail industry is one of other big cities of India
An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make
an impact circa 2003
bullIndian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail
Different Forms of Retailing
1 Store Retailing
2 Non store Retailing
3 Other popular format
Store Retailing
1 Popular Formats in store retailing
Hypermarts
Large supermarkets typically (3500 - 5000 sq ft)
Mini supermarkets typically (1000 - 2000 sq ft)
Convenience store typically (750 - 1000 sq ft)
Discountshopping list grocer
Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit free home delivery etc
MUKESH KUMAR ITS PGDM (2006-2008) 16
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Format Description The Value Proposition
Branded Stores
Exclusive showrooms either
owned or franchised out by
a manufacturer
Complete range available
for a given brand Certified
product quality
Specialty Stores
Focus on a specific
consumer need carry most
of the brands available
Greater choice to the
consumer comparison
between brands possible
Department Stores
Large stores having a wide
variety of products
organized into different
departments such as
clothing house wares
furniture appliances toys
etc
One stop shop catering to
varied consumer needs
Supermarkets
Extremely large self-
services retail outlets
One stop shop
catering to varied consumer
needs
Discount Stores
Stores offering discounts on
the retail price through
selling high volumes and
reaping the economies of
scale
Low prices
Hyper-mart
Larger than a Supermarket
sometimes with a
warehouse appearance
generally located in quieter
parts of the city
Low prices vast choice
available including services
as cafeterias
Convenience Stores
Small self-service formats
located in crowded urban
areas
Convenient location and
extended operating hours
An enclosure having
different formats of in-store
Variety of shops available
MUKESH KUMAR ITS PGDM (2006-2008) 17
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Shopping Malls retailers all under one roof close to each other
Source India info line Table no-4
2 Non-store Retailing
It is another type of retail Business Different types of non-store retailing are
given below
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry with over 600 companies selling door to door office to
office or at home sales parties A variant of direct selling is called multilevel
Business whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products who in turn recruit and
sell to sub distributors who eventually recruit others to sell their products usually
in customer homes
Direct Business
Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices including tale Business
television direct response Business and electronic shopping
Automatic Vending
Automatic vending has been applied to a considerable variety of merchandise
including impulse goods with high convenience value (cigarettes soft drinks
candy newspaper hot beverages) and other products (hosiery cosmetics food
snacks hot soups and food paperbacks record albums film T-shirts insurance
policies and even fishing worms)
MUKESH KUMAR ITS PGDM (2006-2008) 18
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
3 Some other popular formats
Region specific formats With organized retail penetrating in to class II towns
retailers have started differentiating and experimenting with store sizes and
formats For example in departmental store format while most class cities and
metros have large stores of 50000+ square foot in size stores in Class II towns
have stabilized in the 25000-35000 square foot range
Development of discount formats Large discounts formats or hypermarkets
aiming at retail consolidation by providing a single point of contact between
brand-owners and customers are now emerging as major competitors to both
unorganized and organized retailers Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats Big Bazaar Promoted by
Pantaloon and Giant promoted by RPG group provide two examples of this
trend
Convenience stores at gas Station India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products With deregulation private players entering this sector force existing
petro-retailers to review their business models Dealer and company owned
convenience stores at service station are on the rise State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets
MUKESH KUMAR ITS PGDM (2006-2008) 19
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Retail Revolution
Name N0Of stores Formats Details
Pantaloon 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reach a monthly run rate of
Rs 2500 crore by June 2010
Reliance 70 Multiple
Format
Reliance retail has an
ambitious roll out of 1575
stores by 2007 It plans to
have ware house-style store
spread over 150000 sq ft
storesbin a super market
format
Shoppersrsquo
stop
20 Deptt
Hypermarket
Books
One of the earliest in the
retail market Shopperrsquos Stop
plans to expand retail space
to 25 mn sq ft by FY08
From the Current 950700 sq
ft
Raymond 321 Specialty
Stores
A manufacturer-retailer
Raymond also has an
overseas network of around
25 shops
RPG Retail 250 Hypermarkets The group is planning an
MUKESH KUMAR ITS PGDM (2006-2008) 20
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores Retail
space of 4 mn sq ft amp550
stores by 2008
Bharti Group NA Multiple
Format
With joint venture with global
major Wal-Mart the group is
expected to have an
estimated 6 million retail
surface by 2008
Gloubes 28 Deptt
Hypermarket
Books
Will add 6 west side Stores
5 Landmark book stores and
1 hypermarket Space under
retail will expend to 125mn
sq feet in FY 07 from the
current 900000 sq ft income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40
Trent 100 Multiple
Format
Has aggressive growth plans
in the retail sector plans to
reacha monthly run rate of
RS 2500 crore by June 2010
Aditya Birla
Group
NA NA The largest corporate group
to jump into the fray Has
some experience in retail
business of Madura
Garments The format is not
MUKESH KUMAR ITS PGDM (2006-2008) 21
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
known but their hiring plans
indicate a presence in all
categories from apparel food
to furniture The group wild
pump in Rs 5000 cr to 6000
cr in the initial phase
Table no-5 The Economic Times 29 Nov 2006
Classification of Indian retail sector
Food Retailers
There are large number and variety of retailers in the food-retailing sector
Traditional types of retailers who operate small single-outlet businesses mainly
using family labor dominate this sector In comparison super markets account
for a small proportion of food sales in India However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience
Health amp Beauty Products
With growth in income levels Indians have started spending more on health and
beauty products Here also small single-outlet retailers dominate the
market However in recent years a few retail chains specializing in these
products have come into the market Although these retail chains account for
only a small share of the total market their business is expected to grow
significantly in the future due to the growing quality consciousness of buyers for
these products
MUKESH KUMAR ITS PGDM (2006-2008) 22
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Clothing amp Footwear
Numerous clothing and footwear shops in shopping centers and markets operate
all over India Traditional outlets stock a limited range of cheap and popular
items in contrast modern clothing and footwear stores have modern products
and attractive displays to lure customers However with rapid urbanization and
changing patterns of consumer tastes and preferences it is unlikely that the
traditional outlets will survive the test of time
Home Furniture amp Household Goods
Small retailers again dominate this sector Despite the large size of this market
very few large and modern retailers have established specialized stores for these
products However there is considerable potential for the entry or expansion of
specialized retail chains in the country
Durable Goods
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period A greater variety of consumer
electronic items and household appliances became available to the Indian
customer Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector
Leisure amp Personal Goods
MUKESH KUMAR ITS PGDM (2006-2008) 23
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Increasing household incomes due to better economic opportunities have
encouraged consumer expenditure on leisure and personal goods in the country
There are specialized retailers for each category of products (books music
products etc) in this sector Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers
FDI in retail
overnment has relaxed regulatory controls on foreign direct investment
(FDI) considerably in recent years while retailing currently remains
closed to FDI However the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration It has
allowed 51 FDI in single brand retail
G
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing Indian companies know Indian markets better but
foreign players will come in and challenge the locals by sheer cash power the
power to drive down prices That will be the coming struggle
India can become a giant in a short time span in food processing and textiles for
which we have the potential because Indian agricultural production is the lowest
cost in the world and textile labor is the cheapest internationally
Allowing FDI in retail trade especially in groceries and garments marketing is
one sure way of doing it Food processing and textiles will grow very substantially
from the linkage effects of a modernized globalize retail trade that only FDI can
ensure The employment generation for Indian youth would also be enormous
Indian retail trade is of enormous size ($180 billion) nearly 10 per cent of GDP
employing 21 million persons which is about 7 per cent of the labor force It is six
times bigger than Thailand and five times larger than South Korea and Taiwan
Chinas retail trade is 8 per cent of GDP and 6 per cent of employment
MUKESH KUMAR ITS PGDM (2006-2008) 24
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
But the trade in India is fragmented unorganized networked and individually
small The 12 million kirana shops are mostly family or ma-pa owned with little
capital for expansion or credit to receive or to extend to consumers
About 96 per cent of these shops have 500 sq ft or less of space with limited
stock or choice to offer During all these years instead of shedding tears for
indigenous trade and resisting FDI had the government declared it an industry it
would done the trade a world of good Now it is being said that allowing FDI in
retail trade would destroy this commerce Will it
A study by the Associated Chambers of Commerce of Industry of India
New Delhi concluded that at least for the next ten years that will not
happen Thereafter the present fragmented system may get phased out or
evolved into more integrated networked units
Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof but also of assured home delivery and information
feedback between consumers and producers A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products
sold
With IT application the modern retail store can cut transaction costs such as due
to inventory delivery and handling That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 45 per cent of others
With MIT Professor Sanjay Sharmas epochal innovation of RFID (radio
frequency identification) which will do away with cash registers and clerks who
are required to operate it Wal-Mart will further reduce its costs
India is today the only major economy that still does not permit FDI in retail trade
In China 35 of the worlds top 70 retailers have already entered and set up
business They have helped boost exports Wal-Mart alone exported in 2002
about $12 billion worth of goods These retailers source their goods from inside
China
MUKESH KUMAR ITS PGDM (2006-2008) 25
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
India is targeting for its GDP to grow by 8 to 10 per cent per year This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced Exports are one way of generating that demand
Encouraging private consumption expenditure is another way
These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market
According to McKinsey India wastes nearly Rs 50000 crore in the food
chain itself These international retail outlets can help develop the food
processing industry which requires $28 billion of modern technology and
infrastructure
FDI in retail trade has forced the wholesalers and food processors to improve
raised exports and triggered growth by outsourcing supplies domestically The
availability of standardized products has also boosted tourism in these countries
Indian Middle Class People
n India the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings It is vaguely described as
the 200-250 million who are engaged in the market almost as large as the entire
US population According to the National Council of Applied Economic Research
(NCAER) between 1985 and 1999 a quarter of this class earned between Rs
35000 and Rs 75000 a year In the next income category Rs 70000 and Rs
105000 the proportion dropped from 36 in 1985 to one-fifth in 1999
Revealingly in the next category Rs 105000 to Rs 140000 the percentage
increased during this period from 15 to a quarter of the middle class And
above Rs 140000 it similarly went up from 22 to 27 So it seems clear that
this consuming class is better off than ever before
I
MUKESH KUMAR ITS PGDM (2006-2008) 26
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
India has registered a very impressive growth of its middle class -- a
class which was virtually non-existent in 1947 when India became a
politically sovereign nation
At the start of 1999 the size of the middle class was unofficially
estimated at 300 million people
The middle class comprises three sub-classes the upper middle
middle and lower middle
The upper middle class comprises an estimated 40 million people They
have annual incomes of US$600000 each in terms of Purchasing Power
Parity (PPP)Here calculation of PPP is complicated but suffice it to say
that it is based on what a unit of currency can purchase in one country
compared to what the same currency can purchase in another country It
is also known as the law of one price that governs the price level of
general goods and services between the two countries)
The middle class comprises an estimated 150 million people each with
PPP incomes of US$20000 per year each
The lower middle class comprises an estimated 110 million people An
estimate of their annual income is not available but they are mostly the
relatively affluent people in the rural areas of India
The middle classes on the whole (ie upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually
MUKESH KUMAR ITS PGDM (2006-2008) 27
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Opportunity Challenges and emerging trends for
Organized retail in Indian
Opportunity
Population Indiarsquos population estimated at 1055 million is expected to grow by
17 year by year Growing urbanization is key trend in the country with rural
population growth average 179 and urban growth at 307 for the period
1991 to 2001 Today (12 Mar 2007 at 1003) the population of India is
1110480374
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow
Source Technical Group on Population Projections Registrar General of India (RGI) 1996
Figure no-2
MUKESH KUMAR ITS PGDM (2006-2008) 28
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
In the period between 1996-2016 population in the
1 Age group 15-59 will increase from 519 to 800 million
2 Age group lt 15 yrs will decline from 353-350 million
3 Age group gt 60 yrs will increase from 623 to 1129 million
Challenges of Retailing in India
Retailing as an industry in India has still a long way to go To become a truly
flourishing industry retailing needs to cross the following hurdles
bull Automatic approval is not allowed for foreign investment in retail
bull Regulations restricting real estate purchases and cumbersome local laws
bull Taxation which favors small retail businesses
bull Absence of developed supply chain and integrated IT management
bull Lack of trained work force
bull Low skill level for retailing management
bull Intrinsic complexity of retailing ndash rapid price changes constant threat of product
Obsolescence and low margins
bull The credit facility given by the unorganized retail which is not available to
Organized store
bull Traditional pattern of buying of consumer
bull Credit facility given by kirana store
bull Family relationship with kirana storeLalagi
bull Psychological behavior to enter big size
bull Check impulsive buyer
bull Absence of model
bull Limited floor space Park space Display space
bull Time factor
bull Home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 29
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing managing and
coping up with new challenges in an ever-changing marketplace Indian retailers
must use innovative retail formats to enhance shopping experience and try to
understand the regional variations in consumer attitudes to retailing Retail
marketing efforts have to improve in the country - advertising promotions and
campaigns to attract customers building loyalty by identifying regular shoppers
and offering benefits to them efficiently managing high-value customers and
monitoring customer needs constantly are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis
Despite the presence of the basic ingredients required for growth of the retail
industry in India it still faces substantial hurdles that will retard and inhibit its
growth in the future One of the key impediments is the lack of FDI status This
has largely limited capital investments in supply chain infrastructure which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices Multiplicity and complexity of taxes lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing While the industry and the government
are trying to remove many of these hurdles some of the roadblocks will remain
and will continue to affect the smooth growth of this industry Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade this growth would however not be at the same rapid pace as in
other emerging markets Organized retailing in India is gaining wider acceptance
The development of the organized retail sector during the last decade has
begun to change the face of retailing especially in the major metros of the
country Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs In spite of the positive prospects of this industry Indian retailing faces
MUKESH KUMAR ITS PGDM (2006-2008) 30
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
some major hurdles (see Table 1) which have stymied its growth Early signs of
organized retail were visible even in the 1970s when Nilgiris (food) Viveks
(consumer durables) and Nallis (sarees) started their operations However as a
result of the roadblocks the industry remained in a rudimentary stage While
these retailers gave the necessary ambience to customers little effort was made
to introduce world-class customer care practices and improve operating
efficiencies Moreover most of these modern developments were restricted to
south India which is still regarded as a lsquoMecca of Indian Retailrsquo
Factors Description Implications
Barriers to FDI
1048707 FDI not permitted in
pure retailing
1048707 Franchisee
arrangement allowed
1048707 Absence of global
players
1048707 Limited exposure to
best practices Status
Lack of Industry
1048707 Government does not
recognize the
industry
1048707 Restricted availability
of finance
1048707 Restricts growth and
scaling up
Structural Impediments
1048707 Lack of urbanization
1048707 Poor transportation
infrastructure
1048707 Consumer habit of
buying fresh foods
Administered pricing
1048707 Lack of awareness of
Indian consumers
1048707 Restricted retail growth
1048707 Growth of small one-
store formats with
unmatchable cost
structure
1048707 Wastage of almost
20-25 of farm
MUKESH KUMAR ITS PGDM (2006-2008) 31
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
produce High Cost of
Real Estate
High Cost of Real
Estate
1048707 Pro-tenant rent laws
1048707 Non-availability of
government land zoning
restrictions
1048707 Lack of clear
ownership titles high
stamp
1048707 Difficult to find good
real estate in terms of
location and size
1048707 High land cost owing to
constrained supply
1048707 Disorganized nature of
transactions
Duty (10)
Supply Chain
Bottlenecks
1048707 Several segments like
food and apparel
reserved for SSIs
1048707 Distribution logistics
constraintsndashrestrictions of
purchase and movement
of food grains absence
of cold chain
infrastructure
1048707 Long intermediation
chain
1048707 Limited product range
1048707 Makes scaling up
difficult
1048707 High cost and
complexity of sourcing amp
planning
1048707 Lack of value addition
and increase in costs by
almost 15
1048707 Differential sales tax
rates across states
1048707 Added cost and
complexity of distribution
MUKESH KUMAR ITS PGDM (2006-2008) 32
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Complex Taxation
System
1048707 Multi-point octroi
1048707 Sales tax avoidance by
smaller stores
1048707 Cost advantage for
smaller stores through
tax evasion
Multiple Legislations
1048707 Stringent labor laws
governing hours of work
minimum wage payments
1048707 Multiple
licensesclearances
required
1048707 Limits flexibility in
operations
1048707 Irritant value in
establishing chain
operations adds to
overall costs
Customer Preferences
1048707 Local consumption
habits
1048707 Need for variety
1048707 Cultural issues
1048707 Leads to product
proliferation
1048707 Need to stock larger
number of SKUs at store
level
1048707 Increases complexity
in sourcing amp planning
1048707 Increases the cost of
store management
Availability of Talent
1048707 Highly educated class
does not consider
retailing a profession of
choice
1048707 Lack of proper training
1048707 Lack of trained
personnel
1048707 Higher trial and error in
managing retail
operations
1048707 Increase in personnel
MUKESH KUMAR ITS PGDM (2006-2008) 33
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
costs
Manufacturers
Backlash
1048707 No increase in margins 1048707 Manufacturers refuse
to dis-intermediate and
pass on intermediary
margins to retailers
Table no-6 Source Market Participants
Fitch
Emerging Trends in Retailing
Retailing in India is at a nascent stage of is evolution but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences Organized retailing is witnessing a wave of players entering the
industry And these players are experimenting with various retail formats Yet
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India Some of the notable exceptions
have been garment retailers like Madura Garments amp Raymond who was scaled
their exclusive showroom format across the country The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign
ownership
MUKESH KUMAR ITS PGDM (2006-2008) 34
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Trends in Retailing
New retail forms and combinations continually emerge Bank branches and ATM
counters have opened in supermarkets Gas stations include food stores that
make more profit than the gas operation Bookstores feature coffee shops
Even old retail forms are reappearing In 1992 Shawna and Randy Heniger
introduced peddlerrsquos carts in the Mall of America Today three-fourths of the
nationrsquos major malls have carts selling everything from casual wear to condoms
Successful carts average $30000 to $40000 a month in sales and can easily top
$70000 in December With an average start-up cost of only $3000 pushcarts
help budding entrepreneurs test their retailing dreams without a major cash
investment They provide a way for malls to bring in more mom-and-pop retailers
showcase seasonal merchandise and prospect for permanent tenants
1 New retail forms are facing a shorter life span They are rapidly copied
and quickly lose their novelty
2 The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television
computers and telephones to which they can immediately respond by
calling a toll-free number or via computer
3 Competition today is increasingly intertype or between different types of
store outlets Discount stores catalog showrooms and department stores
all compete for the same consumers The competition between chain
superstores and smaller independently owned stores has become
particularly heated Because of their bulk buying power chains get more
favorable terms than independents and the chainsrsquo large square footage
allows them to put in cafes and bathrooms
4 In many locations the arrival of a superstore has forced nearby
independents out of business In the book selling business the arrival of a
Barnes amp Noble superstore or
MUKESH KUMAR ITS PGDM (2006-2008) 35
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
5 Borders Books and Music usually puts smaller bookstores out of business
Yet the news is not all bad for smaller companies Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service
6 Todayrsquos retailers are moving toward one of two poles operating either as
mass merchandisers or as specialty retailers Superpower retailers are
emerging Through their superior information systems and buying power
these giant retailers are able to offer strong price savings These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers
7 In the process they are crowding out smaller manufacturers who become
dependent on one large retailer and are therefore extremely vulnerable
and smaller retailers who simply do not have the budget of the buying
power to compete
8 Many retailers are even telling the most powerful manufacturers what to
make how to price and promote when and how to ship and even how to
reorganize and improve production and management Manufacturers have
little choice They stand to lose 10 to 30 percent of the market if they
refuse
9 Marketing channels are increasingly becoming professionally managed
and programmed Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups They are
not sticking to one format such as department stores but are moving into
a mix of retail formats
10Technology is becoming critical as a competitive tool Retailers are using
computers to produce better forecasts control inventory costs order
electronically from suppliers send e-mail between stores and even sell to
customers within stores They are adopting checkout scanning systems
electronic funds transfer and improved merchandise-handling systems
MUKESH KUMAR ITS PGDM (2006-2008) 36
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
11Retailers with unique formats and strong brand positioning are
increasingly moving into other countries McDonaldrsquos The Limited Gap
and Toys ldquoRrdquo US have become globally prominent as a result of their
great marketing prowess Many more Indian retailers are actively pursuing
overseas markets to boost profits
12There has been a marked rise in establishments that provide a place for
people to congregate such as coffeehouses tea shops juice bars
bookshops and brew pubs
EMERGING TRENDS
1 Forward integration alternate channels In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value
2 Sourcing The CPG industry is following the It outsourcing trend Indian
subsidiaries of global CPG players have proved them self in term of
quality and production capabilities This had led several international
companies to source from India For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap
detergents oral care and skin care products to other Unilever subsidiaries
A new export Oriented unit is being set up by Hindustan lever in Pune to
cater to the need of this business Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies
MUKESH KUMAR ITS PGDM (2006-2008) 37
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
With quotas in textiles sector also being relaxed global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion This trend is likely to be followed by most big
retailers
3 Rapid expansion and format migration After making years of
investment in customer acquisition setting up of systems process and
consequent operational loose many leading retailers have passed their
ldquolearningrdquo phase and are getting in to the consolidationaggressive rollout
phase Today few of them are making modest money out of the business
This provides confidence to the investors to infuse much needed capital in
the businesses and will lead the further expansion and format migration
For example the department store chain Shoppers Stop will soon have
its Initial Public Offer (IPO) and use all the fund raised for rapid expansion
in existing format and roll out of grocery stores Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets
MUKESH KUMAR ITS PGDM (2006-2008) 38
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Retail as an Employment Generator
he retail sector can generate huge employment opportunities and can lead
to job-led economic growth In most major economies lsquoservicesrsquo form the
largest sector for creating employment US alone have over 12 of its
employable workforce engaged in the retail sector The retail sector in India
employs nearly 21 million people accounting for roughly 67 of the total
employment However employment in organized retailing is still very low
because of the small share of organized retail business in the total Indian retail
trade The share of organized retailing in India at around 3 is abysmally low
compared to 80 in the USA 40 in Thailand or 20 in China thus leaving the
huge market potential largely
T
Untapped A modern retailretail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10 share of organized retailing) according to Arvind Singhal CMD KSA
Technopak Retail can create as many new jobs as the BPOITeS sector in India
A strong retail front-end can also provide the necessary fillip to agriculture amp food
processing handicrafts and small amp medium manufacturing enterprises creating
millions of new jobs indirectly Through its strong linkages with sectors like
tourism and hospitality retail has the potential of creating jobs in these sectors
also Though the Planning Commission has identified retail as a prospective
employment generator in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation a pro-active
governmental support mechanism needs to evolve for nurturing the sector
Issues like FDI in retail allocation of government-controlled land on more
favorable terms strong political and bureaucratic leadership etc need to be
addressed adequately Big corporate houses are coming in retail with huge
investment plan in coming future due to the reason of competition Retail has
required more talented amp skilled business people
MUKESH KUMAR ITS PGDM (2006-2008) 39
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
OBJECTIVE OF THE SURVEY
he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail And their
satisfaction level towards these outlets
TAnd other reasons are
1 To get an insight in to the retail industry
2 To understand the factors that influence shoppers to visit organized retail
Outlets
3 To understand consumer behavior about organized retail shop
4 To identify change in consumer behavior ie preference of the small
retail store over the supermarket or vice versa
5 Buying Experience of middle class people for daily need items with from
Organize retail shop amp Kirana store
MUKESH KUMAR ITS PGDM (2006-2008) 40
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
RESEARCH METHODOLOGY
o discover the answer to the research or to achieve the objective of the
project certain scientific procedure was followed These procedures are
explained as follows
T
Research technique
In my research I followed the descriptive method of research which includes
surveys and fact-findings enquires of different kinds The major purpose of
descriptive research is description of the state of affairs as it exists at present In
business research we quite often use the term Ex Post Facto research for
descriptive research studies The main characteristic of this method is that the
research has no control over the variables he can only report what happened or
what is happening
Structured questionnaires were prepared having both open and close-ended
questions The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items
Universe of the study
Universe of the study was the people of middle clsss(Upper middle class Middle
middle class Lower middle class) of NCR (North Central Regon)
Sample size for study
100 people were surveyed by the questionnaire method Both convenience and
judgmental sampling was used
MUKESH KUMAR ITS PGDM (2006-2008) 41
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Data collection techniques
To achieve the objectives of the study both primary and secondary data was
collected
Primary data
100 people were surveyed to know their purchase behavior with organized retail
for daily need items And factors which motivated them to go for organize retail
Secondary data
Secondary data was collected by visiting libraries and associations the major
being
Internet
Different News Paper amp Magazines
Journals
Data tabulation analysis and interpretations
The data was tabulated using tally marks and analyzed by using percentages
The interpretations are based on the overall survey done on the respondents
MUKESH KUMAR ITS PGDM (2006-2008) 42
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Analysis
1) What the factor that influences your decision while going for
purchase of daily need items
12
45
8
18
14
3
0
5
10
15
20
25
30
35
40
45
50
Service Price Dealing ofthe salesperson
Variety of theproducts
Brand name Properproductdisplay
Factors that influence decision making
No
of r
espo
ndan
ts
Series2
Figure no-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious And the price factor influence
their decision while going for purchase of daily need items After that Variety
of the product and brand name effect a lot in decision making Other factor
like service proper product display has not much importance while purchase
of daily need items But apart of daily need items in the sample size of 100
people 45 people is influenced for daily purchase by price That is a reason
that lots of organize retailer are focusing their store on the basis of price The
best examples are Subhiksha Reliance Fresh Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian
MUKESH KUMAR ITS PGDM (2006-2008) 43
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
2) What type of stores do you prefer for shopping for daily need items
No particular
preference 20
MallsDepartmental Store20
Kirana Stores
Convenience store45
Co-operative Stores 15
MallsDepartmentalStore
Co-operative Stores
Kirana StoresConvenience store
No particularpreference
Figure no-4
For daily need items generally people prefers Kirana storesConvenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient According to chart 45 of people prefer kirana
storesConvenience 20 People prefer to go Malls Departmental stores for
daily need items generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they donrsquot have much time to
visit shop daily Shopping from these stores saves their time and their service
variety and offers satisfied their need
These people are generally Upper middle class service people or middle
executives from reputeted organization Rest of 20 people have not any
preference towards stores for daily need items15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product
MUKESH KUMAR ITS PGDM (2006-2008) 44
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
3) What comes when you think about organized retail shop
Figure no-5
In the process of filling questionnaire done by respondents when I interacted with
people then I found that when I asked about organized retail shop then more
than 60 respondents given their view in favor of organized retail stores About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts
Mean to say products are available can be found in less efforts And they are
generally discounted Branded with wide variety Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores That is a positive point for organized
retailers But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop Generally lower middle
class believe on that So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 45
7550 55
4060 70 80 88
60
2550 45
6040 30 20 12
40
0
20
40
60
80
100
120
YES NO
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
4) How often you go for shopping for daily need items
Once a month10
Once in a week25
Once a day40
Thrice a month25
Once a day Once in a week
Thrice a month Once a month
Figure no-6
Basically the reason of asking this question from respondents is to understanding
their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items Generally people purchase items like
milk bred cigarette and vegetables daily 40 of total respondents say that they
daily go for shopping 25 out of 100 say that they go purchase of daily need items
for once week 25 people visit for these items for thrice a month and rest of
10 people go for these items for once a month because they donrsquot have time to
go daily for these Again these people are people from upper middle class So
those people generally purchase in a bulk for a month More than 55 people
from those prefer organized retail because from purchase in bulk they get big
discount Reliance fresh Big Bazaar Spancers and Subhiksha are generally
preferred retailers So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer
MUKESH KUMAR ITS PGDM (2006-2008) 46
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
5) How much portion of your fix income you dispose in shopping
month for daily need items (In Thousands)
2-5 thousand
55
5-7 thousand
15
0-2 thousands
20
more than 7 thousand
10
0-2 thousands 2-5 thousand
5-7 thousand more than 7 thousand
Figure no-7
The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items In the sample size of 100 55 of
people invest between 2 to 5 thousands so this is again an opportunity for shop
keepers to earn After analysis of data it has found that on those 60 of people
who invest more than average they mostly prefers organized retail stores
because of variety quality and discount That is also positive point for organize
retailer
MUKESH KUMAR ITS PGDM (2006-2008) 47
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Buying Experience of daily need items with organised retail on the scale of 5
35
25
55
30
Poor
Average
Good
Very Good
Excellent
Buying Experience of daily need items with unorganised retail on the scale of
5
44
17
11 11
17 Poor
Average
Good
Very Good
Excellent
Figure no-8
Above graph shows that more than 60 people have excellent experience with
organize retail but in traditional retail 60 also have excellent experience but
satisfaction level is much higher in organized retail 25 people found excellent
experience in organized retail but only 11 people enjoyed excellent experience
in unorganized retail The respondent had to rate the both organized as well as
unorganized retail store buying experience
MUKESH KUMAR ITS PGDM (2006-2008) 48
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes55
No45
Yes No
Figure no-8
From the sample size of 100 55 people are satisfied with organized retail
More than 50 respondents had given their view in favor of organized retail
stores About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts Mean to say products are available can be found
in less efforts And they are generally Discounted Branded with wide variety
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores
That is a positive point for organized retailers But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop So here is a lead for organized retailers where they have to
work
MUKESH KUMAR ITS PGDM (2006-2008) 49
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
No40
Yes40
Cant say20
Yes No Cant say
Figure no-9
Generally in organized retail wide variety of products is available can be found in
less effort And they are generally Discounted Branded with wide variety But in
some point of view for daily need items 40 people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop But 40 out of 100 feel that goods
are not expensive in organized retail shop And 20 are not having any idea
about the price
MUKESH KUMAR ITS PGDM (2006-2008) 50
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Question Strongly
disagree
Disagree Moderat
e
Agree Strongly
agree
Shopping in organize
retail stores is more
expensive compare
to local kirana shop
20 18 38 12 12
It is more time
consuming to
purchase in
organized retail
stores
20 18 15 22 25
Prefer shopping from
local kirana shop
because they give
credit
9 22 10 20 39
Prefer shopping from
local kirana shop
because they give
fresh products
32 28 17 8 15
Kirana shops provide
home delivery of
even less products
10 10 30 21 29
Table no-6
From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost But in
MUKESH KUMAR ITS PGDM (2006-2008) 51
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
other hand people had given negative response in question ldquoIt is more time
consuming to purchase in organized retail storesrdquo they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38 people gives the reason that these stores gives
lotrsquos of choice in selection so it save theirs traveling time Lover middle class
prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people But in point of
freshness 60 people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh amp Subhiksha In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50 But in organized retail shop
there is a fix slap for that they give home delivery
MUKESH KUMAR ITS PGDM (2006-2008) 52
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
10) Where you feel better to go for purchase of daily need items
Kirana Stores
Convenience store57
Organized Retail shop
43
Organized Retail shop Kirana Stores Convenience store
Figure no-10
The aim of asking this question from respondents is to conclude the research of
ldquoThe Preference of middle class for Organized Retail For daily need itemsrdquo This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety amp quality conscious That is again
a type of victory for organized retailers
MUKESH KUMAR ITS PGDM (2006-2008) 53
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Conclusion
iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight Big
players and national retail chains are changing the rules of the game in spite of
their meager share in the overall retail trade Organized retailing though still in an
embryonic stage has huge growth potential
L
To meet the challenges of organized retailing that is luring customers away from
the unorganized sector the unorganized sector is getting organized Because of
preference of middle class for these stores is going to increase day by day The
organized retail chains display all the products and the most attractive product
catches the customer attention Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market The
customers of the 21st century would expect to pick hisher own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries Thus the way of distribution of products has gained
importance in the past decade
The first challenge facing the organized retail industry in India is competition
from the unorganized sector Traditional retailing has established in India for
some centuries It is a low cost structure mostly owner-operated has 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 traditional
retailing sector That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop
In contrast players in the organized sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional sector
MUKESH KUMAR ITS PGDM (2006-2008) 54
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
High costs for the organized sector arises from higher labor costs social security
to employees high quality real estate much bigger premises comfort facilities
such as air-conditioning back-up power supply taxes etc Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is the more expensive
Limitations
The time factor was a great limitation while the time of 2 month research
project
Due to less knowledge of site of NCR I visited few areas of NCR so
research is based on according to the customer of that area
Sample size of 100 is not sufficient to finish this project in moredescriptive
manner
During our meeting part with customer we consider only our potential
customer who was middle class people
MUKESH KUMAR ITS PGDM (2006-2008) 55
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Bibliography
Books
Retail Marketing by JA Lamba
Statistic Methods by SP Gupta
Research Methodology by C R Kothari
Web sites
httpenwikipediaorgwikiRetail
httpwwwindiaonestopcomretailinghtm
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=13997
httpwwwibeforgartdisplayaspxcat_id=375ampart_id=3974
httpwwwreportbuyercomconsumer_goods_retail
country_overview_consumer_goods_retail_
indian_organized_retail_industry_2005_2007_htmltop
httppopulationcommissionnicinfacts1htm
httpwwwindiatogetherorg2005juleco-palaceshtm
MUKESH KUMAR ITS PGDM (2006-2008) 56
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Magazines amp News papers
Sudhir Vinita (Apral31 2006)rdquoIn The Growth Trajectoryrdquo Pitch pp 26-29
Guest Column (November15 2006)rdquo The Changing Marketplacesrdquo Pitch pp 100-
110
Sridharan R and Gopalan Krishna (December31 2006)rdquoRetailrsquos Coming Face-
Offrdquo Business Today pp82-94
lsquoThe Behemoth from Bentonvillersquo The Times Of India (Times Ascent) New Delhi
27December2006 pp 10
ldquoRetail Revolutionrdquo (29November2006) The Economic Times New Delhi pp 20
Barbaro Michael amp Greenhouse Steven (August19 2006)rdquoWal-Mart image-
maker quitsrdquo Times Business
Kaushik Neha (21December2006) ldquoYouth and beyondrdquo Business Line (Brand
Line) pp 01
MUKESH KUMAR ITS PGDM (2006-2008) 57
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Annexure
QUESTIONNAIRE
1) What the factor that influences your decision while going for purchase of
daily need items
Service Variety of the products
Price Brand Name
Dealing of the sales person Proper product display
2) What type of stores do you prefer for shopping for daily need items
MallsDepartmental Store Co-operative Stores
Kirana Stores Convenience store No particular preference
3) What comes when you think about organized retail shop
Yes No
Fun in shopping
Promptness
Service
Low price
High price
Discount
Variety
Brand
MUKESH KUMAR ITS PGDM (2006-2008) 58
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Door delivery
4) How often you go for shopping for daily need items
Once a day Once a week
Thrice a month Once a month
5) How much portion of your fix income you dispose in shopping month
for daily need items (In Thousands)
0 - 2 2 - 5
5 - 7 more than 7
6) On the scale of 0 to5 Rate your Buying Experience of daily need items
with
Organized retail shop 012345
Kirana Stores 012345
0 for Very poor 1 -poor 2 - average 3 - good 4 - very good 5- excellent
MUKESH KUMAR ITS PGDM (2006-2008) 59
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
7) Are you satisfied with the shopping of daily need items from organized
retail store
Yes No
8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop
Yes No canrsquot say
9) To what extent do you agree with following statements rate them on the
scale of 0 to 5
Shopping in organize retail stores is more expensive compare to local
kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree 2 - disagree 3 - moderate 4 - agree 5- strongly agree
10) Where you feel better to go for purchase of daily need items
Organized retail shop Kirana Stores
Why
MUKESH KUMAR ITS PGDM (2006-2008) 60
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61
Respondent Details
Sex Male Female
Age Qualification
Occupation
Income annum
0-5 Lac 5-15 Lac 15-3 Lac 3-6 Lac More than 6 Lac
MUKESH KUMAR ITS PGDM (2006-2008) 61