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Table of Content

Acknowledgement …………………………………………………..……2

Preface……………………………………………………………………….3

Abstract…………….…………………………………………………………4

An introduction………………………………………………………………5

The global retail industry…………………………………………………...6

Retail scenario in India……………………………………………………..8

Different forms of retailing ………………………………………………..15

Classification of Indian retail sector……………………………………….21

FDI in retail…………………………………………………………………..23

Indian middle class people…………………………………………………25

Opportunity challenges and emerging trends…………………………….27

Retail as an employment generator……………………………………….38

Objective of the survey……………………………………………………..39

Research methodology…………………………………………………….40

Analysais………………………………………………………………………42

Conclusion……………………………………………………………………53

Limitations……………………………………………………………………54

Bibliographie………………………………………………………………….55

Annexure……………………………………………………………………..56

Total no of Tables------7
Total no of Figure------10

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 1


Acknowledgement

O 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 & 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.
I would like to pay my special thanks to Prof. Shekhar
Ghose. He had contributed to this being a much better
project that it couldn’t 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 2


HUMAN BEING MAKES THINGS POSSIBLE.
Mukesh Kumar
PGDM (2006-2008)
(Mukesh_38@yahoo.com)

Preface

P 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.
The 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.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 3


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.

Abstract

T 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
90’s has begun to impact the structure and conduct of the
retail industry.
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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 4


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 don’t have time for things.
Though some of the customers perceive departmental
stores to be expensive and only high income category’s 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.

Introduction

R 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 5


Handel and Einze handle respectively) also refer to sale of
small quantities or items.
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.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 6


Recreational shopping often involves window shopping (just
looking, not buying) and browsing and does not always result
in a purchase.

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
& 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
“Shopper’s 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.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 7


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.

The Global Retail Industry

An Overview
R 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 U.S.A., U.K., 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.
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 U.S.
$7 trillion sector.
Wal-Mart is the world’s largest retailer. Already the world’s
largest employer with over 1million associates, Wal-Mart

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 8


displaced oil giant Exxon Mobil as the world’s 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
(45/497) from the retail business.

Global Retail
1999 2002 2005
Total Retail (US$ 150 180 225
Billion)

Organized Retail 1.1 3.3 7


(US$ Billion)

% Share of 0.7 1.8 3.2


Organized retail

Table no. -1 Source: CSO, MGI Study

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 9


Top Retailers Worldwide
Rank Retailer Home Country

1 Wal-Mart Stores, Inc. U.S.A.

2 Carrefour Group France

3 The Kroger Co. U.S.A.

4 The Home Depot, Inc. U.S.A.

5 Metro Germany

Table no. -2 (Source:


STORES / Deloitte Touche Tomahatsu)

Retail Scenario in India:

A s the corporate – the Piramals, the Tatas, the


Rahejas, ITC, S.Kumar’s, RPG Enterprises, and mega
retailers- Crosswords, Shopper’s Stop, and Pantaloons race
to revolutionize the retailing sector, retail as an industry in
India is coming alive.
Retail sales in India amounted to about Rs.7400 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 8.3% per year, compared
with 7.1% for consumer expenditure. Modernization of the

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 10


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.
A.T. Kearney Inc. places India 6th on a Global Retail
Development Index. The country has the highest per capita
outlets in the world - 5.5 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 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 11


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:
• 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 17.8% by 2006-07.
• 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.
• Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc.
• The internet revolution is making the Indian consumer more accessible to the growing
influences of domestic and foreign retail chains. Reach of satellite T.V. channels is
helping in creating awareness about global products for local markets. About 47% of
India’s 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.
• Retailers direct procure the products & services in bulk through manufacturers, so
they eliminate the middleman and save the cost. They offer the product & services on
the discount prices or on a wholesaler rate to the consumer.

Country Malaysia Thailan Philippine Indonesia South China Indi


d s Korea a

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 12


Organize 55% 50% 35% 30% 15% 20% 3%
d
Retailing

Tradition 45% 50% 65% 70% 85% 80% 97%


Retailing

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 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 13


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%).

The Organized Retail Pie of Daily need items:

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 14


The Organised Retail Pie
Beauty Products

2%
Books, Music &
3% Gifts

7% Home Decore

7%
Jewellery &
40% watches
9%
Footwear

Durables
13%
Food & Grocery
19%

Cloathing, Textiles
& Fashion
Accessories

(Business Today December 31.2006)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 resemble a
retailing industry in the modern sense of the term. This presents international
retailing specialists with a great opportunity.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 15


• It was only in the year 2000 that the global management consultancy put
a figure that: Rs. 400,000 crore (1 crore = 10 million) which will increase more
than Rs. 800,000 crore by the year 2007 – 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). India’s 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 India’s population is engaged in retailing


(compared to 20 per cent in the United States). There is no data on this sector’s
contribution to the GDP.

• From a size of only Rs.20, 000 crore, the organized retail industry will
grow more than Rs. 160,000 crore by 2007. The TOTAL retail market, however,
as indicated above will grow 20 per cent annually from Rs. 400,000 crore in
2000 to Rs. 800,000 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 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 16


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.

• India’s first true shopping mall – complete with food courts, recreation
facilities and large car parking space – 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
India’s retailing industry. The foreign Retail players has knowledge &
experience about Retail ,at the same, local players has knowledge about Indian
culture &society setup.

• These drawbacks present opportunity to international and/or


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 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.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 17


• Indian 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 (3,500 - 5,000 sq. ft)
• Mini supermarkets, typically (1,000 - 2,000 sq. ft)
• Convenience store, typically (7,50 - 1,000 sq. ft)
• Discount/shopping 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.

Format Description The Value Proposition


Exclusive showrooms either Complete range available
Branded Stores owned or franchised out by for a given brand, Certified
a manufacturer. product quality.
Focus on a specific Greater choice to the
Specialty Stores consumer need; carry most consumer, comparison
of the brands available. between brands possible
Large stores having a wide One stop shop catering to
variety of products, varied consumer needs.
Department Stores organized into different
departments, such as

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 18


clothing, house wares,
furniture, appliances, toys,
etc.
Extremely large self- One stop shop
Supermarkets services retail outlets. catering to varied consumer
needs
Stores offering discounts on Low prices.
the retail price through
Discount Stores selling high volumes and
reaping the economies of
scale.
Larger than a Supermarket, Low prices, vast choice
sometimes with a available including services
Hyper-mart
warehouse appearance, as cafeterias
generally located in quieter
parts of the city
Small self-service formats Convenient location and
Convenience Stores located in crowded urban extended operating hours.
areas.
An enclosure having Variety of shops available
Shopping Malls different formats of in-store close to each other.
retailers, all under one roof.
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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 19


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).

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 50,000+
square foot in size, stores in Class II towns have stabilized in
the 25,000-35,000 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 20


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.

Retail Revolution

Name N0.Of stores Formats Details

Pantaloon 100 Multiple Has aggressive growth plans

Format in the retail sector, plans to


reach a monthly run rate of
Rs 2500 crore by June 2010

Reliance 70 Multiple Reliance retail has an


ambitious roll out of 1575

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 21


Format stores by 2007. It plans to
have ware house-style store
spread over 150,000 sq ft
storesbin a super market
format.

Shoppers’ 20 Deptt./ One of the earliest in the


stop Hypermarket / retail market, Shopper’s Stop

Books plans to expand retail space


to 2.5 mn sq ft by FY08,
From the Current 950,700 sq
ft.

Raymond 321 Specialty A manufacturer-retailer.

Stores Raymond also has an


overseas network of around
25 shops

RPG Retail 250 Hypermarkets The group is planning an


expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores. Retail
space of 4 mn sq ft &550
stores by 2008

Bharti Group NA Multiple With joint venture with global

Format major Wal-Mart, the group is


expected to have an
estimated 6 million retail
surface by 2008

Gloubes 28 Deptt / Will add 6 west side Stores,


Hypermarket / 5 Landmark book stores and
Books 1 hypermarket. Space under

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 22


retail will expend to 1.25mn
sq feet in FY 07 from the
current 900,000 sq ft. income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40%

Trent 100 Multiple Has aggressive growth plans

Format in the retail sector, plans to


reacha monthly run rate of
RS 2500 crore by June 2010.

Aditya Birla NA NA The largest corporate group

Group to jump into the fray. Has


some experience in retail
business of Madura
Garments. The format is not
known but their hiring plans
indicate a presence in all
categories from apparel, food
to furniture. The group wild
pump in Rs 5,000 cr to 6,000
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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 23


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 & 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.

• Clothing & 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 24


tastes and preferences, it is unlikely that the traditional
outlets will survive the test of time.
• Home Furniture & 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 & Personal Goods

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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 25


feature of this sector is popularity of franchising agreements
between established manufacturers and retailers.

FDI in retail

G 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.
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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 26


times bigger than Thailand and five times larger than South Korea and Taiwan.
China’s retail trade is 8 per cent of GDP and 6 per cent of employment.

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 4.5 per cent of others.

With MIT Professor Sanjay Sharma’s 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 world’s top 70 retailers have already entered and set up
business. They have helped boost exports. Wal-Mart alone exported in 2002

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 27


about $12 billion worth of goods. These retailers source their goods from inside
China.

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. 50,000 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:

I 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 35,000 and Rs
75,000 a year. In the next income category, Rs 70,000 and
Rs 105,000, the proportion dropped from 36% in 1985 to
one-fifth in 1999. Revealingly, in the next category, Rs
105,000 to Rs 140,000, the percentage increased during this

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 28


period, from 15% to a quarter of the middle class. And above
Rs 140,000, it similarly went up from 22% to 27%. So it
seems clear that this consuming class is better off than ever
before.
• 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$600,000 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$20,000 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 (i.e. upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 29


Opportunity Challenges and emerging trends for
Organized retail in Indian

Opportunity
Population: India’s population estimated at 1,055 million is expected to grow by
1.7 % year by year. Growing urbanization is key trend in the country, with rural
population growth average 17.9 % and urban growth at 30.7% for the period
1991 to 2001. Today (12 Mar 2007 at 10.03) the population of India is
1,110,480,374.
Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 30


Source: Technical Group on Population Projections, Registrar
General of India (RGI) 1996

Figure no.-2
• In the period between 1996-2016, population in the:
1. Age group 15-59 will increase from 519 to 800 million
2. Age group < 15 yrs will decline from 353-350 million
3. Age group > 60 yrs will increase from 62.3 to 112.9 million

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 31


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:
• Automatic approval is not allowed for foreign investment in retail.
• Regulations restricting real estate purchases, and cumbersome local laws.
• Taxation, which favors small retail businesses.
• Absence of developed supply chain and integrated IT management.
• Lack of trained work force.
• Low skill level for retailing management.
• Intrinsic complexity of retailing – rapid price changes, constant threat of product
Obsolescence and low margins.
• The credit facility given by the unorganized retail which is not available to
Organized store
• Traditional pattern of buying of consumer
• Credit facility given by kirana store
• Family relationship with kirana store/Lalagi
• Psychological behavior to enter big size
• Check impulsive buyer
• Absence of model
• Limited floor space, Park space, Display space
• Time factor
• Home delivery

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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 32


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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 33


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 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 ‘Mecca
of Indian Retail’.
Factors Description Implications

� FDI not permitted in � Absence of global


Barriers to FDI pure retailing players

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 34


� Franchisee
arrangement allowed � Limited exposure to
best practices Status
� Government does not � Restricted availability
Lack of Industry recognize the of finance
industry � Restricts growth and
scaling up

� Lack of urbanization � Lack of awareness of


Indian consumers
� Poor transportation � Restricted retail
Structural Impediments infrastructure growth
� Consumer habit of
buying fresh foods � Growth of small, one-
Administered pricing store formats, with
unmatchable cost
structure
� Wastage of almost
20%-25% of farm
produce High Cost of
Real Estate
� Pro-tenant rent laws � Difficult to find good
real estate in terms of
location and size
� High land cost owing
High Cost of Real � Non-availability of to constrained supply
Estate government land, zoning
restrictions
� Lack of clear � Disorganized nature of
ownership titles, high transactions
stamp Duty (10%)

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 35


� Several segments like � Limited product range
food and apparel
reserved for SSIs � Makes scaling up
� Distribution, logistics difficult
Supply Chain constraints–restrictions of
Bottlenecks purchase and movement
of food grains, absence
of cold chain
infrastructure
� Long intermediation � High cost and
chain complexity of sourcing &
planning
� Lack of value addition
and increase in costs by
almost 15%

� Differential sales tax � Added cost and


rates across states complexity of distribution
Complex Taxation � Multi-point octroi � Cost advantage for
System smaller stores through
� Sales tax avoidance tax evasion
by smaller stores

� Stringent labor laws � Limits flexibility in


governing hours of work, operations
minimum wage payments
� Multiple
Multiple Legislations licenses/clearances � Irritant value in
required establishing chain
operations; adds to
overall costs
� Local consumption � Leads to product

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 36


habits proliferation
� Need to stock larger
� Need for variety number of SKUs at store
Customer Preferences level
� Cultural issues � Increases complexity
in sourcing & planning
� Increases the cost of
store management

� Highly educated class � Lack of trained


does not consider personnel
Availability of Talent retailing a profession of
choice
� Lack of proper training � Higher trial and error
in managing retail
operations
� Increase in personnel
costs

� No increase in � Manufacturers refuse


margins to dis-intermediate and
Manufacturers pass on intermediary
Backlash 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 37


applied across India. Some of the notable exceptions have been garment retailers like
Madura Garments & 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.

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 peddler’s carts in the Mall of
America. Today three-fourths of the nation’s major malls
have carts selling everything from casual wear to condoms.
Successful carts average $30,000 to $40,000 a month in
sales and can easily top $70,000 in December. With an
average start-up cost of only $3,000, 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.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 38


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 chains’ 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 & Noble
superstore or
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. Today’s 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.
10. Technology 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, I.T.S, PGDM (2006-2008) 39


11. Retailers with unique formats and strong brand positioning are increasingly
moving into other countries. McDonald’s, The Limited, Gap, and Toys “R”
U.S. have become globally prominent as a result of their great marketing
prowess. Many more Indian retailers are actively pursuing overseas markets to
boost profits.
12. There 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.
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 “learning” phase
and are getting in to the consolidation/aggressive 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, I.T.S, PGDM (2006-2008) 40


Retail as an Employment Generator

T he retail sector can generate huge employment


opportunities, and can lead to job-led economic
growth. In most major economies, ‘services’ 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 6.7% 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
Untapped. A modern retail/retail 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 41


of organized retailing), according to Arvind Singhal, CMD,
KSA Technopak. Retail can create as many new jobs as the
BPO/ITeS sector in India. A strong retail front-end can also
provide the necessary fillip to agriculture & food processing,
handicrafts, and small & 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 & skilled
business people.

OBJECTIVE OF THE SURVEY

T
and
he following survey was mainly done with an
objective to know the state of mind of an individual
their preference of organized retail. And their
satisfaction level towards these outlets.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 42


And 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, i.e., 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 & Kirana store.

RESEARCH METHODOLOGY

T 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.
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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 43


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.

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 & 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, I.T.S, PGDM (2006-2008) 44


Analysis
1) What the factor that influences your decision while going for purchase of
daily need items?
50
45
45

40

35 S eries2
No. of respondants

30

25

20 18
14
15 12
10 8

5 3

0
Service Price Dealing of Variety of theBrand nam e Proper
the s ales products product
pers on dis play
Fa ctors tha t influe nce de cision m a king

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, I.T.S, PGDM (2006-2008) 45


2) What type of stores do you prefer for shopping
for daily need items?

Malls/Departmental
Malls/Depar Store
No
tmental
particular
Store
preference Co-operative Stores
20%
20%

Kirana Stores/
Convenience store

No particular
preference

Co-operative
Stores
15%
Kirana
Stores/
Convenienc
e store
45%

Figure no.-4
For daily need items generally people prefers Kirana
stores/Convenience 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 stores/Convenience. 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 don’t have
much time to visit shop daily. Shopping from these stores

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 46


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 items.15 people out of 100 believe that Co-
operative stores are giving good discount and quality
oriented product.

3) What comes when you think about organized


retail shop?

120
100 12
25 30 20
80 50 45 40 40
60
60
40 80 88
75 70
50 55 60 60
20 40
0
nd

y
Lo ice

Di ce

ty
Hi rice

nt
om ng

ss

er
rie
ou

Do Bra
i
ne

rv

pr
Pr ppi

liv
p

Va
sc
Se

de
pt

gh
o
sh

or
in
n
Fu

YES NO

Figure no.-5
In the process of filling questionnaire done by respondents
when I interacted with people then I found that when I asked

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 47


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.
4) How often you go for shopping for daily need items?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 48


Once a
month
10%

Thrice a Once a day


month 40%
25%

Once in a
week
25%

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 don’t 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 49


retailers. So for these kinds of people organized retailers are
much profitable that is again a type of strength for organized
retailer.

5) How much portion of your fix income you dispose in shopping / month for
daily need items (In Thousands)?

more than 7
thousand
0-2
10%
5-7 thousands
thousand 20%
15%

2-5
thousand
55%

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, I.T.S, PGDM (2006-2008) 50


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
5%
5%
25%

Poor
Average
30%
Good
Very Good
Excellent

35%

Buying Experience of daily need items


with unorganised retail on the scale of
5

11% 11%

Poor
17%
17% Average
Good
Very Good
Excellent

44%

Figure no.-8

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 51


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.
7) Are you satisfied with the shopping of daily need
items from organized retail store?

No
45%
Yes
55%

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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 52


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.
8) It is expensive to purchase in organized retail
stores in comparison to local kirana shop?

Can't say
20%
Yes
40%

No
40%

Yes No Can't say

Figure no.-9

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 53


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.

9) To what extent do you agree with following


statements; rate them on the scale of 0 to 5.
Question Strongly Disagree Moderat Agree Strongly
disagree e agree
Shopping in organize 20% 18% 38% 12% 12%
retail stores is more
expensive compare
to local kirana shop
It is more time 20% 18% 15% 22% 25%
consuming to
purchase in
organized retail
stores
Prefer shopping from 9% 22% 10% 20% 39%
local kirana shop

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 54


because they give
credit
Prefer shopping from 32% 28% 17% 8% 15%
local kirana shop
because they give
fresh products
Kirana shops provide 10% 10% 30% 21% 29%
home delivery of
even less products
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 other hand people had given negative
response in question “It is more time consuming to purchase
in organized retail stores”, 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 lot’s 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 &
Subhiksha. In the point of home delivery people say that

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 55


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.

10) Where you feel better to go for purchase of


daily need items?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 56


Kirana Organized
Stores/ Retail shop
Convenienc 43%
e store
57%

Organized Retail shop Kirana Stores/ Convenience store

Figure no.-10
The aim of asking this question from respondents is to conclude the research of
“The Preference of middle class for Organized Retail For daily need items” 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 & quality conscious. That is again
a type of victory for organized retailers.

Conclusion

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 57


L 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.

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 his/her 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 58


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. 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, I.T.S, PGDM (2006-2008) 59


Bibliography

Books

Retail Marketing by J.A. Lamba


Statistic Methods by S.P. Gupta
Research Methodology by C. R. Kothari

Web sites

http://en.wikipedia.org/wiki/Retail
http://www.indiaonestop.com/retailing.htm
http://www.ibef.org/artdisplay.aspx?cat_id=375&art_id=13997
http://www.ibef.org/artdisplay.aspx?cat_id=375&art_id=3974
http://www.reportbuyer.com/consumer_goods_retail/country_overv
iew_consumer_goods_retail_/indian_organized_retail_industry_2005
_2007_.html#top.
http://populationcommission.nic.in/facts1.htm
http://www.indiatogether.org/2005/jul/eco-palaces.htm

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 60


Magazines & News papers

Sudhir Vinita (Apral31, 2006)”In The Growth Trajectory”, Pitch pp 26-


29
Guest Column (November15, 2006)” The Changing
Marketplaces”, Pitch pp 100-110
Sridharan R. and Gopalan Krishna (December31,
2006),”Retail’s Coming Face-Off”, Business Today pp82-94
‘The Behemoth from Bentonville’ The Times Of India
(Times Ascent), New Delhi, 27December2006, pp 10.
“Retail Revolution” (29November2006) The Economic
Times, New Delhi, pp 20.
Barbaro Michael & Greenhouse Steven (August19,
2006),”Wal-Mart image-maker quits”, Times Business
Kaushik, Neha (21December2006), “Youth and beyond”
Business Line (Brand Line), pp 01.

Annexure

QUESTIONNAIRE

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 61


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?
Malls/Departmental 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
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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 62


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 0...........1.............2...............3.................4...........5

Kirana Stores 0...........1.............2...............3.................4...........5

0 for Very poor, 1 -poor, 2 - average, 3 - good, 4 - very


good, 5- excellent

7) Are you satisfied with the shopping of daily need


items from organized retail store?

Yes No

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 63


8) It is expensive to purchase in organized retail
stores in comparison to local kirana shop?
Yes No can’t
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......................................................................................
...................................

Respondent Details
Sex Male Female

Age Qualification

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 64


Occupation
Income/ annum
0-.5 Lac .5-1.5 Lac 1.5-3 Lac 3-6 Lac More than 6 Lac

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 65