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COMPARATIVE ANALYSIS OF BUYING

BEHAVIOR
RETAIL PURCHASING OF COMMONMAN
Group members:
Name
Akhani Ronak

Roll No.
1

Prajapti Chandrakant 41

CHAPTER 1.
ABSTRACT:
The customers perception is your reality.
Retailing is one of the largest sectors in the global economy and is going through an
evolutionary stage in India. Retail is currently a flourishing sector of the Indian economy. The
Indian Retail industry has grown at a 14.6% CAGR during FY07-12. This growth can be
directly credited to the emergent Indian economy as well as increase in Private Final
Consumption Expenditure (PFCE) and bring revolution in Indian peoples consumption
pattern. This tendency is expected to continue for at least the next two-three decades,
magnetizing huge attention from entrepreneurs, business heads, investors as well as real
estate owners and builders segments of the economy. Despite this growth, the Indian retail
industry is highly fragmented, with the organized retailing still at a nascent stage which
accounts for far less percentage than the unorganized retailing of the total Indian retail
market. It is estimated that organized retailing accounts for less than 5% of todays market,
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but is expected to develop between14% to 18% by 2015. During FY07- 12, the organized
retailing in India has grown at a CAGR of 26.4%; higher that the total growth of Indian
retailing. The sector is the largest source of employment after agriculture, and has deep
access into rural India generating more than 10 per cent of Indias GDP.
This study aims to identify the factors influencing the perception towards organized
retailing from unorganized retailers. The primary data was gathered by administering a
prearranged questionnaire with 100 customers selected purposively from Udaipur District.
The data analysis of customer attitude towards unorganized and organized retailers shows
that there is a difference between the consumers perception towards both organized retailers
and unorganized retailers regarding their store image, range of products, brand choices, price,
store atmosphere, credit availability, and shop proximity. The data has been collected with the
help of structured questionnaire containing close and open ended questions. Statistical
software and MS excel were extensively used for analyzing the data collected. The rationale
of the study is twofold: First, to examine the shift in perception in the retail sector taking
place due to organized form of retailing.

INTRODUCTION:
Retailing means Re-tailing to the customers so that they come back towards them.
Retailing consists of all activities involved in selling goods and services to consumers for
their personal, family, or household use. In 2004, The High Court of Delhi defined the term
retail as a sale for final consumption in contrast to a sale for further sale or processing (i.e.
wholesale). India is the 2nd fastest growing in the world. It is 3rd largest economy in the
world in terms of GDP and fourth largest economy in terms of Purchasing Power Parity. India
presents a huge opportunity to be used as a hub to the world. India is the promised land for
global brands and Indian retailers A Vibrant Economy. Retailing in India is progressively
moving towards becoming the next fastest growing industry.
According to A.T. Kearney, retailing accounts for $410 billion and organized retailing
accounts for only 5% of the above market. According to the Global Retail Development
Index 2012, India ranks on 5th among the top 30 emerging retail markets. The recent
announcement by the Indian government with Foreign Direct Investment (FDI) in retail,
especially allowing 100% FDI in single brands and multi-brand FDI has created positive
attitudes in this sector.
Retail industry in India has a huge growth potential and opportunities existing in
multiple sectors and segments. For a long time, the corner grocery stores (kirana stores) were
the single choice available to the consumers. But with the LPG policy in 1991 the
international formats of retailing paved their way in India. As the time passes, organized
retailing especially has been creating curiosity amongst Indian consumers to sketching them
into malls for shopping in huge numbers.
However the growth in organized retailing has been limited primarily to the urban
markets in the country. Even the large chunks of unorganized retail have not fell depressed
from this nominal growth in organized retailing and have tried to restructure and redefine
themselves by introducing self- service formats, and value-added services, such as credit and
home delivery. To safeguard the position in the market retailers have made an attempt to
attract customers by offering newer service dimensions and creating unique shopping
experiences for the customers.

Perceptions about these retailers are largely determined by tangible characteristics of


stores, such as format or size, proximity, varieties available as well as intangible factors like
the store atmosphere, complaint handling, etc.
Beginning with the turn of the century and continuing for many years, retailers and
buyers for retail stores (retail purchasing) concentrated all of their buying efforts on the
selection of merchandise items they thought their customers would like and would purchase.
These buyers were product-orientated. It was called subjective retailing because the buyer
based the buying decision on a personal view of the likes and dislikes of customers.
Within recent years the consumer movement (consumerism) has forced a change in the
retailer's buying efforts from a subjective attitude to that of an objective one. The retailer now
has to measure the likes and dislikes of the customers before a buying decision can be made.
The buyer has to be consumer-orientated. Retailing has entered into the new era of the
marketing of merchandise.
The Marketing Approach it was now necessary to obtain the answers, through research
and study, to the where, who, what, when and why of the consumer's buying habits and
choices. The "where" refers to the trading area from which the retailer attracts its customers?
The "who" refers to the demographic descriptions of these customers which provide a profile
of the potential customers?
The "what" refers to the types of merchandise these potential customers want to buy and,
therefore, want the retailer to stock? The "when" refers to the part of the year when the
customers make their purchases? The "why" refers to the psycho-graphics of the customers
which reflect their varied life-styles and the projection of these life styles into purchasing
habits. As a result of this consumerism, the small retailer and the buyer for the larger store has
had to learn the significance of a new vocabulary to successfully effect this marketing of the
merchandise approach.
The new vocabulary includes such phrases as: target group, an understanding of the
wants and needs of the consumers the retailer has selected to serve; the marketing
positioning, the merchandising policies the retailer has established upon which to develop a
reputation as a price, value, quality, assortment, and fashion leader; market penetration, the
extent to which the retailer has succeeded in interpreting and satisfying the merchandise
wants and needs of the target group; the new tools, the new approach of marketing the
merchandise requires a knowledge and understanding of the tools necessary to effectively
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buy for retail stores; and, the merchandise plan, (see below) which is a timetable of
merchandising objectives to be achieved within a stated time frame to ensure that your
planned market positioning and market penetration are realized.
Retailing
In an ideal business world, most marketers would prefer to handle all their distribution
activities by way of the corporate channel arrangement we discussed in the Distribution
Decisions tutorial. Such an arrangement provides the marketer with two important benefits.
First, being responsible for all distribution means the marketing organization need only worry
about making decisions concerning their product. When others, such as resellers, are involved
in distribution attention is not given to a single supplier but is stretched across all products the
reseller carries. Second, having control on all distribution means the marketer is always in
direct contact with buyers of their products, which can make it easier to build strong, longterm relationships with customers.
Unfortunately, as we saw in the last tutorial, for many marketing organizations a
corporate channel arrangement is not feasible. Whether due to high cost or lack of experience
needed to run a channel efficiently, the majority of marketing organizations rely on third
parties to get their products into the hands of customers.
In the next two sections of the Principles of Marketing Tutorials we examine the key
parties through which marketers seek distribution assistance. Choosing which parties to aid in
product distribution is important since a distributors actions can affect how customers view
the marketer and the products they offer. As we discussed in the Targeting Markets tutorial, a
customers perception of a product affects how they mentally position the product in relation
to competitive products. How a product is distributed, including where it is located (e.g.,
reputation of resellers from whom they purchase) and customer experience with the
purchasing process (e.g., how long to receive, condition when received), will impact a
customers feelings about the product which in turn affects how a customer positions the
product in their mind.
In this tutorial we examine retailers as resellers of a marketers products. In terms of
sales volume and number of employees, retailing is one of the largest sectors of most
economies. We will see that retailing is quite diverse and marketers, who want to distribute
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through retailers, must be familiar with the differences that exist among different retail
options.
What is Retailing?
Retailing is a distribution channel function where one organization buys products
from supplying firms or manufactures the product themselves, and then sells these directly to
consumers. A retailer is a reseller (i.e., obtains product from one party in order to sell to
another) from which a consumer purchases products. In the US alone there are over
1,100,000 retailers according to the 2002 US Census of Retail Trade.
In the majority of retail situations, the organization from which a consumer makes
purchases is a reseller of products obtained from others and not the product manufacturer. But
as we discussed in the Distribution Decisions tutorial, some manufacturers also operate their
own retail outlets in a corporate channel arrangement. While consumers are the retailers
buyers, a consumer does not always buy from retailers. For instance, when a consumer
purchases from another consumer (e.g., eBay) the consumer purchase would not be classified
as a retail purchase. This distinction can get confusing but in the US and other countries the
dividing line is whether the one selling to consumers is classified as a business (e.g., legal
and tax purposes) or is selling as a hobby without a legal business standing.
As a reseller, retailers offer many benefits to suppliers and customers as we discussed
in the Distribution Decisions tutorial. For consumers the most important benefits relate to the
ability to purchase small quantities of a wide assortment of products at prices that are
considered reasonably affordable. For suppliers the most important benefits relate to offering
opportunities to reach their target market, build product demand through retail promotions,
and provide consumer feedback to the product marketer.
Benefits of Retailers
As a reseller, retailers offer many benefits to suppliers and customers as we discussed in
the Distribution Decision Tutorial. The major benefits for each include:

Access to Customers For suppliers, the most valuable benefits provided by retailers
are the opportunities they offer for reaching the suppliers target market, building product
demand through retail promotions, and providing consumer feedback. The knowledge
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and skills offered by retailers are key for generating sales, profits, and customer loyalty
for suppliers.

Access to Product For consumers, the most significant benefits offered by retailers
relate to the ability to purchase products that may not otherwise be easily available if the
consumers had to deal directly with product suppliers. In particular, retailers provide
consumers with the ability to purchase small quantities of a wide assortment of products
at prices that are considered reasonably affordable. Additionally, when it comes to
retailers with physical locations (e.g., retail store), these are likely to be located near the
retailers target market; thereby, enabling consumers to make purchases and take home
the product much more conveniently than if they had to visit a product suppliers facility
or purchase via the Internet.

Ways to Categorize Retailers


There are many ways retailers can be categorized depending on the characteristics being
evaluated. For our purposes we will separate retailers based on six factors directly related to
major marketing decisions:

Target Markets Served

Product Offerings

Pricing Structure

Promotional Emphasis

Distribution Method

Service Level and one operational factor:Ownership Structure


However, these groups are not meant to be mutually exclusive. In fact, as we will see in

some way all retailers can placed into each category.


Retail Categories: Target Markets Served

The first classification looks at the type of markets a retailer intends to target. These
categories are identical to the classification scheme we saw in the Decisions tutorial when we
discussed the levels of distribution coverage.

Mass Market Mass market retailers appeal to the largest market possible by selling
products of interest to nearly all consumers. With such a large market from which to draw
customers, the competition among these retailers is often fierce.

Specialty Market Retailers categorized as servicing the specialty market are likely
to target buyers looking for products having certain features that go beyond mass
marketed products, such as customers who require more advanced product options or
higher level of customer service. While not as large as the mass market, the target market
serviced by specialty retailers can be sizable.

Exclusive Market Appealing to this market means appealing to discriminating


customers who are often willing to pay a premium for features found in very few
products and for highly personalized services. Since this target market is small, the
number of retailers addressing this market within a given geographic area may also be
small.

Retail Categories: Product Offerings


Under this classification retailers are divided based on the width (i.e., number of different
product lines) and depth (i.e., number of different products within a product line) of the
products they carry.

General Merchandisers These retailers carry a wide range of product categories


(i.e., broad width) though the number of different items within a particular product line is
generally limited (i.e., shallow depth).

Multiple Lines Specialty Merchandisers - Retailers classified in this category stock


a limited number of product lines (i.e., narrow width) but within the categories they
handle they often offer a greater selection (i.e., extended depth) than are offered by
general merchandisers. For example, a consumer electronics retailer would fall into this
category.
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Single Line Specialty Merchandisers Some retailers limit their offerings to just
one product line (i.e., very narrow width), and sometimes only one product (i.e., very
shallow depth). This can be seen online where a relatively small website may sell a single
product such as computer gaming software. Another example may be a small jewelry
store that only handles watches.

Retail Categories: Pricing Strategy


Retailers can be classified based on their general pricing strategy. Retailers must decide
whether their approach is to use price as a competitive advantage or to seek competitive
advantage in non-price ways.

Discount Pricing Discount retailers are best known for selling low priced products
that have a low profit margin (i.e., price minus cost). To make profits these retailers look
to sell in high volume. Typically discount retailers operate with low overhead costs by
vigorously controlling operational spending on such things as real estate, design issues
(e.g., store layout, website presentation), and by offering fewer services to their
customers.

Competitive Pricing The objective of some retailers is not to compete on price but
alternatively not to be seen as charging the highest price. These retailers, who often
operate in specialty markets, aggressively monitor the market to insure their pricing is
competitive but they do not desire to get into price wars with discount retailers. Thus,
other elements of the marketing mix (e.g., higher quality products, nicer store setting) are
used to create higher value for which the customer will pay more.

Full Price Pricing Retailers targeting exclusive markets find such markets are far
less price sensitive than mass or specialty markets. In these cases the additional value
added through increased operational spending (e.g., expensive locations, more attractive
design, more services) justify higher retail prices. While these retailers are likely to sell in
lower volume than discount or competitive pricing retailers, the profit margins for each
product are much higher.

Retail Categories: Promotional Focus

Retailers generate customer interest using a variety of promotional technique, yet some
retailers rely on certain methods more than others as their principle promotional approach.

Advertising Many retailers find traditional mass promotional methods of


advertising, such as through newspapers or television, continue to be their best means for
creating customer interest. Retailers selling online rely mostly on Internet advertising as
their promotional method of choice.

Direct Mail A particular form of advertising that many retailers use for the bulk of
their promotion is direct mail advertising through postal mail. Using direct mail for
promotion is the primary way catalog retailers distribute their materials and is often
utilized by smaller local companies who promote using postcard mailings.

Personal Selling Retailers selling expensive or high-end products find a


considerable amount of their promotional effort is spent in person-to-person contact with
customers. While many of these retailers use other promotional methods, in particular
advertising, the consumer-salesperson relationship is key to persuading consumers to
make purchase decisions.

Retail Categories: Distribution Method


Retailers sell in many different formats with some requiring consumers visit a physical
location while others sell to customers in a virtual space. It should be noted that many
retailers are not tied to a single distribution method but operate using multiple methods.

Store-Based Sellers By far the predominant method consumers use to obtain


products is to acquire these by physically visiting retail outlets (a.k.a. brick-and-mortar).
Store outlets can be further divided into several categories. One key characteristic that
distinguishes categories is whether retail outlets are physically connected to one or more
others stores:
o

Stand-Alone These are retail outlets that do not have other retail outlets
connected.

Strip-Shopping Center A retail arrangement with two or more outlets


physically connected or that share physical resources (e.g., share parking lot).
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Shopping Area A local center of retail operations containing many retail


outlets that may or may not be physically connected but are in close proximity to each
other such as a city shopping district.

Regional Shopping Mall Consists of a large self-contained shopping area


with many connected outlets.

Non-Store Sellers A fast growing method used by retailers to sell products is


through methods that do not have customers physically visiting a retail outlet. In fact, in
many cases customers make their purchase from within their own homes.
o

Online Sellers The fastest growing retail distribution method allows


consumer to purchase products via the Internet. In most cases delivery is then handled
by a third-party shipping service.

Direct Marketers Retailers that are principally selling via direct methods
may have a primary location that receives orders but does not host shopping visits.
Rather, orders are received via mail or phone.

Vending While purchasing through vending machines does require the


consumer to physically visit a location, this type of retailing is considered as nonstore retailing as the vending operations are not located at the vending companys
place of business.

Retail Categories: Service Level


Retailers attract customers not only with desirable products and affordable prices, but
also by offering services that enhance the purchase experience. There are at least three levels
of retail service:

Self-Service This service level allows consumers to perform most or all of the
services associated with retail purchasing. For some consumers self-service is considered
a benefit while others may view it as an inconvenience. Self-service can be seen with: 1)
self-selection services, such as online purchasing and vending machine purchases, and 2)
self-checkout services where the consumer may get help selecting the product but they
use self-checkout stations to process the purchase including scanning and payment.
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Assorted-Service The majority of retailers offer some level of service to


consumers. Service includes handling the point-of-purchase transaction; product selection
assistance; arrange payment plans; offer delivery; and many more.

Full-Service The full-service retailer attempts to handle nearly all aspects of the
purchase to the point where all the consumer does is select the item they wish to
purchase. Retailers that follow a full-price strategy often follow the full-service approach
as a way of adding value to a customers purchase.

Retail Categories: Ownership Structure


Finally, we can categorize retailers based on the ownership structure of the business.

Individually Owned and Operated Under this ownership structure an individual


or corporate entity owns and operates one or a very small number of outlets. Single
ownership of retail outlets most frequently occurs with small retail stores, though there
are some cases, for instance in the automotive or furniture industries, where single
ownership involves very large outlets.

Corporate Chain A retail chain consists of multiple retail outlets owned and
operated by a single entity all performing similar retail activities. While the number of
retail outlets required to be classified as a chain has never been specified, we will assume
that anyone owning more than five retail locations would be considered a chain.

Corporate Structure This classification covers large retailers predominantly


operating in the non-store retail arena such as online, catalog and vending.

Contractually Licensed and Individually Operated The contractual channel


arrangement discussed in the Distribution Decisions tutorial has lead to a retail ownership
structure in which operators of the retail outlet are not the out-right owners of the
business. Instead, the arrangement often involves a legal agreement in which the owner of
the retail concept allows the operator to run the owners business concept in exchange for
financial considerations such as a percentage of revenue. This structure is most often seen
in retail franchising.

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Retail Formats: Part 1


Now that we have presented ways in which retailers can be classified, we now use
these categories to distinguish general formats or business models that best describes a retail
operation. These categories are designed to identify the primary format a retailer follows. In
some cases, particularly with the advent of the Internet, a retailer will be involved in more
than one format.
Mom-and-Pop
Represent the small, individually owned and operated retail outlet. In many cases
these are family-run businesses catering to the local community often with a high level of
service but relatively small product selection..
Mass Discounters
These retailers can be either general or specialty merchandisers but either way their
main focus is on offering discount pricing. Compared to department stores, mass discounters
offer fewer services and lower quality products.
Warehouse Stores
This is a form of mass discounter that often provides even lower prices than
traditional mass discounters. In addition, they often require buyers to make purchases in
quantities that are greater than what can be purchased at mass discount stores. These retail
outlets provide few services and product selection can be limited. Furthermore, the retail
design and layout is as the name suggests, warehouse style, with consumers often selecting
products off the ground from the shipping package. Some forms of warehouse stores, called
warehouse clubs, require customers purchase memberships in order to gain access to the
outlet.

Category Killers
Many major retail chains have taken what were previously narrowly focused, small
specialty store concepts and have expanded them to create large specialty stores. These so13

called category killers have been found in such specialty areas as electronic (e.g., Best
Buy), office supplies (e.g., Staples) and sporting goods (e.g., Sport Authority).
Department Stores
These retailers are general merchandisers offering mid-to-high quality products and
strong level of services, though in most cases these retailers would not fall into the fullservice category. While department stores are classified as general merchandisers some carry
a more selective product line. For instance, while Sears carries a wide range of products from
hardware to cosmetics, Nordstrom focuses their products on clothing and personal care
products.
Boutique
This retail format is best represented by a small store carrying very specialized and
often high-end merchandise. In many cases a boutique is a full-service retailer following a
full-pricing strategy.
Catalog Retailers
Retailers such as Lands End and LL Bean have built their business by having
customers place orders after seeing products that appear in a mailed catalog. Orders are then
delivered by a third-party shipper.
E-tailers
Possibly the most publicized retail model to evolve in the last 50 years is the retailer
that principally sells via the Internet. There are thousands of online-only retail sellers of
which Amazon.com is the most famous. These retailers offer shopping convenience including
being open for business all day, every day. Electronic retailers or e-tailers also have the ability
to offer a wide selection of product since all they really need in order to attract orders is a
picture and description of the product. That is, they may not need to have the product on-hand
the way physical stores do. Instead an e-tailer can wait until an order is received from their
customers before placing their own order with their suppliers. This cuts down significantly on
the cost of maintaining products in-stock.

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Franchise
As noted in the Distribution Decisions tutorial, a franchise is a form of contractual
channel in which one party, the franchisor, controls the business activities of another party,
the franchisee. Under these arrangements, an eligible franchisee agrees to pay for the right to
use the franchisors business methods and other important business aspects, such as the
franchise name. For instance, McDonald's is a well-known franchisor that allows individuals
to use the McDonald's name and methods to deliver food to consumers. Payment is usually in
the form of a one-time, upfront franchise fee and also on-going percentage of revenue. While
the cost to the franchisee may be quite high, this form of retailing offers several advantages
including: 1) allowing the franchisee to open a retail outlet that may already be known to
local customers, and 2) being trained in how to operate the business, which may allow the
franchisee to be successful much faster than if they attempted to start a business on their own.
For the franchisor, in addition to added revenue, the franchise model allows for faster
expansion since funds needed to expand the business (e.g., acquiring retail space, local
advertising) are often supported by the franchisees up-front franchise fee.
Convenience Store
As the name implies these general merchandise retailers cater to offering customers
an easy purchase experience. Convenience is offered in many ways including through easily
accessible store locations, small store size that allows for quick shopping, and fast checkout.
The product selection offered by these retailers is very limited and pricing can be high.
Vending
Within this category are automated methods for allowing consumers to make
purchases and quickly acquire products. While most consumers are well aware of vending
machines allowing customers to purchase smaller items, such as beverages and snack food,
newer devices are entering the market containing more expensive and bulkier products. These
systems require the vending machine have either Internet or telecommunications access to
permit purchase using credit cards.

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Retailer Summary Chart


Below we summarize each retail format by using the seven categorization
characteristics. The characteristics identified for each format should be viewed as the most
likely case for that format and are not necessarily representative of all retailers that fall into
this format.
For example, under distribution, clearly most retailers today have an online presence,
however, for many the predominant distribution methods is still selling through retail stores.

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Concerns of Retailers
While much of the discussion in this tutorial deals with the role of retailers in the
marketing strategy for consumer products companies, it is necessary to understand that
retailers face their own marketing challenges. Among the marketing issues facing retailers
are:

Customer Satisfaction Retailers know that satisfied customers are loyal customers.
Consequently, retailers must develop strategies intended to build relationships that result
in customers returning to make more purchases.

Ability to Acquire the Right Products A customer will only be satisfied if they can
purchase the right products to satisfy their needs. Since a large percentage of retailers do
not manufacture their own products, they must seek suppliers who will supply products
demanded by customers. Thus, an important objective for retailers is to identify the
products customers will demand and negotiate with suppliers to obtain these products.

Product Presentation Once obtained products must be presented or merchandised


to customers in a way that generates interest. Retail merchandising often requires hiring
creative people who understand and can relate to the market.

Traffic Building Like any marketer, retailers must use promotional methods to
build customer interest. For retailers a key measure of interest is the number of people
visiting a retail location or website. Building traffic is accomplished with a variety of
promotional techniques such as advertising, including local newspapers or Internet, and
specialized promotional activities, such as coupons.

Layout For store-based retailers a stores physical layout is an important component


in creating a retail experience that will attract customers. The physical layout is more than
just deciding in what part of the store to locate products. For many retailers designing the
right shopping atmosphere (e.g., objects, light, sound) can add to the appeal of a store.
Layout is also important in the online world where site navigation and usability may be
deciding factors in whether of a retail website is successful.
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Location Where to physically locate a retail store may help or hinder store traffic.
Well placed stores with high visibility and easy access, while possibly commanding
higher land usage fees, may hold significantly more value than lower cost sites that yield
less traffic. Understanding the trade-off between costs and benefits of locations is an
important retail decision.

Keeping Pace With Technology Technology has invaded all areas of retailing
including customer knowledge (e.g., customer relationship management software),
product movement (e.g., use of RFID tags for tracking), point-of-purchase (e.g., scanners,
kiosks, self-serve checkout), web technologies (e.g., online shopping carts, purchase
recommendations) and many more.

India started its Retail Journey since ancient time.In Ancient India there was a concept of
weekly HAAT, where all the buyers and sellers gather in a big market for bartering. It takes a
pretty long times to step to shape the modern retail. In between these two concepts (i.e.,
between ancient retail concept and the modern one there exist modern Grocery/mom and pop
shops or BaniyakiDukan. Still it is predominating in India So the Indian retail industry is
divided into two sectorsorganized and unorganized. The Indian retail industry is now
beginning to evolve transformation that has swept other large economies. There is a vast
change in Indian retail, the liberalization of the consumer goods industry initiated in the mid
1980s and accelerated through the 1990s 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. Hence,
focusing on two aspects of retail marketing, i.e., store retailing and non-store retailing. Store
Retailing as the departmental store, which is a store or multi brand outlet, offering an array of
products in various categories under one roof, trying to cater to not one or two but many
segments of the society and Non store retailing as the direct selling, direct marketing,
automatic vending.
The most important debate concerning the implications for the expansion of the
organized retailing in India revolves around whether it is going to have positive impacts on
the economy as a whole as compared to the traditional unorganized form of retailing.
According to one camp, it has overall positive impacts in terms of generating more number of
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employments, new diversified forms of employments, and improving the nature of retail
employment (higher salary, more job benefits, security of job, employability, etc.). This form
of retail sector is also looked upon as a huge sector having immense business opportunities
for entrepreneurs and capital investors. Moreover, organized retailing is considered to be
efficient and apt to cater to the diversified and changing nature of the consumer demands in
growing economies like India. The general benefits of organized retail also include improved
supply-chain, improved marketability of farmers produce and it is also expected that it will
contribute to heightened economic activity.
The extensive research brought me to conclude that departmental stores are soon
emerging on the top priority lists, amongst the shopping spree in Delhi, as they seem to
derive immense pleasure as shopping is considered as an experience now rather than a task
and exposure to variety under one roof in their extremely busy lives, when they dont have
time for things.
The organized retail food and grocery stores make constant efforts to induce
customers to visit the store by discount offers. Most of these stores believe in creating not just
a marketing activity with its customers, but rather favor relationship building with him so as
to convert first time customers into a client. They provide better parking facilities to
customers and the facility to examine the product. They also offer a wide range of payment
options to customers. India is currently the twelfth largest consumer market in the world.
According to a study by McKinsey Global Institute, India is likely to join the premier league
of the worlds consumer markets by 2025 improving its position to the fifth. But this growth
is not going to happen is smooth way. Any change always comes up with some friction and
Indian retail sector is and will be witnessing the same friction. Indian retail sector is still in its
nascent form if we consider its full potential.
While most of the developed market of US and Europe and also some SE Asian
emerging market economies have reaped the benefits of modern retail, India has not yet
entered into advanced phase of modern retail forms. Unorganized retailing, on the other hand,
refers to the traditional formats of low-cost retailing, for example, hand cart and payment
vendors, and mobile vendors, the local Grocery shops, owner manned general stores, paan /
beedi shops, convenience stores, hardware shop at the corner of your street selling everything
from bathroom fittings to paints and small construction tools; or the slightly more organized
medical store and a host of other small retail businesses in apparel, electronics, food, etc.
Small-store retailing has been one of the easiest ways to generate self-employment, as
it requires limited investment in land, capital and labor. It is generally family run business,
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lack of standardization and the retailers who are running this store they are lacking of
education, experience and exposure. This is one of the reasons why productivity of this sector
is approximately 4% that of the US retail industry. Unorganized retail sector is still
predominating over organized sector in India, unorganized retail sector constituting 98% (12
million) of total trade, while organized trade accounts only for 2%. The road side hawkers
and the mobile (pushcart variety) retailers.
The grocery stores (the Indian equivalent of the mom and-pop stores of the US),
within which are: (i) Open format more organized outlets, (ii) Small to medium food retail
outlets. Modern trade or organized retailers within modern trade, we have: (i) the discounter
(Subhiksha, Apna Bazaar, Margin Free); (ii) The value for money store (Nilgiris), (iii) The
experience shop (Food world, Trinethra), (Iv) The home delivery (Fabmart) Tug of war:
Organized Vs. Unorganized Sector
Future of retail sector in India is swerving-on one side organized retail is marching
into life of urban consumers, while on the other our own neighborhood Grocery stores are
resistingfiercely with their existing strong foothold. India today is at the crossroads with
regard to the retail sector. A shift between organized and unorganized retail sector is evident,
which hasled to a number of speculations on the fate of Indian retail. Unorganized sector
cannot ignore. In any newspaper or television channel, we find hordes of news about
happening in organized retail sectors, which is indeed fairly real situation. While the role of
organized retail sector in growth of economy cannot be denied, but one thing is also of
extreme importance that unorganized retail format is a support to a large chunk of
populationprovidingdirect employment to 39,500,000 individuals. So there is no way that
governmentor anyone can discount these foundation stone of Indian economy.
Changing Landscape of Indian
Consumerism
The face of Indian consumerism is changing: not Indian consumerism is evolving
from Bajaj Scooter family man to Bajaj Pulsar trendy youngster. This changing consumers
taste and lifestyle, somewhere automatically give some advantage to organized sector. This
makes imperative for unorganized retail sector to restructure itself in order to withstand the
increasing competition and to meet consumer expectations by moving with trends. What they
can do and what they are doing, some of these issues will be discussed in future parts of
article.
Retail Trends in Past Few Years

20

Before the decade of eighties, India with hundreds of towns and cities was a nation
striving for development. The evolution was being witnessed at various levels and the people
of the nation were learning to play different roles as businessmen and consumers. The
foundation for a strong economy were being laid, youth were beckoning new awareness in all
spheres. And this brought in an opportunity for retail industry to flourish. First in the metros
and major cities later to impact sub urban and rural market as well. Retailing in India at this
stage was completely unorganized and it thrived as separate entities operated by small and
medium entrepreneurs in their own territories. There was lack of international exposure and
only a few Indian companies explored the retail platform on a larger scale. From overseas
only companies like Levis, Pepe, Marks and Spencer, etc., had entered targeting upper
middle and rich classes of Indians.
However as more than 50 % population was formed by lower and lower middle class
people, the market was not completely captured. This was later realized by brands like Big
Bazaar and Pantaloons who made their products and services accessible to all classes of
people and today the success of these brands proves the potential of Indian retail market. A
great shift that ushered in the Indian Retail Revolution was the eruption of Malls across all
regional markets.
Now at its peak, the mall culture actually brought in the organized format for retailing
in India which was absent earlier. Though malls were also initially planned for the higher
strata, they successfully adapted to cater to the larger population of India. And it no wonder,
today malls are changing the way common Indians have their shopping experience. However
there is still great scope for enhancing Indian mall culture as other than ambience and
branding many other aspects of Retail Service remains to be developed on international
standards. It is surprise that there
was not a single mall in India a decade before and just a few years ago only a handful of them
were striving, today there are more than 50 malls across different cities and 2 years from now
around 500 malls are predicted to come up. Indeed this shows a very promising trend ahead,
however before taking a leap into the future of Retail in India, lets see what the Indian retail
Industry is currently occupied with.

The Merchandise Plan:


The plan is applicable to all forms of retailing at all sales levels. It is most often a six-month
merchandise plan but there can be time frame variations depending upon the merchandise. The
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first six-month plan includes February- March-April (spring) and May-June-July (summer). This
plan is prepared and finalized in the previous August to permit early buying of imports and other
merchandise. The second six- month plan includes August-September-October (fall) and
November-December-January (winter).
This plan is prepared and finalized in the previous February for the same reasons stated
above. The important items to be considered monthly when developing your six-month
Merchandise Plan are:
Net Sales - This figure represents a realistic dollar estimate of your monthly merchandise sales.
These sales estimates are based on past experience and on future considerations including;
business conditions, competition, inflation, promotional plans, merchandising opportunities, and
merchandise availability.
Stock - In order to achieve your estimated (planned) sales figure you must provide sufficient
stock to permit a satisfactory selection for your customers. This stock figure can be determined
by calculating your inventory turnover rate or your sales-stock ratio, or by estimating the
maximum quantity for each item or the stock requirements based on expected weekly sales.
Reductions - Reductions refer to the lowering of retail value of your inventory and are caused by
planned markdowns, shrinkage (stock shortage) and discounts to employees or other special
groups. Since these are the only three things that can cause the retail value of the inventory at the
end of a period to have a lower valuation than it had at the beginning of the period, they are to be
included in the plan.
Purchases - This figure represents the dollar value of merchandise the buyer must purchase to
replenish the stock likely to be sold to your retail customers. It is calculated by subtracting the
dollar value of the stock-on-hand at the beginning of the month from the total dollar value of the
planned net sales, shrinkage, and reduction for the month.
The result is the planned purchases for the month..
Open-To-Buy - To arrive at the open-to-buy figure for the month, it is necessary to subtract
(from the above planned purchases figure) the dollar value of the commitments already placed for
delivery during the same month. Since each month is an entity by itself, it is not possible to carry
any unspent open-to-buy commitments over to the next month. Knowledgeable buyers generally
commit about 50 percent of the planned purchase figure in order to allow funds for reorders, fillins, and to take advantage of unexpected marketing opportunities. In addition to the above items

22

and depending upon the retail operation, the following elements may also be included in your sixmonth plan: turnover, markon, payroll, advertising, gross margin, number of transactions, and
average sale. It should be noted that the six-month plan is flexible and can be adjusted at any time
to meet changing business conditions.
The Stock Plan:
After determining the broad categories of merchandise the store is to stock (men's clothing,
stationary, costume jewelry, etc.), the retailer divides the broad categories into smaller categories
called classifications (men's suits, tuxedos, raincoats, etc.). In turn, the classifications are divided
into sub-classification (single-breasted, double-breasted, etc.). A unit stock plan of the number of
items to be stocked in each by price, style, color and size is then prepared. The purpose of this
approach is to ensure that the stock will present an assortment of items that will satisfy the wants
and needs of the broad section of targeted consumers. One element of the stock plan approach is
the model stock or basic stock list. This list will contain those items that the customer expects to
find in stock at all times. These are the musts or never-out items which are sometimes referred to
as the bread-and-butter items.
The number of items in all stock plans is multiplied by the price line to arrive at the dollar
value of the planned inventory. Adjustments in the stock plan may be necessary if the financial
constraints preclude an ambitious stock assortment.
The Buying Plan:
One of the most important aspects of market penetration is to have the items in stock
when the customers want to buy them. This implies going into the market to buy the goods early
enough to ensure delivery to the store at the proper time. For example, to ensure on-time delivery
of children's Easter clothes, you must place the orders and commit the resources in the previous
September. So buying for a retail store requires advance planning to determine the merchandise
needs for each month and then placing the commitments without procrastination.
Since retailers offer for sale the new items months before the actual calendar date for the
beginning of the new season, it is imperative that buying plans be formulated early enough to
allow for intelligent buying without any last minute panic purchases. The main reason for this
early offering for sale of new items is that the retailer regards the calendar date for the beginning
of the new season as the merchandise date for the end of the old season. For example, March
21st, from a merchandising viewpoint, is the end of spring while June 21st is the end of summer
and December 21st the end of winter.
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The period following the calendar date for the beginning of the season is used by the retailer
to sell closeouts, job lots, imperfects, irregulars, seconds, distress merchandise, off-price
purchases and markdowns from regular stock.
In summary the Buying Plan should detail: When the market should be visited to see,
examine, and study the new offerings for the coming season;
When commitments should be placed; and When the first delivery should be received at the
store.

The Selling Plan:


The Selling Plan is closely allied to the buying plan. Once the merchandise has been
purchased, plans must be formulated to ensure the sale of the greatest number of units during
the period of customer acceptance. The Selling Plan should detail:
a) When the items should be promoted through advertising, window and interior displays,
etc.;
b) When the inventory should be peaked;
c) When reorders should no longer be placed;
d) When markdowns from regular stock should be taken; and
e) When the item should no longer be in stock.
The buyer for the retail store must determine at the time the merchandise is purchased
when the item should be introduced, when it should be reordered, when it should be marked
down, and when it should be removed from stock. This procedure can be compared to the
tides - low and high. In merchandising terms it is referred to as the ebb and flow of
merchandise. The old must go and the new must take its place.
The Unit Control Plan:
To maintain an in-stock position of wanted items and to dispose of unwanted items, it is
necessary to establish an adequate form of control over the merchandise on order and the
merchandise in stock. For the small retailer there are many simple, inexpensive forms of unit
control. They are:

24

Visual or eyeball control enabling the retailer to examine the inventory visually to determine
if additional inventory is required; Tickler control enables the retailer to physically count
a small portion of the inventory each day so that each segment of the inventory is counted
every so many days on a regular basis; Stub control enables the retailer to retain a portion
of the price ticket when the item is sold. The retailer can then use the stub to record the
items that were sold; and finally, a Click sheet control enables the retailer to record the
item sold (at the cash register) on a sheet of paper, such information is then used for
reorder purposes.
For the large retailer more technical and sophisticated forms of unit control are used. They
include:
Point-of-sale terminals which relay to the computer the information of the item sold. The
buyer receives information printouts at regular intervals for review and action;
Off-line point-of-sale terminals relay information directly to the supplier's computer which
uses the information to ship additional merchandise automatically to the retailer; and a
manufacturer's representative visits the large retailer on a scheduled basis and takes the
stock count and writes the reorder.
Unwanted merchandise is removed from stock and returned to the manufacturer through the
procedure of an authorized level. A sound unit control must include control over open orders so
that delivery dates are adhered to and to ensure that stores do no receive goods they did not order.

Growth Drivers of the Retail Sector


The Indian retailing sector is at an inflexion point where the growth of organized
retailing and consumption by the Indian population is going to take a higher growth
trajectory. The Indian population is observing a noteworthy demographics change. An
increasing young working population under age of 24 years, sharp rise in the per capita
income, an increase of dual income nuclear families in the urban areas, along with increasing
working women population, internet revolution and emerging opportunities in the services
sector are going to be the key growth drivers of the organized retail sector in India. The
whole model of shopping has altered in terms of format and consumer shopping behavior
pattern, which ultimately could lead to a shopping revolution in India.

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MAJOR PLAYERS OF RETAILING:


UNORGANIZED RETAIL STORES:

Local Kirana stores


General or provisions stores
Small shops
Carts

ORGANIZED RETAIL STORES:

Shopping malls:
o Big bazaar
o Star bazaar
o Subhiksha mart
o V mart
o Himalya malls
o Reliance marts
o Wal-Mart
o Other shopping malls
Online shopping websites:
o flipkart.com
o snapdeal.com
o amazon.com
o ebay.in

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CHAPTER 2.
LITERATURE REVIEW
Though significant work has been done to study the impact of organized retailing on
unorganized retailing at the national level, but not much has been studied in the North
Gujarat, probably due to late entry of organized retailing in North Gujarat. Some related
studies undertaken in the past and reviewed are:

Lahiri, Isita and Samanta, Pradeep Kumar (2010):

In their paper titled Factors influencing purchase of apparels from organized retail outlets
mentioned that apparel takes a hefty share in organized retail because people are more quality
conscious and comparatively less price sensitive. They also highlighted the distinct features
of organized retail outlets like discount offers, pick and choice etc., which are considered to
be more appealing by the buyers.

Ramanathan & hari(2011)


Ramanathan & hari(2011)observed from their study that due to the recent changes in the

demographic system of consumers, and the awareness of quality conscious consumption,


consumers preferred to buy different products both from the organized and unorganized
retailers. Joseph, Soundararajan, Gupta, & Sahu, (2008) concluded that unorganized
retailers in the locality of organized retailers were adversely affected in terms of their volume
of business and profit. According to him with the emergence of organized outlets consumers
gained through the availability of better quality products, lower prices, one-stop shopping,
choice of additional brands and products, family shopping, and fresh stocks. According to
report of ICRIER organized and unorganized retail not only coexist but also grow
substantially. The reason behind that the retail sector is gradually growing on an overall
basis hence the benefit of this growth goes to both the sectors. Kearney, (2006) found that
traditional markets are transforming themselves in new formats such as departmental stores,
hypermarkets, supermarkets and specialty stores. Martineau, (1958) first time used the
concept of store image. This store image was partly based on functional attributes and partly
27

on psychological attributes. In functional attributes he included variety of commodities,


layout, location, price value relation, and service that consumers could independently
compare with other stores. Whereas in psychological attributes attractiveness and lavishness
symbolized special attributes of that store. Munjal, Kumar, & Narwal, (2011) through their
research concluded that the kirana shops being affected by malls is only a myth. He further
concluded that in spite of the available opportunities to the organized retail to grow in India
these kirana shops also were benefited from this growing economy. Sivaraman.P, (2011)
from his study concluded that the impact of organized retailers was clearly visible on the
business of unorganized retailers in terms of sales, profit and employment. Due to their
financial infirmity these small retailers continuously struggled to introduce changes in their
existing retail practices. Some kind of intervention was required for their future existence.

Another study by Ali, Kapoor., & Moorthy, (2010) in their study indicated that
consumers shopping behavior was influenced by their income and educational level while
gender and age had no significant impact on their behavior. While Dodge, Robert,
Summer, & Harry, (1969) and Aaker, Jones, David, & Morgan, (1971) concluded that
consumers socio economic background, their personality, and past purchase experience
were those factors upon which the customers decision lied. Nair & Nair, (2013) in their
study revealed that the perception of service quality was influenced by various natures
among various customers and some of the general factors like personal interaction,
physical aspects on which customer perception remained constant and common. But
Singh & Agarwal, (2012) revealed that customers preferences for grocery shopping
were gradually shifting from local kirana stores to organized convenience stores. Brand
choice and credit card facilities were the main determinants which influenced preferences
from kirana to organized retail. Payment through credit cards increased purchases from
organized retail store. Sinha & Banerjee, (2004) in their study concluded that store
convenience and customer services positively influenced consumers store selection.
Gupta , (2012) concluded in her study that store attributes like convenient operating
hours and accessibility were the factors which lead to customer loyalty and not store
appearance. Similarly, product attributes like freshness of the product and availability of
products range according to the pocket were major determinant of loyalty. It was also
evident that even today Kiranas are preferred by customers because of various reasons
viz. convenient location, home delivery, personal relations with shopkeeper, giving
products on credit, payment in installments. Srivastava, (2012) in his study showed that
28

the overall customers perception across urban and suburban was not varied. The
customers were ready to pay higher prices for branded goods across the urban and
suburban areas. They gave priority to purchase grocery from nearby shops while for
purchasing of apparel they liked to travel some distance. The outcomes of the study
showed that the exposure of marketing strategy through electronic and print media made
the customers more choosey and knowledgeable. Whereas Solagaard & Hansen, (2003)
identified several store attributes that were considered important for the consumers
evaluation of stores. These attributes were merchandise, assortment, merchandise quality,

personnel, store layout, accessibility, cleanliness and atmosphere.


Purohit and Kavita according to their studies that the traditional retailers are not very
much clear about the consequences of the modern retailing the traditional retailers are
neutral or undecided, modern retailing will cut the profit margin of the traditional
retailers; the modern retailing will lead healthy competition in the market, modern
retailing will reduce the sales volume of the traditional retailers and traditional retailers

should improve customer care services in the era of modern retailing.


Shaoni Shabnam: It is important to highlight that in organized retail, the status of
employment is much better than that in unorganized retail. Hence it is definitely desirable
that more and more labor gets absorbed in this sector of retail. In the current context, the
labor employed in unorganized retailstands unfit for finding employment in organized
retail. If appropriate training and skills could be imparted to them, it is possibly feasible
to offerbetter forms of employment to them in the organized retail sector. The status of
employment is much better than that in unorganized retail. Hence it is definitely desirable
that more and more labor gets absorbed in this sector of retail. In the current context, the
labor employed in unorganized retail stands unfit for finding employment in organized
retail. If appropriate training and skills could be imparted to them, it is possibly feasible

to offer better forms of employment to them in the organized retail sector.


Meeta Punjabi: According to their study theysuggest that the development efforts in this
area are based on three grounds: First, farmersassociated with the modern value chains
earn higher returns than selling to the traditional markets. Second, the modern supply
chains have specific quality requirements which are easier to meet by the large and
medium farmers and the small farmers tend to get left out of these markets. Third, there
are several successful examples of linking small farmers to these modern valuechains
with effort from government agencies, NGOs and development agencies. This knowledge
presents strong grounds for a closer look at the emerging sector in India.
29

Mathew Joseph: Unorganized retailers in the vicinity of organized retailers experienced


adecline in their volume of business and profit in the initial years after the entry of large
organized retailers. The adverse impact on sales and profit weakens over time. There was
no evidence of a decline in overall employment in the unorganized sector as a result of
the entry of organized retailers. There is some decline in employment in the North and
West regions which, however, also weakens over time. The rate of closure of unorganized
retail shops in gross terms is found to be 4.2% per annum which is much lower than the
international rate of closure of small businesses. The rate of closure on account of
competition from organized retail is lower still at 1.7% per annum. There is competitive
response from traditional retailers through improved business practices and technology up
gradation. A majority of unorganized retailers is keen to stay in the business and compete,
whilealso wanting the next generation to continue likewise. Small retailers have been
extending more credit to attract and retain customers. However, only 12% of unorganized
retailers have access to institutional credit and 37% felt the need for better access to
commercial bank credit. Most unorganized retailers are committed to remaining
independent and barely 10% preferred to become franchisees of organized retailers.

30

CHAPTER - 3
RESEARCH METHODOLOGY
OBJECTIVES OF THE STUDY:

To study the factors influencing the consumers to buy from organized

retailers/unorganized retailers.
To study the influence of demographic factors on buying decisions from organized

and unorganized retailers.


To study the perception of customers towards organized and unorganized retailers.

SUB-OBJECTIVES OF THE STUDY:

To know the significance and limitations of organized retailing in North Gujarat.


To know the significance and limitations of unorganized retailing in North Gujarat.
To study the impact of organized retailing on unorganized retailing in North Gujarat.
To study the different factors that affect consumer behavior with regards to buying

from a organized retail outlet or unorganized retail outlet.


To study the future prospects of organized retailing and unorganized retailing in North
Gujarat.

HYPOTHESIS:

There is no significant difference between the choices of retailers format across

shopping items.
There is no significant difference in the choices of retailers formats across the family

income level.
There is no significant difference between the choices of retailers format across

various shopping factors.


There is no significant difference between the choices of retailers format across the

respondents age.
There is no significant difference between the choices of retailers format across the
respondents gender.

RESEARCH DESIGN: Descriptive Research

DATA COLLECTION METHODS:

PRIMARY DATA:
31

Primary data will be collected through personal one-to-one interview from the
respondents by stratified random sampling technique.

SECONDARY DATA:
Secondary data will be collected from websites available on Internet, especially that

of the organized and unorganized retail enterprises. Besides, the cyber forums also serve as
source of secondary data, wherein the forum members provide the relevant secondary data
available with them. The research study is more of a behavioral study and so it is qualitative
as well as quantitative in nature. However, quantification of the subjective data will be done
using techniques like the rating scale technique. It will include a descriptive and exploratory
research of the relationship between the purchase behavior of a buyer and the socio-cultural,
economic, technological, personal, psychological and other factors around the consumer,
which influence his/her purchase behavior.
TYPE OF SCHEDULE
Structured Questionnaire with suitable scaling.
TYPE OF QUESTIONS:
Likert scale, Close ended and multiple choice questions.
STATISTICAL TOOL USED:
Chi square test, Weighted Average

RESEARCH INSTRUMENT

Research instruments, for the purpose of primary data collection were Questionnaires.

The questionnaire was divided into 3 parts.


Part-A had questions related to demographic information of respondents.
Part-B was related to some basic information regarding respondents choice to visit

particular retailers for purchasing an item.


Part-C contained semantic differential scale to measure customer perceptions
regarding store attributes related to its image.

32