REVIEW AND CONCEPTS

This chapter brings out the literatures that explain the retail scenario in various

countries, customer

reviews will help the researchers to bring out the research done in this sector and

the dimensions analyzed. It also helps to understand the gap that exists in the

research and substantiates the need and importance of the current research.

3.1 CONCEPT OF RETAIL

A retailer is a person, agent, agency, company, or organization which is

instrumental in reaching the goods, merchandise, or services to the ultimate

customer

wants, developing assortments of products, acquiring market information, and

financing. A common assumption is that retailing involves only the sale of

products in stores. However, it also includes the sale of services like those offered

at a restaurant, parlor, or by car rental agencies. Retailing encompasses selling

through the mail, the Internet, door-to-door visits -any channel that could be used

to approach the customer.

Retailing is one area of the broader term, e-commerce. Retailing is buying and

selling both goods and customer services. With more number of educated and

literate customers entering the economy and market, the need for reading the pulse

of the customers has become very essential. Bharathi (2010) explains that retail

marketing is undergoing radical restructuring. This is because of increase in gross

domestic product, increase in per capita income, and increase in purchasing power

and also the ever changing tastes and preferences of the people. The entry of

plastic money, ATMs, credit cards and debit cards and all other customer finances,

the taste for the branded goods also added for the evolution of retail marketing.

Unorganized retail store is an outlet run locally by the owner or caretaker of a

shop that lacks technical and accounting standardization. The supply chain and

sourcing are also done locally to meet local needs. Its organized counterpart may

not obtain its supplies from local sources.

According to Ananthi and Jayalakshmi

has led to the development of modern retail outlets, mainly in the southern parts of

the country. Chennai, Bangalore and Hyderabad are developing as the Hub of

.

ushered in the multi-brand, all- under-one-roof concept, as well as the specialty

store catering to niche products and customer , remarks Asif Ali Syed (2006).

Organized retailing refers to trading activities undertaken by licensed retailers,

those who are registered for sales tax, income tax etc. It includes the retail chains,

corporate backed hypermarkets and privately owned large retail businesses.

Organized retailing comprises the shopping malls, multi-storied malls and huge

complexes that offer a large variety of products in terms of quality and value for

money and gives a shopping experience. Occupying 7-8 percent of the total retail

sector in India, the emergence of organized retailing is a recent phenomenon and is

concentrated in the top 20 urban towns and cities (Joseph et al, 2008).

3.2 RETAIL SCENARIO IN INDIA

Indian retail is dominated by a large number of small retailers, consisting of the

local kirana shops, owner-manned general stores, chemists, footwear shops,

apparel shops, paan and beedi (small corner shops) and handcart and pavement

unorganized

years have seen the entry of a number of organized retailers that have opened

stores in various modern formats in major cities and urban areas. The emergence

of organized retail formats is transforming the face of retailing in India, as

domestic and foreign

specialty stores across the country to

satisfy increasing customer demand.

The Indian retail market, the fifth-largest retail destination in the world, was

ranked the most attractive emerging market for investment in the retail sector in

Development Index (GRDI) in 2009. As of July 2009, FDI inflows in single-brand

retail trading stood at approximately US$46.60mn, according to the Department of

Industrial Policy and Promotion (DIPP). Local retailers are anxious to steal a

regulations single-brand retailers are able to own a 51percent majority stake in a

joint venture with a local partner, but multi-brand retailers must operate through a

franchise or cash-and-carry wholesale model. With the Ministry of Finance calling

for deregulation of the retail industry as a means of accelerating modernization

and further stimulating economic growth, local retailers need to forge ahead with

expansion plans while they still have an advantage. In 1999, India had three

shopping malls, collectively measuring less than 1mn square feet (92,903m2). By

the end of 2006, the country had 137 shopping malls, occupying 28mn square feet

(2.6mn m2). By the end of 2008, it is estimated that there were more than 450

malls in India, accounting for at least 120mn square feet (11.1mn m2) of retail

space. According to the Mall Realities India 2010 report by property consultants

Jones Lang LaSalle Meghraj (JLLM) and Cushman & Wakefield India, in

association with Shopping Centers Association of India (SCAI), more than 100

malls encompassing 2.8mn m2 of shopping space are projected to open in India

before the end of 2010 (Source: BMI India Retail Industry Report Q1 2010).

With retailing picking up and customers becoming choosy, it becomes vital for the

retailers to look out for new avenues and opportunities to make their customers

happy. Intense competition in the market has forced retailers to rethink on their

strategies. The retail market being price sensitive calls for in-depth deliberation

and delivery of retail mix. Constant efforts are being made to deliver high value

added products and services to the customers. Popular brands having national

presence are able to create entry barriers through their strong distribution channel

and heavy promotion. Barriers such as heavy promotion in turn increases the

marketing cost of national brands and customers look towards the industry to

unburden the same. This throws an opportunity for retailers to offer products in the

form of private labels, thereby, reducing the promotional expenses. The objective

of developing and delivering private label is to close the value gaps not delivered

by so called national brands. There is also an increase in demand for private labels

which mutually benefits the retailers and customers. With the emergence of

private labels, retailers are able to differentiate, build store loyalty and create

competitive advantage for themselves.

The increased retail space is attracting new entrants to the market. In April 2009,

g retail

companies, Lifestyle, to open stores in Hyderabad, Mumbai, Chennai and Noida.

The global recession has failed to stop leading domestic retailer Future Group. Its

retail division, Pantaloon Retail India Ltd (PRIL), posted a year-on-year (y-o-y)

sales increase of more than 30percent in March 2009 and announced plans to open

15 new Fresh Fashion stores in major cities across India, including in Chennai,

Kolkata and two in Bangalore in the next two years. The average retail space of

each store will be about 1,860m2. The customer electronics sector is also largely

bucking the downturn. Mobile handset maker Nokia Corp has submitted an

application to the Foreign Investment Promotion Board (FIPB) to set up a joint

to establish retail outlets selling

handsets and services. Panasonic is to open 100 customer electronics and IT shops

across India.

McKinsey study claims retail productivity in India is very low compared to

international peer measures. For example, the labor productivity in Indian retail

was just 6percent of the labor productivity in United States in 2010. India's labor

productivity in food retailing is about 5percent compared to Brazil's 14percent;

while India's labor productivity in non-food retailing is about 8percent compared

to Poland's 25percent. Total retail employment in India, both organized and

unorganized, account for about 6percent of Indian labor work force currently -

most of which is unorganized. This about a third of levels in United States and

Europe; and about half of levels in other emerging economies. A complete

expansion of retail sector to levels and productivity similar to other emerging

economies and developed economies such as the United States would create over

50 million jobs in India. Training and development of labor and management for

higher retail productivity is expected to be a challenge. To become a truly

flourishing industry, retailing in India 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.

Lack of Retailing Courses and study options

Intrinsic complexity of retailing rapid price changes, constant threat of

product obsolescence and low margins.

In November 2011, the Indian government announced relaxation of some rules

and the opening of retail market to competition. The opening of retail industry to

global competition is expected to spur a retail rush to India. It has the potential to

transform not only the retailing landscape but also the nation's ailing

infrastructure.

Another cap to the retailing industry in India is allowing 51percent FDI in single

brand outlet. The government is now set to initiate a second wave of reforms in the

segment by liberalizing investment norms further. This will not only favor the

retail sector develop in terms of design concept, construction quality and providing

modern amenities but will also help in creating a customer-friendly environment.

Retail industry in India is at the crossroads but the future of the customer markets

is promising as the market is growing, government policies are becoming more

favorable and emerging technologies are facilitating operations in India. And this

upsurge in the retail industry has made India a promising destination for retail

investors and at the same time has impelled investments in the real estate sector.

As foreign investors cautiously test the Indian Markets for investments in the retail

sector, local companies and joint ventures are expected to be more advantageously

positioned than the purely foreign ones in the evolving India's organized retailing

industry.

Industry experts are sensitive to the point that local markets have an edge over the

retail investors in India as they have unique advantages such as an understanding

of local needs and extended service like home delivery. As the FDI influence on

the Indian retail sector sets in, the total size of the retail trade is expected to grow

extensively in the coming years and the customer segments patronizing the big

malls will create frenzy for organized retailing predicting a growth of 25-30 per

cent per annum over the next decade. Moreover, Indian retail chains would get

integrated with global supply chains since FDI will bring in technology, quality

standards and marketing thereby, leading to new economic opportunities and

creating more employment generation.

India is in the midst of a retail boom. The sector witnessed significant

transformation in the past decade from small unorganized family-owned retail

formats to organized retailing. Indian business houses and manufacturers are

setting up retail formats while real estate companies and venture capitalist are

investing in retail infrastructure. Many international brands have entered the

market. With the growth in organized retailing, unorganized retailers are fast

changing their business models.

Retailing consists of the sale of goods or merchandise from a fixed location.

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 strategy.

The Retail Industry: From Myth to Malls

India's retail sector is going to transform and with a three-year compounded annual

growth rate of 46.64 per cent, retail sector is the fastest growing sector in the

Indian economy. Traditional markets are transforming themselves in new formats

such as departmental stores, hypermarkets, supermarkets and specialty stores.

Western-style malls have begun appearing in metros and near metro cities,

introducing the Indian customer to a new shopping experience. KSA-Technopak, a

retail consulting and research agency, predicts that by 2010, organized retailing in

India will cross the US$ 21.5-billion mark from the current size of US$ 7.5 billion.

The Indian retail market is of enormous size about US$ 350 billion. But organized

retail is not so huge and it is at only US$ 8 billion. However, the opportunity for

growth is huge by 2010, organized retail is expected to grow to US$ 22 billion.

With the growth of organized retailing estimated at 40 per cent over the next few

years, Indian retailing is clearly at a tipping point. This article is an attempt to

analyze the areas where retail sector is growing and will grow, what will be the

target market segment for the retailers and how will they try to serve this segment.

Regulatory Framework

The Indian government has not focused on retail as an industry. Until now, there

are no specific rules and regulations that are to be followed by retail companies.

However, there are certain laws that the retailers need to follow, which are general

in nature and which pertain to the establishment of stores and the conduct of

activities. These laws are as follows:

Shop and Establishment Act

The Income Tax Act

Standards of Weights & Measures Act

Customs Act

Provisions of the Contract Labor Act

The Companies Act

3.3 EXPANSION OF ORGANIZED RETAIL BY FORMAT

The total number of organized retail outlets in India rose from 3,125 covering an

area of 3.3 million sq. ft. in 2001 to 27,076 with an area of 31 million sq. ft. in

2006. Small-sized single-category specialty stores dominated the organized retail

in the beginning with almost two-thirds of total space in 2001. Departmental stores

and supermarkets accounting for the balance. There were no hypermarkets in India

in 2001. In 2006, India had about 75 large-sized hypermarkets carrying a tenth of

the total modern retail space in the country. The pace of construction of shopping

malls is progressing rapidly and the number of malls is expected to be about 479

by the end of 2008 with a capacity of 126 million sq. ft. Specialty stores are still

the most common modern retail format with over a half of total modern retail

space in 2006. There had been no specific restrictions on the entry of foreign

retailers into the Indian market till 1996. A few foreign players were granted

permission for retailing under this earlier regime. However, in 1997 it was decided

to prohibit FDI in retailing into the country. In January 2006, however, a partial

liberalization took place in policy in which foreign companies are allowed to own

up to 51 per cent in single-brand retail JVs as approved by the Foreign Investment

Promotion Board (FIPB). Besides this, foreign companies are allowed in

wholesale cash-and-carry business and export trading with 100 per cent equity

through the automatic route. Foreign companies with 100 per cent equity can also

carry out trading of items sourced from the small-scale sector and do test

marketing of products for which the company has a manufacturing approval under

the FIPB route. With regard to domestic regulation, the organized retailer has to

secure a number of licenses and clearances from various central, state, and local

authorities before it starts its operations. They are related to operations,

infrastructure, labor, taxation and other general matters. The number of licenses

varies from state to state and it also depends on the type of store format.

In 1991, the Indian government introduced the economic policy to attract foreign

investments and since then, it has amended the policy from time to time in various

sectors to allow higher levels of foreign participation. The government policy in

retail sector allows 100 percent foreign investment in wholesale cash-and-carry

and single-brand retailing but prohibits investments in retail trading. In 1997, the

government imposed restrictions on FDI in retail .sector but in 2006. These were

lifted and opened in single-brand retailing and in cash-and-carry formats. The

cash-and-carry business is the easiest mode of entry for foreign retailers into India.

Many global players like Metro and Shoprite have already entered the market.

Wal-mart has forged an alliance with Bharti for a cash-and-carry business and

Bharti is concentrating on front-end retail. Similarly, Tesco has entered India

through an alliance with Trent (Tata Group). Apart from investing in the cash-and-

carry business, Trent will also support the back-end activities of Trent Ltd. Many

foreign brands have also entered India either through JVs with leading Indian

retailers or through exclusive franchisees to set up shop in India. Louis Vuitton

Marks & Spencer Pic, GAS, Armani are some such operators who have entered

India through JVs. McDonald's, KFC, are the retailers who have

taken the franchise route.

Slowly the government is opening up to the idea of permitting FDI in the Indian

retail sector; consequently there is greater momentum in the sector. Last year,

owing to the global meltdown, investments dropped in all sectors. The government

has therefore changed the guidelines for foreign investments to boost investments

in the current year. This move is certainly likely to improve the investment climate

in the Indian retail space. The share of organized retail in developed countries is

much higher than developing countries like India. In 2006 the share of organized

retail in the US was around 85 percent, in Japan it was 66 percent, and in the UK it

was 80 percent, while in developing countries like India, China and Russia it was

6 percent, 20 percent and 33percent respectively. The concept of organized retail

had occurred much later in developing economies than the developed economies.

the most promising emerging market for investment. In 2007, the retail trade in

India had a share of 8- 10 percent in the GDP (Gross Domestic Product) of the

country. In 2009, it raised to 12 percent. It is also expected to reach 22 percent by

2010. According to a report by Northbride Capita, the India retail industry is

expected to grow to US $ 700 billion by 2010. By the same time, the organized

sector will be 20 percent of the total market share. It can be mentioned here that

the share of organized sector in 2007 was 7.5 percent of the total retail market.

Currently, organized retail is in a nascent stage of growth in India as it just has a

5.9 percent share in the total India retail trade. However, in recent years, organized

retailing has been growing at a robust rate due to rise in the number of shopping

3.4 OPPORTUNITIES AND THREATS TO INDIAN RETAIL INDUSTRY

The huge population, increasing per-capita income and changing customer habits;

all these developments have culminated in the booming of the retail sector in

India. Like many others industries, the Indian retail sector is also dominated by the

unorganized sector. Almost every road and street, there is a general store or a

kirana shop after every hundred steps. And it is in these huge numbers that the

Indian unorganized retail industry finds its protection. The government view is

that the entry of the organized retail, especially the FDI led variety, will threatens

these numbers. The powerful trade unions across the country have also been

persistent against the entry of organized retailers and FDI in this sector. The

organized sector, identified as malls/multiplexes/supermarkets is still at a nascent

stage, and is unlikely to prove a threat to the unorganized sector for many, many

years to come. The retail sector itself is growing so fast that it will absorb any

fresh additions to the supermarkets very easily and the unorganized sector will still

continue to grow. India is one of the youngest and largest customer markets in the

world with a median age of around 25 years, which is the lowest as compared with

It is expected that over 53percent of the population will be under the age of 30 by

2020, which means that the potential for the Indian retail segment will be

enormous. This generation will be more dynamic than the previous generations

because their consumption is driven by wants rather than needs. Thus, the

organized retailing, which thrives on lifestyle products, is expected to receive a

boost because of the young population by 2020.

By 2015, the middle class is expected to constitute around 25percent of total

households and account for 44 percent of the total disposable income, and by

2025, the respective figures are likely to go up to 46 percent and 58 percent. The

Indian middle-class population and their growing disposable income levels will

drive the future growth of organized retail in India. There has been a substantial

increase in the number of Indians who use the Internet and a concomitant increase

in the number of online purchases. Indians have started using the Internet not only

for increasing awareness but also to shop online, which has opened a whole new

channel of retailing in the Indian retail scenario.

The prime reason for a paradigm shift in the shopping attitude of the Indian

customer is the change in their preferences and tastes. Due to the increasing use of

IT and telecom, Indian customers have become aware of brands and shops for

lifestyle and value brands according to the need and occasion. Customers will

continue to drive the growth in the organized retail by expanding the market and

compelling retailers to widen their offerings in terms of brands and in terms of

variety. Besides there are a number of opportunities which clearly vouch for the

fact that India will continue to be dominated by small retailers for a long time to

come. The organized retail sector that constitutes highly organized malls presently

does not enjoying any significant share of the market revenue but it is estimated

that future belongs to the organized retail sector in India.

The retail industry in India is currently growing at a great pace and is expected to

go up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3

trillion by the year 2018 at a CAGR of 10percent. As the country has got a high

growth rate, the customer spending has also gone up and is also expected to go up

further in the future. In the last four years, the customer spending in India climbed

up to 75 percent. As a result, the India retail industry is expected to grow further in

the future days. By the year 2013, the organized sector is also expected to grow at

a CAGR of 40 percent.

Retailing in India is gradually inching its way toward becoming the next boom

industry. The whole concept of shopping has altered in terms of format and

customer buying behavior, ushering in a revolution in shopping in India. Modern

retail has entered India as seen in sprawling shopping centers, multi-storied malls

and huge complexes offer shopping, entertainment and food all under one roof

The Indian retailing sector is at an infixion point where the growth of organized

retailing and growth in the consumption by the Indian population is going to take a

higher growth trajectory. The Indian population is witnessing a significant change

in its demographics. A large young working population with median age of 24

years, nuclear families in urban areas, along with increasing working-women

population and emerging opportunities in the services sector are going to be the

key growth drivers of the organized retail sector in India.

The small local stores have dominated Indian retailing over the decades and are

present in every village and local community, addressing the needs of the

population in the area and being the point of contact with the customer. The

distribution networks of brands extend right up to this point to stay in touch with

customer needs and preferences. India like most other countries has a very large

network of local stores. The retail industry in rural India has typically two forms:

"Haats" and "Melas". You will find these in almost every village and locality. A

lot of them function as pan and cigarette outlets with tea and coffee sometimes

also offered.

Besides this these stores stock and offer small eats and soft drinks including

biscuits, soft drinks, chocolate, sweets, bread and baked products. Many of them

also sell fruits like bananas and a range of toiletries and cosmetics like soaps,

shampoos, toothpastes and some creams. These small stores cater to the needs of

their own local population and travelers who stop by for a smoke or a snack. A

little larger format is the neighborhood grocery store that focuses on grains, foods,

snacks and toiletries besides other home essentials.

Fruits and vegetables that are perishable are usually maintained and offered by

exclusive vegetable stores and not by the normal groceries. Every fair sized village

is likely to have at least one grocery store, a fruit and vegetable shop and a paan

and cigarette shop. The new addition of the past decade is to have a telephone

booth that lets locals and travelers make national and international telephone calls.

This network is very large and spread all across India. It is not really a network

since each store is individual or family owned and has no connection with the

other. It does however represent a network since large customer product

companies like Unilever, Procter & Gamble, Colgate-Palmolive, Cadbury, Coca

Cola, Pepsi and ITC uses them as their final point of retail to the customer.

While it is commonly believed that the new retail chains will drive these small

stores out of business, reality points the other way and it is likely that these stores

will continue even in the next two decades of growth. These small stores are very

personal and have strong relationships with the local population. They are points

of news and connection. They offer credit to the local population and help out in

times of crisis. They also have a very good understanding of requirements of the

local population and have very low overheads enabling them to offer the best price

for their products.

Closure of Small Unorganized Outlets

It is interesting to know whether the presence of organized retail has led to the

closure of traditional outlets. The survey asked the respondent retailers whether

they are aware of any closing down of small shops in their neighborhood after the

opening of organized outlets. A total of 151 such outlets were reported to have

been closed down over an average period of 21 months, which constituted about

4.2 per cent annualized closure of retailers. This ratio is somewhat higher in the

West at 6.8 per cent, about 4.5 per cent in the North, 3.5 per cent in the South and

least at 2.1 per cent in the East. These rates of closure are very low by

international standards. The US data show a 50 per cent closure of small

businesses within four years of operation (Headd, 2003). However, only 41 per

cent of the retailers attributed these closures directly to competition from

organized retail. This means that the closure of unorganized retail outlets has been

about 1.7 per cent a year on account of competition from organized outlets. This

varied between a high of 3.2 per cent in the West to a low of 0.4 per cent in the

East and 1.5 per cent in the South and 1.6 per cent in the North.

3.5 RETAIL SCENARIO IN BANGALORE

ector in Bangalore has shown an upward trend in

- South, Knight

-markets in East Bangalore may be

witnessing an over-supply situation, others in North and West Bangalore have a

-market

is highly dependent on the growth of the residential segment in the micro-market

(Primary Catchment) and surrounding residential areas (Secondary Catchment), a

setting up more outlets. I for instance have an outlet in a mall, near Indiranagar,

and another in a mall in Whitefield. We have decided against opening another

outlet in an up market mall in Malleswaram for this seems to be the

general trend. A number of retailers, the correspondent spoke to are simply being

cautious. Bangalore is the second biggest retail destination that follows Mumbai.

deal. We are just trying to exp

looking at a value mall but a designer mall would not interest me right now,

primarily because although the footfalls may be high, those actually translating

seems to be the strategy retailers are

adopting. While some retailers are targeting new high-streets, others are adopting

and creating brand presence is no longer popular among retailers. Every store has

are still on the lookout, most of the retailers have shrunk the average size of their

stores to reduce the rental burden. Retailers are also looking at emerging high-

The retail sector in Bangalore is witnessing an explosive growth, despite traffic

snarls that jam every important junction. "Far from getting saturated, Bangalore is

facing a severe shortage of retail space," says Bikash Kumar, Head, and Integrated

Retail Management Consulting. He estimates that the city can accommodate

another 50-60 retail units of 30,000- 40,000 sq ft. "Shanghai with a 15 million

population has 120 super and hyper markets. Bangalore with 8 million can easily

have more than half of that," he says. Two years ago, with far less traffic,

Bangalore had Big Bazaar, Globus, Lifestyle and Westside and some other outlets,

accounting for 6 lakh sq ft of retail space. Since then, the 3.5-lakh sq ft Forum

Mall, including an 11-screen PVR multiplex, and the 2.3-lakh sq ft Garuda Mall

have also come up. But the rush to set up more retail stores seems unabated. The

growth is not just confined to the central business district of Bangalore, but has

also spilled over to other parts such as Kormangala, Indiranagar and Airport Road

in the east, Jayanagar in the south and Malleshwaram in the north. These areas

offer retail giants a huge opportunity because the middle-class population here

would rather shop in nearby places than travel to the business district on

weekends. The retailers also have the advantage of acquiring space here at low

rentals between Rs 60 and Rs 90 per sq ft.

Kormangala is where the Forum Mall is located. Pantaloon Retail, which owns the

country's biggest retail chain, is set to increase its space to 10 lakh sq ft from the

existing three lakh sq ft in three years. The company plans eight more hypermarket

discount stores branded Big Bazaar in Bangalore, taking the total to 10, which

means almost every area will have one Big Bazaar with not less than 40,000 sq ft.

Indiranagar will shortly get another Big Bazaar outlet, and Jayanagar and

Malleshwaram too will have them. Bangalore looks set to have the largest number

of Big Bazaars in the country. "Bangalore means big money for us as the middle-

class population is not only huge but prepared to spend money," says Vishnu

Prasad, Pantaloon's retail head for south. Both the Big Bazaars in the city have

total sales of around Rs 150 crore, while the Bangalore Central Mall, another

Pantaloon retail store catering to the higher income group, mops up an annual sale

of Rs 100 crore.

Pantaloon's resolve to make a mark in Bangalore can be gauged from the fact that

`Bangalore Hebbar', the cities showcase for culture is fully sponsored by the retail

chain. "We have funded the entire event because we want to identify with the

city," Prasad says. The event was earlier sponsored by the State Government.

"Every time a Bangalorean wants to shop for anything, Big Bazaar should

immediately come into his mind," he says. According to estimates, Bangalore will

have a retail space of around 4 million sq ft by 2007; it is now less than 1 million

sq ft, of which Pantaloon alone has a 25 per cent share. According to Mayank

Saxena of Trammell Crow Meghraj, one of India's leading property consultants,

developers are getting aggressive in Bangalore because of the potential they see in

the retail sector. "Earlier, they were comfortable because IT was the main focus.

Now because of the IT boom, the spending power has gone up considerably and

this has given a major push to the retail sector expansion in the city," he says. It is

a view shared by LG Electronics' Vice-President - Marketing, Girish Rao too.

"Bangaloreans are more aware of technology than others." LG Electronics now

looks at Bangalore as one of the top three cities for growth. "There is a huge

potential here and it is one of the fastest growing markets in India," Rao says.

The reason for the retail boom is the city's growing affluence. In the last 10 years

Bangalore's population has increased around 30 per cent; it is ranked the seventh

most affluent city in India. It is estimated that over one-third of the households in

Bangalore have an annual expenditure between Rs 50,000 and Rs 1 lakh, while 40

per cent of the city's population has annual incomes ranging between Rs 70,000

and Rs 1.4 lakh. The 15-45 age groups are a retailer's delight. The retail boom in

Bangalore is not merely visible in bigger malls but also among the smaller ones

like MK Ahmad Stores, Foodies, etc which are basically large departmental stores

and have sprung up in shopping areas in several localities. "In Bangalore, the retail

boom can be seen in every nook and corner," says Bikash Kumar. Smaller shops,

which not so long ago struggled for survival, have started expanding and one can

see at least three-four supermarkets in almost every locality. "Very

few kirana shops have closed down. They have in fact morphed into bigger stores

or mini supermarkets," he adds.

(Source:http://www.thehindubusinessline.in/bline/2005/12/24/stories/2005122400

130100.htm)

It is estimated that over one-third of the households in Bangalore have an annual

expenditure between Rs 50,000 and Rs 1 lakh, while 40 per cent of the city's

population has annual incomes ranging between Rs 70,000 and Rs 1.4 lakh. The

15-45 age groups is a retailer's delight (Cushman wakefield-2009).

The growth of organized retail in Bangalore city was analyzed based on the year

of starting of the organized retail outlets surveyed. From the results presented in

Table 3.1.1 it can be seen that very few outlets were started during the period 1990

to 1999 whereas the number increased from 2000 to 2005. This goes to show the

29 phenomenal rises in organized food retail in the city. Food World, Nilgiris,

many others joined the fray.

Organized retail arrived on the Indian ret

Prior to that there were single retails outlets and these did not grow into chains.

However, after 1995, organized retail chains arrived in a big way. Growth of

organized outlets shows that in the period between 1990 and 1999 witnessed a

sizeable growth of organized retail outlets. The period 2000-05 saw the growth of

many organized retail outlets. Year 2005 and beyond has only consolidated the

growth of these outlets. In the period between 1990 to 1999, Food World had

around six outlets being the largest player among the new entrants followed way

beyond by others. In the period 2000-2005 outlets like food world increased in

total opening a sizeable no of outlets. This only increased after year 2005. Retail

outlets like Reliance Fresh expanded rapidly and hold highest percent of market

share in terms of their volume of spread. The period also witnessed a number of

retail outlets opening up in different locations of Bangalore city. Many of them

were operated and owned by big industrial houses like the Goenkas, TATAs,

, Reliance, Heritage Foods and Jubilant Organics. Others were owned by

smaller groups. Scrutiny of the table clearly reveals that the big industrial houses

have big stake in the organized food retail outlets and they have been growing

especially in recent years. Out of the 122 retail outlets started after 2005, about

106 are owned by big industrial houses. This is an indication that these ventures

require huge investment which only the big industries can afford.

Table 3.T.1: Growth of Organized & Traditional Retail Stores in Bangalore

Year Opened Organized

Retail Stores

Percent to

Total Stores

Traditional

Retail Stores

Percent to

Total Stores

Before 1980 4 3.17 percent 6 3.39 percent

1980- 1989 1 0.79 percent 24 13.56 percent

1990 1999 9 7.14 percent 76 42.94 percent

2000 2005 47 37.30 percent 59 33.33 percent

After 2005 65 51.59 percent 12 6.78 percent

Total 126 100 percent 177 100 percent

(Source: Primary Data)

The pattern of growth of organized and traditional retail outlets has shown

1999 with a vast majority of 90percent of outlets. Their numbers dropped

phenomenally in the year 2000-05 and after the year 2005 they have grown only

15 percent. On the other hand the retail outlets from 7 percent growth in the 1990s

they grew by 44 percent in 2000-05 and after 2005 the growth of organized almost

doubled to eighty four percent. The pattern of growth being different was

vindicated by the significant chi square test. This goes to show that the explosive

growth of organized retail outlets has halted the growth of new traditional retail

outlets. Economic development of the country has given an added impetus to the

growing formats, with the customer purchasing power increasing.

Value Drivers behind Growth of Organized Retail Market

There are multiple factors which affect the growth of the Indian retail market that

rate of growth of GDP, the level of income, especially disposable income,

urbanization and changing demographics and customer profile. These factors are

discussed below:

Economic Growth

surpass that of China by 2015. Despite rising inflation which has touched 11.5

percent, India can maintain its 9 percent GDP gro

expected to grow at an impressive 9.5 per cent in FY 2009 (Financial Express,

2008). At a constant value (CAGR) of just under 7 percent for 2006-2011, the

value sales growth for retailing in India would be a trifle slower than in other

emerging economies such as Thailand and Vietnam. Therefore, the sheer potential

of the country makes India one of the hottest retail locations globally.

Demographics

The Indian customer is also witnessing some changes in its demographics marked

by a large working population in the age group of 24-35, an increase in the number

of nuclear families, and an increase in the working women population with the

emerging opportunities in the service sector during the past few years, which has

been the key growth driver of the organized retail

Sector

population in the world, approximately 60 per cent of the Indian population is

below 30 years of age and the median age is 25 years. The low median age of the

population means a higher level of current consumption vs. savings as a younger

population has both, the ability and willingness to spend. Higher consumption

levels coupled with an increase in the percent of working women who are more

avid shoppers compared to men folk; together provide a big boost to the retailing

sector.

Increasing Income and purchasing power

The increasing number of double income families who have more disposable

incomes is an important contributory factor behind the growth of the retail sector

in India The rapid pace of organized retailing in both cities and large towns is

fuelled by changing customer habits of the Double Income No kids (DINKS)

ncomes may

in terms of the increasing use of mobile telephones and credit-cards has further

c

higher customer density areas and aggregation of demand that helps a retailer in

Business world, it has around 192 million households, of which only a little over

that is, with a household income in excess of INR

215,

immediately below the affluent category, earning between INR45,000 and

INR215, 000. This is a sizable proportion which offers an excellent opportunity

for the growth of organized retailing.

Changing Indian Customer

In the last few years, Indians have gone through a dramatic transformation in

lifestyle. Due to increasing literacy in the country and the exposure to developed

nations via satellite television or by way of the overseas work experiences,

customer awareness about the quality and price of the products/services has

increased several fold, which, in turn, has heightened the aspirations of customers

to consume more and to shop in a more congenial and luxurious environment.

Customers spending are witnessing a shift from traditional expenditure on food,

groceries and clothing to that on lifestyle categories that deliver better quality and

customer seeks more and more reliable sources for

making purchases and hence the logical shift to purchases from the organized

retail chains that have a corporate background. These organized

Retailers, through their highly efficient procurement and distribution systems, are

able to offer customers lower prices, greater convenience, higher quality and safer

products/ services in increasingly complex, often congested, urban markets. Thus,

other demographic and social factors are boosting the rapid development of Indian

retailing market. These factors are propelled by increased expectation of

customers, who now value convenience and choice on a par with getting value for

their hard-earned money. As a result, the last few years have witnessed an

explosion in the range of modern retailers in an otherwise fragmented and

unorganized Indian retail market. These new organized retailers are attempting to

customer. In this effort they use different value propositions to remain competitive

in the market and design strategies for delivering these values. The emergence and

growth of the organized retail segment comprising of a large number of retailers,

necessitate better enforcement of taxation mechanisms and introduction of an

efficient labor law monitoring system. In a word modern retailing is no longer a

matter of just stocking and selling but that of efficient supply chain management,

developing vendor relationship, quality customer service, efficient merchandising

and timely promotional campaigns.

Evolution of the Indian Retail industry

The Indian retail industry is evolving in line with changing customer aspirations

across product groups, with the emerging modern formats of retailing. . This is in

line with what has been observed in other developed markets. Organized retailing

in most economies has typically passed through four distinct phases in its

evolution cycle. In the first phase, new entrants create awareness of modern

formats and raise customer expectations. The second phase is one in which

customers demand modern formats as the market develops thereby leading to

strong growth. As the market matures, intense competition forces retailers to

invest in backend operating efficiency. In the final phase, retailers explore new

markets as well as inorganic opportunities as growth tapers off. India is currently

in the second phase of this evolution, with Indian customers becoming more

demanding with their rising standard of living and changing lifestyles. Change in

experience) has led to a pickup in momentum in organized formats of retailing. As

the sector enters the third phase of evolution, supply chain management will

assume top priority. Fierce competition will force retailers to quickly respond to

changes in the market bringing to the fore the importance of supply-chain

management in managing stock availability, supplier relationships, new value

added services and cost cutting. Traditional retailers are expected to enhance their

investments in supply chain, whilst new entrants are likely to look at supply chain

first before rolling out their national reach.

3.6 REVIEWS OF GROWTH OF RETAIL IN INDIA

Retail in India has emerged as one of the most dynamic and fast-paced industries

the sector accounts for over 10 percent percent of the

total employment (The Marketing White Book 2009-

presently constitutes a very little share of less than 5 percent of the total retail

percent is in the ten biggest cities, and 86 percent in the

biggest six. Within the top cities of the country too, retailers concentrate on the top

segments of the population. Today the major Indian retail players are Future

Group, RPG Enterprises Ltd., Tata Group, ITC, Reliance Retail, Bharti Retail, K

Raheja, Landmark, Aditya Birla Retail, Vishal Retail and Subhiksha. Despite the

slowdown of 2008-09, modern retail sector is expected to grow to account for over

10 percent of the total Rs. 18 trillion retail sector by 2010

Customers increasingly expect higher quality and service and some customization.

In response entrepreneurial retailers are building entertainment into stores with

rather than a product assortment. Subsequently, store-based small retailers are

succumbing to the growing power of giant retailers (Kotler, 2002). Importance of

shopping malls to realty sector has also been identified. One cannot sell real estate

unless they are bundled with shopping malls, IT parks, etc. (Sumit Dabriwala,

Managing Director of Riverbank Holdings Pvt. Ltd.). It has been observed that a

customer

influence of the elements differ, factors like store location, store design and

physical facilities, merchandise assortment, advertising and sale promotion, store

personnel, customer services and clientele (social-class membership) exert great

influence on store choice. Product variety and convenient

Timings seem to be primary impression about the store, customers carry with them

(Piyush and Arindam, 2004).

The average Indian also devotes some time to leisure every day and the growth of

retail is contributing to shopping becoming a preferred option. Big malls offer the

customer a unique experience when they shop, regardless of their status, where

people with not so great purchasing power also throng the stores. Everybody

wants to be seen and experience the feeling of shopping at such huge places and

people have already started to associate it with status. Women undertake shopping

as a social experience, which the Internet does not provide and like to see what

they are buying before parting with their cash. When two women shop together,

they talk, advice and c

there is a healthy cross-fertilization of ideas. When shopping is followed with a

environment, making the activity even more positive and pleasurable (Paco,

takes some thought and involves an investment of time. All this makes one feel

important and worthwhile. But most importantly, it distracts the person out of his

Das, Psychiatrist, Max Healthcare).

Campbell, Anthropologist). Quality is the paradigm that has gained a new

momentum in importance among customers (Krishnaveni,

spends primarily on clothes, food, books, music and gadgets such as mobile

g and young people

have grown to become a huge customer -

President, Raymond) The new generation is also more receptive to the concept of

bas - President, Head of Cards,

HSBC). Demographics and lifestyle in India is changing to fast-paced, career-

young hands, and unlike in the past, the motto of the young today is have

A study by Pantaloons Retail India Limited (PRIL) has segregated customers into

three sets: the consuming class, the serving class and the struggling class. The

consuming class, i.e., the upper-middle and the lower middle class, has substantial

disposable income and constitutes only 14 percent

modern retail formats were attracting customers mostly from this segment till

recently. The serving class constitutes almost 55 percent of the population and

includes drivers, household helps, office peons, liftmen, washer men, etc. They

have very little disposable income to spend on buying aspirational products and

services though their population is sizeable. The deprived class lives a hand-to-

mouth existence and cannot afford to even aspire for a better living. The present

retail formats cannot address their needs and thus they will continue to be on the

boundaries of the consumption pattern for some time now.

Since 1995, the top three income classes rich, middle and aspirer have moved

from 20 percent to 48 percent of Indian households. Over that period, 28 percent

of households have moved out of the deprived category and into the aspirer

category. This upward mobility from deprived to aspirer and from aspirer to

middle class poses growth opportunities for retailers. It is thus important to study

the demographics of customers at malls, what they buy and the reasons for their

purchases in order to understand the buyer decision making process.

Over the period July 2004 to March 2007, shopping as an activity has increased in

the malls. It has shown marked precedence over window-shopping. Entertainment

at multiplexes and video game parlors has also gained rapid acceptance among

customers. Eating at food-courts is a preferred activity and has shown a gradual

increase Customers prefer the air-conditioned environment as also availability of

several product categories under one roof, quality of service, confidence that the

store-owner is not cheating, car parking facilities, convenience of shopping and

the ambience of malls. Such lifestyle factors along with the status symbol of being

in malls, supplemented with a greater disposable income are the chief reasons that

prompt them to the malls. Malls were initially visited by customers who would

familiarize themselves with the different formats and form their perception about

malls.

With the passage of time, visits by regular users have consistently increased at the

malls. After the initial experience, customers have acquainted themselves with the

layout of the malls, product and service offerings and various brands that are

available in the malls. The benefits perceived by customers gradually instilled

trust, confidence, credibility and reliability in the minds of customers and induced

them into gradually accepting the malls. Consequently, customers are repeating

their visits for successive purchases marked by the increase of regular users at

malls.

Kearney (2007) studies the steady growth of the Indian economy as a result of

foreign direct investment which resulted in increasing disposable income among

single- and dual-

middle-class population in the 25- to 35-year-old age group and provided an

increased propensity to spend. The resultant increase in customer spending has

stimulated the growth of the Indian retail industry, and for three years in a row

India tops the Global Retail Development Index (GRDI) as one of the most

attractive nations for international retail investment. According to this report,

modern retail is being readily adopted in the Indian market due to the growth of

the young professional segment with high disposable incomes and the propensity

and willingness to spend for speed, variety, and convenience. As a result,

numerous luxury retailers and international brands such as Tommy Hilfiger,

Calvin Klein, Esprit, Louis Vuitton, and Swarovski have invested or are investing

in India through single-brand retail.

Sengupta Anirban (2008) states that emergence of organized retailing in India

has more to do with the increasing purchasing power of buyers, specially post

liberalization, increase in product variety, and the increasing economics of scale,

with the aid of modern supply and distribution management solutions. The current

retailing revolution has been provided impetus from multiple sources. These

revolutionaries include many: Conventional stores upgrading themselves to

modern retailing. Companies in competitive environments are entering the market

directly to ensure exclusive visibility for their products. Many professional chain

stores are also coming up to meet the need of the manufacturers who do not fall

into either of the above categories. Attractiveness, accessibility and affordability

seem to be the key offerings of the retailing chain. India retail industry is the most

promising emerging market for investment.

As per Global Retail Development Index (GRDI) 2011 high saving and

investment rates; fast labor force growth; and increased customer spending make

India for a very favorable retail environment and the 4th spot in the GRD.

Srivastava (2008) seeks to capture the history of the evolution of modern-format

food and grocery retail in India. Its focus is on the time period from 1971 to 2001.

The study reveals that emergence of modern retail in India is not just a result of

increasing customer buying power manufacturers and unorganized retailers also

have an important role to play in this process at the macro-level. At the micro-

level, the trigger came from diverse angles like entrepreneurial desire to provide

better service to customers, social desire to provide relief to the masses in the form

of lower prices, desire to capitalize on emerging business opportunities being

provided by the changing business environment, etc.

share of organized retail has just hovered around about 4 per cent despite advent of

big corporate in retail sector.

Berry (2001) explains that in Asia as a region retail sales are expected to grow to

more than $ 8.5 trillion in 2014 from USD 5.4 trillion in 2010. Multinational

retailers such as Wal-Mart, Tesco, and Metro will continue to expand their

operations in Asia as modern retail outlets continue to rise in popularity.

Mukherjee, Arpita & Nitisha Patel (2005)

disquieting is the pace at which corporate retail chains are entering and expanding

in the retail market, with analysts quoted as saying that India is attempting to do in

10 years what took 25-

study is aimed at investigating the impact of malls on small shops and hawkers.

The competition for urban space between the organized and the informal retailer is

becoming more intense. With rural-urban migration and general unemployment in

the cities, the organized sector is unable to absorb labor in sufficient quantities.

RNCOS (2009) states that increased trend in organized retailing will drive the

growth of convenience store industry in the world by 2011. Asia remains the

fastest growing convenience store market in the world as the major Asian retail

markets explosive growth in opening up of new convenience store. Changing

customer preferences, lifestyles and rising income level, which is heavily

influenced by economic growth, remains the major driving force for c-store

Thomas (2007) states that The Indian retail industry is valued at about $300

billion and is expected to grow to $427 billion in 2010 and $637 billion in 2015.

Only three percent of Indian retail is organized. Retailers of multiple brands can

operate through a franchise or a cash-and-carry wholesale model.

Goswami Paromita & Mishra Mridula (2009) attempts to understand whether

Indian customers are likely to move from traditional kirana stores to large

organized retailers while shopping for groceries. Although traditional retail

currently constitutes over 95 per cent of the total sales in the country, smaller

kiranas that are unable to compete with new age retailers in terms of variety and

scale have begun losing volume in several parts of the country.

Retail Market in India 2012 Latest Report states that retail market in

India was valued at INR 16.94 trillion in 2010 and is expected to grow at a CAGR

of 11 percent. It accounts for 22 percent of the country's GDP and is the second

largest employer with 35.06 million people. Traditional retail formats are fast

getting replaced by modern organized retail formats. Due to growing retail space

and changing customer behavior, retail market in India is poised for strong growth

in the near future. An analysis of the drivers and challenges explains the factors

leading to the growth of the market including low organized retail penetration,

rising income levels and customers, growing retail space and mall boom,

increasing availability of credit and changing demographics and customer

behavior. Strong opportunity exists in the market due to low organized retail

penetration in India. This coupled with the fact that income level and customerism

are rising, will drive the retail market. The key challenges identified are

insufficiencies in supply chain, shortage of skilled manpower and real estate

issues.

3.7 EMERGING RETAIL FORMATS

Aggarwal (2007) and Bhardwaj and Makkar (2007) highlight the emergence of

organized retailing in India and view the Catalytic effects of retail on Indian

Economy. Employment generation, growth of real estate, increase in disposable

income and development of retail ancillary market are the various catalytic effects

on Indian economy. The changing Indian retail scenario with the intervention of

organized retail in the form of modern retail formats has also seen remarkable shift

in the preferences of customers.

Kastoori Srinivas & Jyothi Jagtap (2007), explains that the retail sector has

played a phenomenal role throughout the world in increasing productivity of

customer goods and services. It is also the second largest industry in US in terms

of numbers of employees and establishments. There is no denying the fact that

most of the developed economies are very much relying on their retail sector as a

locomotive of growth. The India Retail Industry is the largest among all the

industries, accounting for over 10 per cent of the country s GDP and around 8

per cent of the Indian Commerce Association 27-29 December, 2007, Hyderabad

employment. The Retail Industry in India has come forth as one of the most

dynamic and fast paced industries with several players entering the market. But all

of them have not yet tasted success because of the heavy initial investments that

are required to break even with other companies and compete with them. The

India Retail Industry is gradually inching its way towards becoming the next boom

industry.

Piyush Kumar Sinha (2003) studied shoppers in India and have largely been

limited to their time and money spending pattern, demographic profile and

preferences for a particular format. It has been found in the studies in other

countries that shoppers do not differ much in terms of their demographic profile.

Therefore, this study attempts to understand shoppers from their disposition

towards shopping. This has been found useful as the differences between retailers

are not significant in terms of value delivered. The study brings out the shoppers

orientation of the Indian shoppers. The analysis indicates that the Indian shoppers

seek emotional value more than the functional value of shopping. Although there

is an indication of shopping being considered as a task and should be finished as

soon as possible, this orientation is overshadowed by the entertainment value

derived by the shoppers. The study also indicates that though there are some

similarities in the orientation of Indian shoppers from developed countries, there

are some significant differences too. The Indian shoppers show an orientation that

is based on the entertainment value than on functional value.

Piyush Kumar Sinha, Arindam Banerjee, (2004) researched with the objective

to identify, at a macro level, the drivers of store choice in various product

categories, in the context of the evolving retail industry in India. The paper

attempts to correlate the distinct store features as perceived by respondents with

the true motivations of various customers in patronizing various stores. In the

process it provides insight as to whether the average Indian customer values the

new store dimensions offered by retailers as a part of the new formats emerging in

the market place. The framework evolved for evaluating effectiveness of newer

store formats is necessary since it has a major impact on the overall profitability of

the retailing business. Suggests that customers in a developing market such as

India do not require the service paraphernalia offered by many of the new store

formats emerging in the market and notes that this may cast a serious doubt over

the retail revolution, which has taken shape in the Indian markets lately. Some

hypotheses about the evolution of the retailing business in India, which requires

further investigation, are suggested.

Goyal & Meghna Agarwal (2009) brings out the retail sector and its environment

that have experienced radical changes in the last decade. Most of the challenges

are due to changing demographics, social, politic, business climate, and changes in

the retail sector including the addition of Wall Mart, Carrefour, K-Mart, etc. This

paper examines the relative importance of the various products purchased at

organized retail outlets and the choice of format, the customer has when

purchasing a product. The paper also discusses the expected development of

organized retail in the future, focusing on aspects with potential effects on

customer purchasing behavior. Not all items are equally important for retail outlets

and various products need specific retail formats.

Kastoori Srinivas & Jyothi Jagtap (2007) brings into limelight the opening of

the Indian economy that has created a new sunshine sector, the mystical six letters

industry in India. It examines the growing awareness and brand consciousness

among people across different socio-economic classes in India and how the urban

and semi-urban retail markets are witnessing significant growth. It explores the

role of the Government of India in the growth and the need for further

reforms. In India the vast middle class and its almost untapped retail industry are

the key attractive forces for global retail giants wanting to enter into newer

markets, which in turn will help the India Retail Industry to grow faster. The paper

includes growth of retail sector in India, strategies, strength and opportunities of

retail stores, retail format in India, recent trends, and opportunities and challenges.

This paper concludes with the likely impact of the entry of global players into the

Indian retailing industry. It also highlights the challenges faced by the industry in

near future.

Dabholkar, P A; Thorpe, D I and Rentz, J O (1996), brings the retail

environment today is changing more rapidly than ever before (Dabholkar, 1996).

It is characterized by intensifying competition from both domestic and foreign

companies, a spate of mergers and acquisitions, and more sophisticated and

demanding customers who have great expectations related to their consumption

experiences (Sellers, 1990; Smith, 1989). Consequently, retailers today must

differentiate themselves by meeting the needs of their customers better than their

competitors. There is general agreement that a basic retailing strategy for creating

competitive advantage is the delivery of high service quality (e.g., Berry, 1986;

Hummel and Savitt, 1988; Reichheld and Sasser, 1990).

Mridula S. Mishra (2007) explains that organized retail has started to spread its

roots in the Indian market since past one decade and is gradually making mark

among all sections of the society. This paper tries to explore the way

organized retail has dramatically changed not only the Indian traditional retailing

structure by also the consumption behavior. The consumption behavior was

examined with the help of a structured questionnaire. The results show that, for

customers, the shopping mall or variant of organized retail format is the preferred

type of retail store, due to convenience and variety.

Mulky, Avinash Nargundkar, Rajendra (2003) explains the structure of a

marketing activities of firms. The Indian retail sector has arrived at a very critical

stage. Stores in modern formats have emerged in the metropolitan cities but the

bulk of the retail sales happen through traditional retail formats. The development

of modern retailing is of great interest to marketing scholars, practitioners and

policy makers. This paper analyses the developments in retailing in India. A

literature survey of retailing in India and some newly industrialized countries is

carried out. Factors stimulating modernization are discussed and some

implications for managerial action and policy are derived.

Piyush Kumar Sinha Dwarika Prasad Uniyal (2004) this study uses observation

of shopping behavior as a method for developing shopper segments. Shoppers

were observed at different stores and based on the behavioral cues they were

classified into six segments. The study generated some segments that were similar

to earlier studies based on attitude or psychographics. In addition, it identified new

segments. More importantly, the study proposes an alternative basis and

methodology for segmenting shoppers. The study also found that the segments

were differentiated largely on the basis of the type of products the stores sold and

the format of the stores. The study suggests that in an evolving market situation

store could add value through store format design to create differentiation in the

market place and mould the behavior of the shoppers to its benefit.

Hemalatha, V.J. Sivakumar, and G.S. David Sam Jayakumar (2009) studies

different groups of customers believe that different store attributes are important.

Therefore, store attributes appears to be a promising market segmentation

criterion. In this sense, the present work focuses on store attributes as a possible

criterion to segment the shoppers. It starts by analyzing the importance of

customer segmentation to the retailers. After reviewing the literature of market

segmentation, we performed a segmentation analysis of clothing and apparel

shoppers in India. First, a hierarchical cluster analysis was carried out, and then k-

means cluster analysis identified three meaningfully differentiated customer

groups. Further, a classification tree analysis was performed to identify the store

attributes that differentiated the clustered groups. Finally, three clusters of Indian

shoppers, namely, economic shoppers, convenient shoppers and elegant shoppers

are identified. Main conclusions and its implications for retailing management are

pointed out. Our concern in this paper is to understand the Indian shoppers and

segment them based on the shopper's perception on store attributes.

Bhargavi, K. & S. Arun Kumar (2010) investigates the influence of service

should help to measure, control and improve customer perception of service

quality by public banks. Hence, this relational impact should be a central concern

for public retail bank managers as well as for service management academics and

practitioners. Purposive sampling technique is used to select the respondents from

two major public banks of Tiruchinappalli city of Tamilnadu, India. Univariate

analysis is used to analyze the demographic and rational variables. The service

quality variables of tangibility, responsiveness and empathy dimensions play an

important role in predicting Customer behavioral intention which is identified

using multiple regression analysis.

Patel Vipul (2010) states that sales promotion has grown enormously in recent

years in India. Vast amount of money is being spent on sales promotion. It consists

of a wide variety of short term tactical promotional tools aimed at generating a

desired response from customers. In this study, attempt is made to study the

impact of demographic factors on customer responses to sales promotions. Five

demographic factors were considered to have impact on customer responses to

sales prorhotion. These demographic factors were gender, age, income, education

and household size. 518 active mall shoppers are surveyed with the help of

structured questionnaire in shopping malls located in the four cities of Gujarat, T-

test and ANOVA were applied to test the null hypothesis. This study may provide

refined insights in and understanding of the influence of sales promotions on

customer purchase behavior. The results of this study may help the marketing

managers of retail stores to identify their target customers and in turn, to develop

appropriate sales promotional programs to persuade those customers to purchase

readymade garment.

Hui-Ming Deanna Wang, Ram Bezawada, Julia C. C. Tsai (2010) explains that

there has been a blurring with respect to the retail formats because of competition

and proliferation of different types of formats. In this research, we use a unique

scanner panel dataset to investigate how brand choice behavior varies for the same

customer shopping for the same brand across different retail formats. We develop

hypotheses pertaining to promotion sensitivity, price sensitivity, package size

preference, and effects of demographic and shopping variables on customer brand

choice behavior and test them using a multi-format probit choice model that

allows for the estimation of the cross-format differences with respect to the above.

We find that customers exhibit different promotion and price sensitivities in brand

choice behavior between the mass merchandise format and supermarkets.

According to Swinyard (1997), Shopping patterns of US customers are more

sophisticated, they expect high level of services and merchandise quality.

Moreover economic and demographic trends are dramatically affecting the retail

industry. Micromarketing, globalization, new formats and age related

merchandising changes are the consequences of retailing trends in USA.

Arshad et al (2008) and Ghosh et al (2010) highlighting the prospects of retailing

in India opined that 47 percent

will further increase to 55 percent by 2015 and this young population will

immensely contribute to the growth of the retail sector in the country.

The study by Dash et al (2009) and CII (2008) depict that growing middle class,

large number of earning youth customers, increase in spending, and improvement

is the various opportunities for organized retailing in India. The customer has

multiple options to choose ranging from the shopkeeper to the most sophisticated

supermarkets, departmental stores, plazas and malls which provide the latest and

better quality products and it made India the top spot among the favored retail

destination as observed by Gupta (2004), Jasola (2007) and India Retail Report

(2009).

According to Mishra (2007) & (2008), customers buy essentially convenience

goods with low level of risk from organized outlets and essential products of more

involvement from traditional retailers. Further Mishra explores that India is

currently in the second phase of evaluation, i.e., customer demand organized

formats. Retailers need to customize retail models as per taste and preferences of

Indian customer.

Tusharinani (2007) noted the customers in the metro cities. Hino (2010) shared

his observation about the emergence and expansion of supermarkets that gradually

decreased the market share of the traditional formats by displacing them and the

factors that helped supermarkets in gaining customers favors over the traditional

customer

Kuruvilla and Ganguli (2008), Gopal (2008) and Srivastava (2008) opine that

mall development is expected to grow at a frantic pace in metros and mini metros

driven by the organized retail sector. Malls comprise of 90 percent of the total

future retail development. The basic reason behind the growth of malls is that it

offers an experience and not just goods. There is a wide range of shopping

experience bargains and discounts, high-end brands for couples, gaming and other

amusement facilities for kids and the multiplexes theaters etc.

Goyal and Aggarwal (2009) and Ali and Kapoor (2010) opine that in India, a

consuming class is emerging as a result of increasing income levels and dual

career families with high disposable incomes. With retailers eyeing their presence

in the market, it is important to identify the target shoppers as well as the prime

factors of enjoyment in shopping.

Shukla (2007) and Goyal et al (2009) described that food and grocery; health and

beauty; apparel; jewellery and customer durables are the fastest growing

re in

the organized retail pie. The most appropriate retail formats for various items are:

Food and grocery- Supermarket; Health and beauty care services- Supermarket;

- Mall; Entertainment-Mall; Watches-Hypermarket;

Pharmaceuticals-Hypermarket; Mobile, accessories & Services- Hypermarket;

Foot wares-Departmental store.

The study by Satish and Raju (2010) throws light on the major Indian retailers

which highly contribute to the retail sector in India. Pantaloon, Tata Group, RPG

Group, Reliance Group and A V Birla group are some of the major Indian

retailers. According to Halepete (2008), India is expanding internationally due to

saturation of markets and challenges faced by international retailers. Partnership

between Bharti and Wal-Mart is one of the successful expansions of international

retail in India.

Erdem et al (1999) examines the linkage between customer values and the

importance of some salient store attributes. The study indicated that the important

judgments for store attributes were influenced by the set of terminal and

instrumental values viewed as important by the shoppers. Herpen and Pieters

(2000) identify that the attribute-approach captures customer

traditional formats into new formats, viz., departmental stores, hypermarkets,

supermarkets, specialty stores and malls taking the lead in attracting perception of

assortment variety better than the product based approach and that it offers new

insights into assortment variety.

Urbonavicius et al (2005) methodology is based on the three latent factors that

methodology is based on the three latent factors that integrate

image attributes and explain interrelationships among them. These factors are: 1)

additional value and image, 2) store, and 3) products. These factors aggregate

numerous attributes of multiple retailers, and allow comparing positions of the

chain stores.

Popkowski et al (2001) observed that the changing retail structure has provided

the customers with more options in the form of formats and services such as less

travel time, large variety of products and quality products etc. Thang et al (2003)

and Dalwadi et al (2010) supported that customer

traditional market stores is influenced by various factors like ambience,

assortment, sales promotion schemes and in-store services. The facility of one

stop-shop had a positive response from the customers, who found it more

convenient, time saving and satisfactory.

The study by Jackson et al (2006) demonstrates that customer choice between

stores can be understood in terms of accessibility and convenience, whereas choice

within stores involves notions of value, price, and quality. Another study by

Jackson et al (2011) investigates the extent to which attitudes toward mall

attributes and shopping value derived from a mall visit differ across gender and

generational cohorts. Analysis of results show that there are no differences in

hedonic and utilitarian shopping values by generational cohort, but generational

differences in attitude toward mall hygiene factors, location convenience and

entertainment features did exist.

Lather et al (2006) and Gupta (2007) study uncovered six main indicators: viz.,

price, sales personnel, quality of merchandise, assortment of merchandise,

advertising services and convenience services that play key role for retailers in

choosing the type of retail formats that may help them to cope up with the

changing preferences of customers.

Mittal et al (2008) suggest that the retailers marketing strategy will have to take

into account two sets of attributes: (1) loyalty drivers and (2) shopping experience

enhancers. These attributes will have to be integrated into the retail format. For

apparel shopping the loyalty drivers are merchandise mix, sales promotions, price,

and recommendation/relationship whereas the shopping experience enhancers are

store reputation/advertisements, temperature (air conditioning), return/guarantee,

and ambient conditions. Enjoyable pleasant and attractive in store shopping

environment increases the chances of impulsive buying among customers,

Crispen et al (2009).

According to Gopal (2006), Jain and Bagdare (2009), Jacobs et al (2010)

layout, ambience, display, self service, value added services, technology based

operations and many more dimensions with modern outlook and practices are the

major determinants of modern retail formats. Crossmerchandise, private-label

brands, fun and entertainment, effective sales personnel and technology adoption

are the various strategies recommended for retailers by Ghosh and Tripathi

(2010).

Robinson (1998) and Herper et al (2000) mentioned a need for customer

orientation rather than product orientation for future developments in retailing.

Tripathi et al (2008) is of the view that the household size of a family has a

positive effect on the likelihood of a shopping trip. Similarly high family income

levels, may lead to higher consumption levels, which would imply larger

aggregate shopping.

According to Singh (2007) the degree of brand awareness of various food

products among urban respondents is more in comparison to rural households.

Post-graduate rural and urban respondents have high degree of brand awareness

for many food products in comparison to other educational levels of the

households. The young customer seeks more and more information about the new

products available and retailers need to communicate them more effectively is

emphasized by Kaur et al (2007).

According to Talwar (2010), during the past decade, retail industries have built up

strong lifestyle brands positioning themselves to cater to the tastes and preferences

of their customers and utilizing the increasing disposable income of the end-users.

With the economy recovering faster than anticipated, there is a drastic change in

the customer spending patterns and for India, the year 2010 is the beginning of a

pivotal decade of how much development will take place in the next ten years. It is

expected that the country will continue to accelerate its GDP growth and will

sustain a GDP growth of about 9.6 percent by 2020. India is housing about 1.30

billion people and the per capita income of every Indian will be double to an

average of 8 percent. The number of middle class households will increase from

120 million to 170 million with the addition of 50 million people earning US$

to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound

annual growth rate (CAGR) of 10 percent. As a democratic country with high

growth rates, customer spending has risen sharply as the younger population (more

than 47percent of the country is below the age of 25) has seen a significant

increase in its disposable income.

According to Benito et al (2006) the households that patronize supermarkets are

more advanced in the cycle of their family life, have higher educational levels, and

work in more professional activities; Discount stores are preferred by older

households, those with less education, and those employed in less qualified

professional activities and finally, the hypermarket seems to attract the grocery

spending of the youngest households with small children, lower educational levels,

and more basic professional activities.

Mittal, K. C.; Prashar, Anupama (2011) states that retailing involves

understanding customers, their needs and expectations. Satisfying customer's

expectations while maintaining wafer-thin margins is heroic task for most of the

retailers. Indian retail is still in the infancy stage, with the retail revolution and

there are a number of challenge factors which need to be overcome and a number

of opportunity factors which need to be leveraged upon, if organized retailing is to

flourish the way it ideally should. This field study is done for identifying the

opportunities and challenges faced by organized retailers in the tri-city

(Chandigarh - Panchkula - Mohali) region. The result of the study reveals that

competition from the unorganized sector is the biggest challenge for organized

retailers. Other challenges facing the organized retailers are inefficiency of

distribution channels, internal logistical problem and retail shrinkage. It was also

found that organized retailers see growing middle class as their greatest

opportunity followed by large number of earning youth customers. The tri-city

region has people from all over India, proportionate increase in spending with

earnings and India's booming economy. Thus, the study found that the major

challenges as well as opportunities of organized and unorganized retail are almost

the same. This means that mitigating the challenges and leveraging on the

opportunities could benefit both sectors.

Samuel, Michael Vinrald; Shah, Mrinalini (2009) brings out the fact that India

is the second largest producer of fruits after China with an estimated production of

54.4 million tones in 2008. India's diverse agro-climatic condition allows

production of a wide range of tropical, subtropical and temperate fruits. Sighting

huge business opportunities, retail giants like the UK's Tesco, France's Carrefour,

and American Wal-Mart are looking to make a foray into the Indian retail market

by providing the Indian customer a unique experience of shopping. Not lagging

behind are the Indian cooperatives like Reliance with Reliance Fresh, Aditya Birla

Group, ITC, Mahindra & Mahindra, and Adani Group. This research has

specifically been carried out to understand the present organized agri-food retail

sector in India as well as the objectives, strategies, and financial performances of

six existing companies in this business. The research paper will enable business

houses to plan and decide at what level they can venture the present highly

fragmented Indian market.

Reddy (2009) says that current economic scenario in India is paving a way for the

emergence of organized retail. Due to positive liberal environment, significant

number of Indian businesses houses as well as Multinational Corporations is

entering into the retail sector in an organized form. This sudden spurt in organized

retail in the country leads to a lot of controversy in terms of its impact on the

existing traditional retailers. Author tried to analyze the impact of organized retail

on traditional retailers on a pilot basis initially. This study will lead to a larger

study in the next two years with a broad framework. Factor analysis Chi-Square

test applied to draw specific conclusions.

3.8 FACTORS INFLUENCING RETAIL

Consider a customer who, to purchase a required basket of products (shopping

list), would normally engage in a shopping trip to a specific outlet of the focal

chain. When this store outlet closes, the customer faces two key decisions. The

first decision is the selection of a replacement store. In some instances, the

customer may decide to drop the trip. This could occur for snack trips (e.g., when

a customer pops into a store to grab a cereal bar for immediate consumption but

forgoes this purchase if the conveniently located store closes). In most cases,

however, the customer will transfer the trip to another store. If this store belongs to

customer may also

The second issue, then, is whether this store switch will alter the customer

of spending. As long as the replacement store is of the same chain and format,

they expect trip spending to remain unaltered (Inman and Winer 1998). First, on

switching to the replacement outlet, customers might adjust their shopping list.

Second, even if the list of planned categories is unaltered, the format change may

cause customers to deviate more or less strongly from this list. For example, a

customer who did not (plan to) buy pastries in the focal chain supermarket may

purchased are the same, customers may buy different amounts. For example, a

customer in need of fresh fruit may still purchase from this category, but in

smaller quantities, when his or her trip is diverted to a smaller format.

These changes may be negative, but the customer may also spend more in the

replacement store, in which case the store switch leads to a gain for the focal

chain. An important question is what drives these decisions. It is expected that

when customers are confronted with a store closure, they will make a tradeoff

between substitution and transaction costs (e.g., Campo, Gijsbrechts, and Nisol

2003). Substitution costs arise if the replacement store leads to lower utility than

the originally selected outlet because of a less appealing assortment or higher

price. Transaction costs result from higher transportation costs to the replacement

store, enhanced search costs (time and effort to locate and select the required

items), or enhanced checkout time. In turn, the level of these costs depends on (1)

(replacement) store, (2) shopping trip, and (3) shopper characteristics

Features of the available replacement stores strongly affect the substitution and

transaction costs of a store switch (Campo, Gijsbrechts, and Nisol 2003). First,

distance increases transaction costs, such that customers typically prefer nearby

replacement stores. Second, characteristics inherent to the replacement store chain,

such as assortment quality, service level, and value for the money, shape variable

shopping utility (Bell, Ho, and Tang, 1998), and thus, the substitution cost of

switching. Third, store format whether the substitute store is a convenience store,

supermarket, or hypermarket outlet plays an important role. Although larger

formats probably entail lower substitution costs (because customers have a wider

array of items to choose from at often lower prices), in-store travel time and search

costs are typically higher. This may affect the likelihood that larger formats are

chosen as a replacement store and influence planned or unplanned spending after

the switch. Specifically, shifts to smaller formats are expected to shrink basket

sizes.

Major shopping trips are less likely to be dropped than minor trips, especially

snack trips (Achabal, Kriewall, and McIntyre, 1983). Moreover, trip size will

affect the transaction and substitution costs from specific store switches. On one

hand, customers tend to transfer large trips to formats large enough to procure the

total basket of products. On the other hand, they may be reluctant to transfer their

major trips to large outlets of unfamiliar or less preferred chains

(Chetthamrongchai and Davies, 2000) to avoid high search or substitution costs.

As for basket composition, purchases of fresh items, such as produce, bread, and

fish or meat, are more likely to take place in low fixed cost replacement stores.

Finally, basket size and composition influence the changes in spending after a

format switch. Larger formats confront customers with wider assortments or more

in-store traveling, and the extent to which this increases their outlay depends on

the shopping task and category needs: Larger-basket trips and hedonic categories

Inman & Winer, 1998).

Small-basket shoppers, who typically visit more chains to begin with, experience

lower increases in search cost when visiting another chain. Whether they will

switch to larger formats remains ambiguous: Given their small-sized trips, they are

more strongly put off by the transaction cost of switching to hypermarkets (Bell

and Lattin, 1998), but to the extent that they are less time constrained, they are

less vulnerable to transaction cost increases. Finally, small-basket shoppers exhibit

different category spending patterns and, thus, changes in spending after a format

switch (Inman and Winer, 1998).

Shilpa Bagdare & Jain Rajnish (2009) has stated that customers experience has

assumed important status in the modern retailing driven by the winds of challenge,

hedonic value in terms of pleasurable movements of truth The results have

reconfined the role of environmental clues including people, product, processes

expectation clearly gives an understanding of important determinants of customers

experience in new format retail stores. Both the utilitarian and emotional

dimension has been found to contribute in shaping retail experience.

Gulat Ashok & Thomas Reardon (2008) has conducted a study on, The Impact

eloping countries since the

early-to-mid-

impact on traditional retailers; has set off ripple effects upstream in the food

system, on the wholesale, processing, and farm sectors; and has incipient effects

on trade.

Goswami Paromita & Mishra Mridula (2009) in their study reveal that

Customer patronage to grocery stores was found to be positively related to

location, helpful, trustworthy salespeople, home shopping, cleanliness, offers,

quality, and negatively related to travel convenience. Kiranas do well on location

but poorly on cleanliness, offers, quality and helpful trustworthy salespeople.

Given that modern trade outlets have deeper pockets and can afford to make

mistakes and get away with it in the short term, kiranas have to stay alert, try to

upgrade and continue to serve customers well, while concentrating on innovating,

evolving and remaining efficient on retailer productivity scores.

IBEF (2010) conducted a study on Indian retail market which states that, India is

size was estimated at

US$ 350 billion and is expected to reach US$ 590 billion. While there is immense

potential, growth prospects of the sector might face hurdles due to factors such as

restrictions on FDI, lack of a uniform tax structure across states and increasing

logistic issues. Going forward, we believe that rising income levels of the Indian

middle class and the consequent rise in disposable incomes will fuel growth of the

sector.

Gupta et al. (2003) studied the changing Indian customer behavior in the past

decade due to availability of large assortment of major products leaving an impact

on their consumption and consumption structure. The customer is no longer

shopping for clothes/household products from the local market; rather the place of

shopping has shifted to the stores in malls.

A specific research conducted to understand the impact of personal and non

personal retail services Palic, M. et al (2011) indicated there is significant impact

of level and quality of personal service on customer satisfaction and loyalty but

non personal services has much more impact on customer loyalty. The research

has provided empirical substantiation of positive but feeble and insignificant

Establishing the importance of employee work satisfaction Evanschitzky, H. et al

(2011) suggested that overall employee satisfaction increases customer satisfaction

and also confirmed that there is positive impact of service quality, product quality

and value for money on customer satisfaction. On testing the reliability of the

scale in the framework of customer satisfaction measurement Coelho, P. and

Esteves, S. (2007) found ten-point scale shows better properties than the five-

point scale and the ten-point scale generally shows higher validity than the five-

point scale. The study has also confirmed that the five-point scale tends to show a

higher attraction of responses towards the middle point of the scale.

Grover, Dutta (2011) made an attempt to identify the factors which significantly

explained the customer satisfaction in an organized retail outlet and found that

store convenience, appealing store value, product offering, and value for money,

price and choice availability are such factors.

Further research taken up by Hanif, Hafeez, & Riaz (2010) found that customer

services/retail services & price fairness are independent variables but play a vital

role in customer satisfaction and these variables not only influence the dependent

variable-customer satisfaction but also complement each other. Having realized

the importance of customer centric retail services researchers has done significant

research on the area of customer oriented retail services.

Shankar Gopalakrishnan & Priya Sreenivasa (2009) argues that corporate food

will produce a decline in land productivity, reduce food security, adversely affect

price stability and will tend to negatively impact employment and credit relations.

The authors explore the changes in class and social relations that come about with

the transition to a corporate system of food provisioning. It considers the potential

impacts of such changes in the Indian context. In their argument, corporate retail is

more accurately viewed as one face of a different system of provision. This is a

crucial change in emphasis, for in this view, corporate retailers and their strategies,

for good or for bad, cannot be seen in isolation.

The reasons being multifold, the emergence of organized retailing is mainly

attributed to the demographic and psychographic changes taking place in the lives

of urban customers. Changing life style and values, growing number of nuclear

families, working women, greater work pressure, increased commuting time,

influence of western way of life etc. have shifted the needs and wants of customers

from just being cost and relationship driven to brand and experience driven. But

still the element of value for money dominates in the Indian mindset in buying

Class customer

ignited the growth of organized retailing in India. Nowadays people look for better

quality of products at cheaper rates, better service, better ambience for shopping

and better shopping experience and organized retail promises to give all these.

Corporate retailers tend to penetrate only into urban upper class segments,

especially given the higher prices that most corporate retail outlets charge when

the corporate food system has not yet been set up. However, this soon changes,

and corporate retailers penetrate well into the markets of the poor and into smaller

towns (Reardon et al 2003), though there remains a correlation between

educations, income levels, type of employment and use of supermarkets.

Existing evidence from previous research shows the importance of customer

service quality perception on customer

that service quality offered by retail stores is a significant determinant for

customer Anon, 1985; Doyle, 1987; Shycon,

1992), perceived value and willingness to buy (Sweeney et al., 1997), customer

satisfaction and customer retention (Dabholkar et al., 1995; Parasuraman and

Grewal, 2000).

Among customer shopping behavior, customer satisfaction and loyalty behavior

success in financial performance and market shares largely depends on the

satisfied customer who are willing to purchase products or services repeatedly and

recom customers (Siu and

Cheung, 2001; Srinivasan et al., 2002).

Sreedhara, R.; Babu, K. Nagendra (2010) explains that the organized retail in

food and grocery segment in India is growing fast. It is spreading and is gaining

momentum with many players entering the market with different types of formats.

Customers are having a variety of shopping experiences. At the same time,

retaining customers is becoming increasingly important for retailers. Some

customers are intrinsically loyal and patronize the same retail outlet brand. There

are also a large number of customers switching between retailers who offer them

the best alternative at a particular time with comparable offers

Lahiri, Isita; Samanta, Pradip Kumar (2010) says the whole world is

witnessing a paradigm shift from traditional forms of retailing to a modern

organized mall-driven sector, Indian retailing cannot float opposite in the direction

the global wind blows. In spite of late entry, it is forecasted that the country will

be the second largest market of the world shortly and shall lead the industry, the

way world does. Increase in the rate of literacy, growing number of working

women, highly disposable income, easy availability of credit at low interest rates

and high rate of media penetration along with the assurance of similar quality

products with large ambit of price differentiation, painted the country's dynamic

organized retail landscape. Rising interest and growing expansion of organized

retail market leading to success of a business, depends solely on customers' urges

that there is a need to study their buying behavior. But the existing literature briefs

a little about the buying behavior functions in the Indian retail market. The

frequent change in lifestyles with changing fashion preference of customers is fed

by the newer retail offerings coming from the organized retailers where apparel

gets utmost importance. Keeping these changing facets in view, this study makes

an attempt to identify the factors of the customers' buying behavior that is

influenced by retail apparel segment, and to assess the importance of each of them

to customers in selecting apparel from organized retail outlets.

Smith and Sparks (2000) identify a potential future role for small independent

retailers. For example, certain situational factors could encourage patronage of

independent shops. In rural areas, small shops may be used for all purchases as

they are the only readily available outlets. Small shops may be used as a source of

number of roles that small retailers may perform, in terms of employment

generation and maintenance, and embeddedness within local business networks.

Moreover, the often dynamic nature of the independent retail sector may serve to

act as a seed-bed for new retail and product ideas. Such dynamism may be

manifested in a greater understanding of the local market and a greater

appreciation of the service requirements of customers.

Phil Megicks & Gary Warnaby (2008) suggests that market and competitive

dynamics threaten the very survival of small shops in the UK. In light of this, the

relationship between market orientation and performance in small UK retailers

through an empirical analysis of survey data. Findings indicate that market

orientation and performance are positively related and, moreover that, the

customer strategy focus of small retailers is the key determinant of success

compared with other components of market orientation and environmental

particularly the importance of market-oriented culture in formulating and

implementing customer-led strategies which distinguish successful small retailers

from those that struggle to survive.

carefully di erentiated and targeted strategies with an external emphasis (Narver

and Slater 1990). In addition, a market orientated culture may be especially

important to small retailers who can, according to Pelham

Park & Kim (2003) identifies the factors that influence retail buying behavior.

Age of the customers is a predominant variable. In the context of interactive

shopping, cultural characteristics also influence shopping patterns. Customers

from individualist cultures, develop innovative profile and more predisposed to

shop via internet and other modern buying channels. Young men with high income

level and university education try internet buying. But the profile is changing in

US as more women surfers also prefer online shopping.

Chintagunta (2002) demonstrates that store traffic and competition influence

retail pricing. Quantity discounts may serve as a retention and acquisition tools for

high volume customers who purchase large size across categories. There is

competition from mass discounters who offer larger sizes at discounted price. This

brings in price discrimination based on the volume of purchases made by the

customers.

Andrew Alexander (2002) uses empirical data from the archive of Mass

Observation to explore directly customer

development and change in early 1940s Britain. Mass Observation data is shown

to provide clear evidence of customer he retail industry,

their preferences for particular retail types and their reactions to retail change. It

also confirms the need to remain alert to the importance of social relations in

understanding customer

Watchravesringkan & Punyapiroje (2011) explains the customer attitude to

understand the marketing efforts of hypermarket retails. Customer attitude towards

marketing practices of three retailers - Tesco Lotus, Big C and Carrefour in

Thailand was studied. Research revealed demographic variables career and income

has significant association with the type of hypermarket retailer. Customers prefer

Tesco Lotus over other two retailers as they believe that the sales person at Tesco

Lotus is more helpful. Moreover, three aspects of marketing practices are

perceived differently among Thai customers: retail service, positive advertising

and fair price. As the customers spending power has increased, multinational

hypermarket retailers are investing to improve on their marketing efforts.

Sin and Cheung (2001) examined the service quality of a Japanese Supermarket

in Hongkong. The original dimension of Problem solving areas integrated with

Personal interaction and a new factor emerged in the study, which was named as

Trustworthiness.

Marc Dupuis, Nathalie Prime, (1996) proposes a preliminary model of analysis

of the key success and failure factors in retail internationalization. Indicates that a

business distance between the domestic and target markets are

al competitive advantages. Give the examples of the

internationalization of French hypermarket in the USA (failure) and in Asia

(success) as illustrations. Outline future research directions and managerial

implications.

Louis P Bucklin (1962) explains that the use of the three by three matrix of

customer buying habits may aid the retailer in developing his marketing strategy.

It is a device which can isolate the important market segments. It provides further

help in enabling the retailer to associate the various types of customer behavior

with those elements of the marketing mix to which they are sensitive. Finally, the

analysis forces the retailer to assess the probability of his success in attempting to

use the necessary strategy in order to sell each possible market.

Srivastava, (2008) is of the opinion that malls in 2006 are more developed in the

North and West part of India. Food, groceries and apparel purchase by customers

contributed to 52 percent. On average 75 percent of customers spend about 1-3

hours in the mall. Malls with multiplexes such as cinema theatres, food courts, and

play places for children are becoming the centre for family outings. Small retailers

have improved their service to cater to Indian customers. Credit limits and home

service are helping them to hold on to their customers. Retailing focus is changing

towards satisfying the different hierarchy of needs of customers.

Pavleen Kaur, Raghbir Singh, (2007) explains that the changing lifestyle of the

Indian customer makes it imperative for the retailers to understand the patterns of

consumption. The changing consumption patterns trigger changes in shopping

styles of customers and also the factors that drive people into stores. The author

reveals that the Indian youth primarily shop from a hedonic perspective. They

importantly serve as new product information seekers, and the retailing firms can

directly frame and communicate the requisite product information to them.

Anirban Sengupta, (2008) Emergence of modern retail in India is not just a result

of increasing customer buying power manufacturers and unorganized retailers

also have an important role to play in this process at the macro-level. At the micro-

level, the trigger came from diverse angles like entrepreneurial desire to provide

better service to customers, social desire to provide relief to the masses in the form

of lower prices, desire to capitalize on emerging business opportunities being

provided by the changing business environment, etc.

Lutz Hildebrandt (1987) explains that due to the decline of the number of small

neighborhood stores, especially in rural areas, it is hypothesized that the quality

of retail supply in these areas is attenuated. A causal modeling approach is applied

to secondary data measuring retail supply in rural and urban areas. An explicit test

of validity proposes a four-dimensional measurement model of retail satisfaction.

Competing hypotheses are tested in a complex causal model to reveal the causes

of retail satisfaction, measured by four dimensions. The analysis identifies

accessibility and diversity of retailers as important dimensions

of retail satisfaction, which are affected by situational variables of the household.

The location of the household is shown to be a strong factor for (dis)satisfaction.

Dhruv Grewal, Julie Baker, Michael Levy, Glenn B Voss (2003) opines that

many factors, both obvious and subtle, influence

intentions. Using videotape technology that enabled us to experimentally

manipulate the number of visible store employees, number of customers, and

music, we test the relative importance of wait expectations and store atmosphere

evaluations on patronage intentions. These constructs are found to be critical

antecedents of store patronage intentions in the context of the service-intensive

retail store at which the model was tested. We also find support for the direct

effects of gender on wait expectations and store atmosphere evaluations.

Burtchett, Floyd F (2002), explain that the possibility of organized speculation

seems to rest essentially upon the existence of a unit of operation which is

sufficiently standardized to admit dealing on the part of largely divergent

economic groups; homogeneity of each unit of purchase or sale that each shall be

interchangeable with the other within its class; a sufficiently large number of

persons engaging in speculation with such frequency as to create a more or less

continuous stream of speculative transactions; a reasonable uncertainty of future

prices so that there will exist at all times a substantial diversity of judgment

regarding them. In a few fields, i.e., stocks, bonds, and about thirty commodities,

these requisites have been sufficiently realized so that specialized institutions exist

for the furtherance of speculation.

Veena, et.al (2011), explains that Supply Chain Management (SCM) not only

helps in cutting costs, but also adds to maintain and improve the quality of fruits

and vegetables (F&V) marketed. In marketing F&V, which are perishable in

nature, Supply Chain (SC) plays a crucial role. The very nature of land holding by

the farmers, varied climatic conditions, production spread over wide geographical

area, mainly in remote villages, diversified consumption patterns and poor SC

infrastructure makes SCM for F&V more complicated. In India, SCM is at its

nascent stage in marketing of F&V. Marketing of F&V is challenging because of

the perishabality, seasonality and bulkiness and consumption habits of the Indian

customers. In addition to this, poor SC infrastructure, poor private equity in SC

and conventional small-scale unorganized retailers, make state of- the-art SC

challenging in the present scenario. The Indian retail market is mainly dominated

by unorganized retailers. The unorganized retailers are not a homogeneous group.

Recent development in retailing is the entry of large number of organized retailers.

Current SC catering mainly to the unorganized retailers is riddled with number of

drawbacks. As per the survey conducted for this study, important drawbacks of the

current SC are number of intermediaries, high level of wastage, quality

degradation, poor infrastructural facilities and high cost.

Kokatnur, Shilpa S (2009) opines that malls, supermarkets and hypermarkets are

growing rapidly adopting aggressive strategies to attract customers. These

strategies in turn affect the existing small players. The purpose of this paper is to

analyze the impact of new retail formats on traditional/unorganized retailers'

strategies. The paper investigates the impact of organized retailers' strategies on

traditional stores. A total of 20 organized retailers and 150 small stores in different

categories were interviewed to know their strategies with respect to the retail mix.

Data are analyzed with factor analysis and analysis of variance. The results find

that service and promotion are the major strategies affecting unorganized players.

The impact of organized stores differs for different category stores. Service and

technology up gradation are the major strategies adopted by small players to retain

customers. The results also indicate that traditional retailers need to redesign their

business models. Until now, hardly any studies incorporated the impact of

organized stores on small players. Traditional retailers exert an important

influence on economic development.

Gupta and et.al (2009) explains that every store, whether organized or

unorganized, attempts to entice customer towards its products and services. In-

store stimuli, such as product display, product price, large variety, store ambience,

etc., form the core reasons that influence customers to purchase on impulse.

Clearly, a large store must be able to attract more impulse purchases from a

customer as compared to a small store. However, there is a caveat here. The

impulse purchases made from a large store must be large enough to justify the

investment and turnover of the store as compared to a smaller-size store.

Therefore, in this research we study the influence of store size on impulse

purchase. The study reveals that the impulse purchase as a ratio of total spending

is high for the mid-sized departmental stores when compared to small-sized and

big-sized retail stores.

Mitra and et.al (2004) explains that, using Turkish industry-level data from 1983

to 1990, we find that politically organized industries receive both higher protection

and promotion than unorganized ones. Tariff rates are decreasing (increasing) in

the import-penetration ratio and the absolute value of the import-demand elasticity

for organized (unorganized) industries. Subsidy rates are decreasing (increasing)

in the output-supply elasticity for organized (unorganized) industries. The results

are consistent with the predictions of the Grossman-Helpman model and its

extension in this paper. The mix of protection and promotion is inversely related to

the ratio of their respective marginal deadweight cost measures.

Krishna and et.al (2008), says that except the word 'change', every object or thing

is vulnerable to change. However, only the time span varies from one to the other.

The face of retail markets in India too, is no exception. The past decade has

witnessed and brought about many changes in the transaction processes, services

and formats of retail markets. Retailing, which is the last aspect of distribution of

marketing strategy, acting as a bridge between the mass producers and the final

customers, has spread in every nook and corner of the globe? Just a few months

ago, while assessing and forecasting the growth of the Indian retail markets on

various fronts by various competent agencies, it was understood that currency-

wise, market size is speculated to be $180 bn, and employment-wise, 15percent of

the adults are perhaps the largest contributors to India's GDP. There are nearly 12

million retail outlets spread throughout India, occupying a space between 50 sq ft

to 50,000 sq ft plus, on an average. The lion's share goes to the rural areas, where

twothird of the stores are located. Due to the LPG (Liberalization, Privatization,

and Globalization) formula adopted by the Indian government, potential players

throughout the globe, including the giant Wal-Mart, have an eye on the huge

unorganized retail markets.

Thenmozhi S. P.; Dhanapal D (2010), opines that Retail is the fastest growing

sector in Indian economy with a compounded annual growth rate of 46. 4 percent

for the past three years. Traditional retail outlets are paving way to newer formats

like Supermarkets, Specialty store and Hypermarkets. In India, the organized

retailers are entering the grocery market at a rapid rate and posing a threat to the

livelihood of kirana shop-owners. It is important to find out how a retailer is

represented in the minds of the customer and what differentiates one retail

experience from another. It is also important to analyze whether a retail business

meets the customer needs and expectations which can be measured by assessing

the retail service quality in unorganized retail outlets. It is essential to understand

the unique sales techniques adopted by unorganized retail outlets that give a

competitive edge over established organized retail outlets. In the emerging Indian

retail environment, this study has brought new insights into retail service quality.

The managerial implications of the present study will thus help unorganized

retailers to frame effective marketing strategies to face the competition.

Item-Based Loyalty Program (IBLP) is expected to have several potential positive

and negative effects on the attractiveness of the focal store. On the positive side,

first, because price discounts for individual items are replaced with reward points,

the IBLP presents numerous opportunities (i.e., through every promotion) to

remind customer y

program and thus can sensitize customer

Second, the IBLP may create a stronger lock-in effect of the loyalty program, in

that loyalty program reward points are valid only with a given retailer and thus

switching to another retailer would imply losing the previous accumulated

benefits. We expect this lock-in effect to be stronger under the IBLP because the

cumulative reward points now include those converted from would-be price

discounts, and thus the forfeited benefit when switching is greater. Third,

feelings and pride about being economical. Such psychological benefits may be

stronger under the IBLP, which constantly reminds customers about the potential

rewards they can earn. Behavioral learning suggests that such positive and

continuous reinforcement can increase future purchase behavior (Leenheer et al.

2008).

We also expect several negative effects on the attractiveness of the focal store.

First, the IBLP may discourage customers from patronizing the store because it

delays the payoff of promotion benefits. Previous research has suggested that

customers prefer immediate rewards over delayed ones (Leenheer et al. 2008).

In addition, benefits are less certain under the IBLP because customers need to

reach a redemption threshold before receiving a reward, which may be another

reason they prefer price discounts over reward points. In addition, the IBLP may

leave the impression that the ret

purchase behavior because all promotion benefits are delayed and regulated by the

rules of the new loyalty program. Psychological reactance theory shows that

customers tend to react against attempts to control or influence their behavior, and

previous research has found evidence for the existence of promotion reactance in a

loyalty program context.

In terms of neoclassical analysis, the primary source of retail demand hypotheses

is the market area model associated with Losch (1954) and others. The key

demand-related variables in this class of models include income, population

density, and transportation cost. The density of households has proven to be an

important dimension in measuring aggregate income and demand potential within

an urban neighborhood. Studies of inner city income patterns have found that

income density (income per unit of area) is often greater in central neighborhoods

with relatively low average income but higher population density (Weiler, et. al.

2008).

Another spatial demand and cost factor is transportation cost, which on the

demand side is negatively related to the customer -store willingness to pay, all

else equal (Losch, 1954).

Transportation cost has an ambiguous effect within the market area model which

depends on price strategy assumptions (Villegas) and population density effects.

The specification of income, the third imension of urban demand, inevitably raises

some options. Per capita income is our preferred specification, partially due to its

more direct role in the market area model. However, other measures including

median household income, mean household income, median household income by

zip code as a percent of the metropolitan area median, and the poverty rate, were

included in preliminary tests with generally insignificant results.

More generally, biased or inadequate demand information has been shown to be a

significant problem in some case studies (Weiler et al. 2008). Underestimated

demand may exist because of an undercounted population in low income areas,

underestimated or underreported income, and unawareness of the negative relation

between the average propensity to consume and income level, or a lack of

understanding of ethnic differences in taste.

There are several aspects of location that affect the number and size of retail

stores. Agglomeration, or clustering, may offer production advantages through

information and input sharing, as well as offering some advantages for the

customer. The corresponding increase in competition may offer a countervailing

disadvantage for some types of retail outlets. Secondly, more densely populated

areas of cities may present significant challenges when assembling larger land

parcels for large scale grocery or general retail facilities. Input prices, including

land, labor and delivered inventory, also affect cost in obvious ways. Both the

prevailing wage and the productivity of available labor are relevant factors in firm

location decisions, and land costs can vary significantly within and across cities.

None of these cost factors are necessarily less favorable to business in modern

inner city areas, however.

Discrimination is perhaps the most well-established social factor affecting retail

location choice. Ethnic prejudice may influence retail demand in multiple ways.

influence prejudiced customer

shoppers from outside the neighborhood, may feel reluctant to shop in mixed or

minority areas because of prejudice or fear. Gallagher (2003), among many

others, shows that whites significantly exaggerate the percent of minorities living

in mixed neighborhoods.

Quillian and Pager (2001) show a positive correlation between African-

American population and crime, but also find that Caucasians systematically

overestimate the crime rate in these neighborhoods. These two facts imply that

whites will significantly overestimate the danger of shopping in mixed or African-

American neighborhoods, in addition to any effect on demand from prejudice

itself. Given the generally higher average income for Caucasians, this possible

discrimination by white shoppers implies lower aggregate retail demand in black

neighborhoods. The role of racial and ethnic discrimination on operating cost is

more mixed and less directly related to neighborhood characteristics. Yet there is

substantial evidence that racial discrimination exists in capital markets. There is

more and better evidence of discrimination by lending institutions against minority

entrepreneurs.

Such ethnic redlining implies lower access to or higher cost for initial capital, a

potentially significant barrier to inner city retail development. Other social and

economic factors affecting inner city retail access include the role of corporate

decisions, cultural attitudes toward entrepreneurship, and crime. Some argue from

a Marxist perspective that corporations can be blamed for urban decay, and that

partially autonomous urban business clusters should be promoted, preferably

under local ownership. Another social factor is the role of entrepreneurship in

various American cultures. From a relatively free-market perspective, Porter

(1995) and Butler (1997) argue that African-American entrepreneurship needs to

be actively encouraged, particularly among inner city residents. Crime represents a

real cost to business, but also contains elements of bias, as noted above.

Government may have both positive and negative effects on retail location choice

through its effect on entry and operating costs. Possible negative factors for

operating costs include taxes and ongoing regulatory costs. The cost of entry may

be affected by the process of gaining approval for zoning variances, construction

permits, and environmental impact. On the other hand public sector urban

development and small business programs may offer information and entry cost

savings. Fainstein and Gray (1997) emphasize the positive role of government

development planning and subsidies in urban business development, policies that

Porter (1995) regards ambivalently.

The technology was originally intended to speed up customer checkout in retail

outlets and reduce labor costs at the cash register as well as on the store floor, for

example, for price changes. The main reason early adopters gave for implementing

-saving potential of

Shaw, 1977). Few initial adopters conducted

proper assessments of the technology, either because they had no baseline against

which to measure productivity or because they implemented other changes in

conjunction with scanner installation (Shaw 1977). Instead, they relied on

expense.

Today, scanners provide previously unimaginable data. Store managers report

using scanner data primarily for promotions and price setting (Bucklin and Gupta

1999), but scanners can also provide detailed worker-level productivity

information items scanned per second which may be used in promotion or

compensation decisions. Researchers used such detailed productivity data to study

the effect of peers on checkout speed. Scanner data also helps track customer

demand through so- -enabled inventory

management has improved in-stock rates. Many authors have speculated that

barcode scanners and the IT revolution in inventory management that scanning

made possible, provided the foundation for the increased product selection and the

growth of stores we have observed in recent decades.

Taking a closer look at what happens when, say, a supermarket manager cuts

staffing to meet a payroll or the target. A typical supermarket is a complex

operating environment. It carries close to 39,000 SKUs, ranging from an Idaho

potato to a 6.4-ounce tube of Crest fluoride anti-cavity toothpaste with tartar

protection. The store receives multiple deliveries every day from manufacturers

and its own distribution centers, and store employees shelve much of the

merchandise. It has about 100 promotions a week and serves close to 2,500

customers a day. Customer transacts throughout the day and week and on

holidays, but the transactions are fairly predictable. In this environment, it takes a

lot of operational expertise to get the right product on the right shelf at the right

time. Like most retailers, supermarkets carry more goods than they can display. So

there is not only a constant unloading of deliveries but also a constant shifting of

items from backrooms to the selling floor and back again. It also takes a lot of

logistical support to get the wrong product or the shelf. For example, items move

to storage when promotions end. Store employees are also supposed to remove

damaged or expired goods generally more than 1 percent of what is on the shelves.

In grocery retail, for example, close to a third of stock-outs are so-called phantom

stock-outs the supply chain gets the products to the right store, but customers

cannot find them because the products are in the wrong place. For a specialty retail

chain we looked at, the average was 60 percent. Two surveys at Borders stores

showed that one out of six customers who asked a salesperson for help finding

something had experienced a phantom stock-out. Misplaced products obviously

percent higher without phantom stock-outs. Misplaced products also frustrate

ductivity.

on agreements with manufacturers about promotions. Manufacturers spend

millions of dollars planning promotions, but a 2008 study by the In-Store

Implementation Share group, an industry organization, found that about half are

executed either late or not at all. Less obvious but hardly less serious is the way

such problems distort point-of-sale data, which results in poor inventory and

promotion planning. For example, when a customer experiences a phantom stock-

out, inventory records show positive inventory for the product, and point-of-sales

data show that the product did not sell. The forecasting system then concludes that

there is no demand and reduces the forecast of future demand, so the retailer will

stock less or even stock none of that product.

-mart, the poster child of big-box retailing and supply-chain

management, has struggled with these problems, which is one reason it began

putting RFID tags on some merchandise. But such technologies are often an

expensive way to solve people and process problems. Because labor budgets at

many retail chains are set as a percent of sales, they take a hit when sales drop.

When the labor budget is low, store managers cannot increase staffing levels, even

when they know it will make the store more profitable. And retail chain managers

are hesitant to invest in employee training or other benefits that increase retention

and boost sales. The vicious cycle continues.

When retailers view labor not as a cost to be minimized but as a driver of sales and

profits, they create a virtuous cycle. Investment in employees allows for excellent

operational execution, which boosts sales and profits, which allows for a larger

labor budget, which results in even more investment in store employees (Ton,

2012).

In addition to offering the lowest prices in their industries, these retailers also

provide better customer service than their competitors. The University of

Nordstrom, a department store chain known for outstanding customer service and

Quik-Trip performs better than its

competitors in evaluations by mystery shoppers. Customers get in and out of

Quick Trip stores quickly because merchandise is always where it is supposed to

be, and employees have been trained to ring up three customers per minute (often

by not having to scan merchandise and by calculating change in their heads).

American retail customers have become resigned to the notion that if they want

nd

conversation and inform them about new products. Many Mercadona employees

employees are known for suggesting products and recipes. In fact, Customer

-best supermarket chain in the United

States after Wegmans, which is known for outstanding labor practices but does not

compete on the basis of low prices.

With fewer products, employees can be familiar with everything the store sells and

this. At Mercadona stores, each section is managed by a specialist who will gladly

explain to shoppers why Mercadona does or does not carry particular products.

This is one reason the company felt it could further reduce product variety to cope

with the recent economic crisis. Its confidence was borne out. Sales went up

because simplifying operational execution allowed Mercadona to reduce prices

even more and allowed employees to explain to customers why they were getting

a better deal.

At retail chains that operate in a vicious cycle, changes in customer traffic lead to

changes in the number of employees. These retailers follow what Harvard

-

But although fluctuations in customer transactions tend to be fairly predictable (at

one retailer, it was found that more than 90 percent could be explained by day of

Workers get very short notice of changes and are often asked to shorten their

shifts. A lot of retailers consider this to be an efficient approach but do not take

involved replacing knowledgeable full-time employees with part-timers who did

not know as much abou

not help customers effectively. Not surprisingly, it found that unpredictable

schedules, short shifts, and dead- (Ton,

2012).

When morale is low, absenteeism, tardiness, and turnover rise, increasing the

variability of the labor supply, which, of course, makes matching labor with

customer traffic more difficult. In addition, retailers with high turnover cannot

afford to invest in employee training; average training per new retail employee is a

mere seven hours in the United States. Untrained or poorly trained employees are

less productive and make more errors.

Instead of varying the number of employees to match traffic as much as other

retailers do, Quik- Trip and Mercadona vary what employees do. They achieve

this by training employees to perform a variety of tasks. At Quik-Trip part-time

employees receive 40 hours of training and full-time employees receive two weeks

not just in checking out customers but also in brewing coffee, ordering

merchandise, sweeping doors and the parking lot, cleaning bathrooms, and

stocking coolers, freezers, and grills. At Mercadona, every new employee receives

four weeks of training, during which they learn how to manage a particular section

(meat or cosmetics, for example), perform inventory checks (for data accuracy),

order merchandise, replenish products from backrooms, and check for product

defects or other problems (Ton, 2012).

When customer traffic is high, employees at Quik-Trip and Mercadona focus on

customer related tasks; when traffic is low, they focus on other tasks. Quik-Trip

employees also can move from one store to another, because all stores have the

same design. As a result of this cross-training, employees have more-predictable

schedules and are always busy (that is, more productive), and customers get faster

service from more-knowledgeable employees.

Retailers that invest in employees are by no means easygoing about what people

do. Rather, they are obsessed with eliminating waste and improving efficiency. At

Costco stores, products are shelved on pallets, which eliminate the need to unload

packaged instead of loose, which speeds up chec

also work hard to eliminate waste in the supply chain by, for example, purchasing

most products directly from manufacturers and moving them to retail stores via

their own highly efficient distribution centers.

Quik-Trip and Mercadona apply world-class manufacturing practices to their store

operations. Every in-store logistics process from receiving merchandise to moving

products within the store is timed and standardized, and compliance with the

standards is constantly monitored. Employee feedback is incorporated into process

design and improvement. At Quik-Trip, employees from every position regularly

discuss problems and identify opportunities for improvement. At Mercadona,

managers at headquarters in charge of specific processes routinely visit stores and

talk to employees. The company also has held employees whose main job is to

relay employee and customer feedback to purchasing and marketing departments

(Ton, 2012).

In contrast to retailers that constantly strive to make do with fewer employees;

retailers that operate in a virtuous cycle often err on the side of overstaffing. They

want to make sure that employees are not too rushed to serve customers well and

finish their logistics tasks. Quik-Trip goes even further, maintaining a force of

hundreds of employees who do not report to a specific store but are ready to fill in

for people who get sick, take a vacation, or have an emergency.

In most retail stores, merchandise planning is centralized and only managers can

make decisions about product returns and customer complaints. But at companies

that operate in a virtuous cycle, employees constantly make decisions. Quik-Trip,

order for their stores. How can large chains trust thousands of people to make

inventory decisions? Every decision is small, corporate IT is designed to assist,

and the decisions are monitored. Because empowering employees in these ways

makes companies more responsive to local needs and preferences, it increases

customer as well as employee satisfaction (Ton, 2012).

Today many retail managers believe that there is a trade-off between investing in

employees and offering the lowest prices. That, too, is false. Retailers that persist

in believing in it forgo the opportunity to improve their own performance and

contribute the kind of jobs the U.S. economy urgently needs. When backed up

with a specific set of operating practices, investing in employees can boost

customer experience and decrease costs. Companies can compete successfully on

the basis of low prices and simultaneously keep their customers and employees

happy.

According to the J.D. Power 2010 survey on Retail Banking Satisfaction,

customers are more willing to switch banks now, notwithstanding the hassles of

opening new accounts and setting up new links for payments and deposits. The

study found that 66 percent of customers would contemplate switching, up from

54 percent three years ago, and that many believe banks are more profit-driven and

less customer-focused. Whatever we are doing in the interactions we have with

customers is driving them away rather than building commitment. Increased

customer switching behavior adds to the cost of closing out accounts and requires

expensive customer-attraction initiatives to replace defecting customers. All this

when the time of the new legislation that has demolished fee income.

For small-business customers, so important at the local market level, projected

add-on purchases are down. According to J.D. Powers Small Business Banking

Satisfaction Study, these customers exhibit the lowest satisfaction levels. For the

second consecutive year satisfaction and residual customer loyalty have declined

with only 19 percent of customers (business owners) saying this year they

"definitely will" reuse their financial institutions for additional business products,

compared with 34 percent in 2008 a huge drop. Small business, a primary source

of job creation, is a segment that bank branches should be especially equipped to

win.

The net is that customers keep voting for technology and convenience and against

in-person interactions, yet they are less satisfied and committed to future

purchases with us. Future technology will only exacerbate the problem. It all leads

to a key challenge for 2011. How to build customer loyalty and additional business

as more of our business is done via technology. But it's not like technology and

customer satisfaction has to be incompatible. Consider that a leader in the very

technology revolution that is impacting financial services so dramatically, Apple,

is also leading a revolution in customer satisfaction and the renaissance of retail

stores.

retailers during the last several years, but many fail to support it with their

systems. Customer-centricity has become the new, challenging competitive battle

field. The only way to survive in the current marketplace is by building a wide

base of loyal customers, and the only way to do that is by tailoring the shopping

experience to customer wants and needs as much as possible.

Following are four-step guide to holding the customer coronation ceremony:

1. Know Thy (Core) Customer: Some very simple fundamentals lie at the root

of creating a customer-centric shopping experience, and the most basic of all

knows who your host customers are. In an age of malls, plazas, big-box stores and

multi channel shoppers, this is a trickier proposition than it was in the days of the

neighborhood five and dime. But it's not impossible. Outdoor sporting-goods

retailer Recreational Equipment Inc. (RED has the advantage of advocating a

"lifestyle." Serious enthusiasts of outdoor activities such as camping, biking and

fishing, use RED as their headquarters. REI offers customers a chance to get even

more involved by paying a small one-time fee to join its cooperative program.

"Our store philosophy is based on what the customer wants the experience to be,

the services to be, the product mix to be and the staff expertise to be," said REI

director of retail operations. Tim Spangler. "As a member organization, a large

group of vocal customers who will tell us what they like and what they don t like,

or think is missing." Spangler further explained REI's unique customer/member

relationship: "When planning a store, in terms physical plant, technology, layout

anti staffing, from the ground up decisions are based on our members telling us

what REI could become." Burgeoning analytics solutions are helping retailers

better answer their customers' needs. "Retailers art- now able to take each store in

a vast chain and tailor it for the individual neighborhood and customer," said

Barbara Anderson, president of retail consulting firm BVAC Inc. "The

optimization of assortment and space as well as replenishment really opens the

door for a different way of replenishing and assorting goods."

2. Die Citsto Hiers an Experience Beyond the tour Walls: Satisfying

customers' needs means providing the goods customers want in an easily

accessible manner. Executed properly, this is probably enough to keep a retailer in

business. Hut for retailers looking to grow, it's not enough. "Retailers are focusing

on sensory merchandising," said Brian Dyches, president and CEO of brand

management/design consulting firm Atmospheric Group Inc., Laguna Niguel,

Calif, "fliey need to recognize the five senses. For example, the way floor-

covering material reads beak to a customer is very important. If you have a lot of

mothers with babies, you should get a double-padded carpet." In addition, "Smell

is continuing to be adapted. Humans can detect 10,000 distinct scents. It's a great

emotional tie to something nostalgic. Gift retailers use hot apple cider in the fall

and winter months," Dyches added. This yields a sales lift of 10 percent to 15

percent, he said.

3. Bring the Store to the Customer: While most major retailers run some sort

of e-commerce site, true multichannel retailing is still rare. A true multichannel

retailer uses all available technology to create a single, unified shopping

experience that brings the entire store to the customer, wherever he or she may be.

"Wi-Fi allows retailers to present a customer interface where [customers] can get

information such as product location on their cell phones or PDAs," said Ken

Morris, president of Cleveland-based retail consulting firm Lake West Group. "It

enhances the shopping experience, especially when done consistently through

multiple sales channels. You can order a product in a mall and then have it

wrapped and pick it up without wasting any time," he said. "For a full-line

merchant in a small footprint, a kiosk is an incredible opportunity. It can make

buying merchandise in a store almost pointless." Wireless and Web technologies

also can open the store to the customer by helping store associates be more

knowledgeable and efficient. "PDA applications have been developed that allow

clerks to answer customer inquiries and go even deeper," said Connie Driscoll,

founder of strategic business development consulting firm Connie Driscoll and

Associates, Mount Clemens, Mich. "For example, in the shoe department, a clerk

can see if there is a pair in a larger size or different color and send a request to the

back room without leaving the customer sitting there.

4. RFID: It's Not Just for the Supply Chain Anymore: The potential of RFID

warrants it being singled out as a tool for creating a customer-centric shopping

experience. Although most RFID activity is currently taking place in the supply

chain, it isn't too early to begin investigating in-store applications of the

technology. "As RFID and data sharing with manufacturers grow in importance

with systems such as store inventory; forecasting and replenishment become much

more important,' said BVAC's Anderson Retailers that have not been able to keep

one accurate inventory will now be expected to keep two (back room and selling

floor) or more inventories. Store processes and systems must manage the status of

products, [and] RFID will manage the location of products.

According to Purdue University's Center for Customer Driven Quality, nearly 70

percent of the business leaders polled tabbed customer service as the most

important factor in building satisfaction and loyalty. Ken Lehman, chairman of

Winning Workplaces, says customers believe businesses don't pay as much

attention to them as they used to. He says that statistics from the Better Business

Bureau back up these claims customer complaints against retail stores rose 104

percent in a three-year period. Lehman stresses that, to be successful, one must

have a service culture that begins with how employees are treated. Open and

honest communication with employees empowers them to make good decisions

Department stores continue to lose customer loyalty, says the fall 1993 Retail

Satisfaction Index. Just 46 percent of customers list department stores as their first

choice for men's clothing, compared with 55 percent in the 1992 survey. The

decline in woman's apparel is identical, with 45 percent of customers turning to

department stores first, down from 54 percent a year ago. Where are these

customers going? For men's apparel, it appears to be discount department stores,

which are now first choice for 38 percent of respondents, up from 29 percent in

1992. Specialty stores have absorbed some of the slack in women's apparel,

ranking first with 22 percent of customers, compared with 14 percent last year.

Steve Beussink, AutoZone's assistant treasurer, customer satisfaction, stated,

"General-liability claims are going up and, yes, we attribute it to the economy. In

the last year, general-liability claims are up 30 percent but customer traffic

certainly has not grown by 30 percent." What makes this trend even more

concerning is that about 10 percent of the general-liability claims AutoZone

receives are fraudulent. However, AutoZone does not prosecute because of the

time and expense involved. Beussink admitted this policy creates a challenge and

fosters repeat offenders. The numbers and claims accumulate quickly. Typically,

AutoZone receives about 6,000 claims a year, of which 50 percent are general

liability. In addition to the "no prosecution" policy, Beussink identified two other

factors that contribute to the volume of general-liability claims.

In mature markets such as North America, both the infrastructure for physical

distribution of products and customer purchasing power are largely in place. More

often, the retailing innovation challenge in such markets is to replace goods,

services and experiences that are currently being consumed with innovative new

goods, services and experiences as a path for growth. The rationale being, most

basic needs of customers are being more than adequately met and hence, retailers

need to focus on how they can fulfill the higher-order needs of customers and

thereby grow. In other words, retailers have to think about how they can create

superior value for customer

A major challenge faced by globalizing retailers based in mature markets in their

attempts to sell to customers in emerging markets (particularly, to potential

customers residing in rural areas) is the absence of a well developed and

functioning retailing distribution network, mass media, transportation and storage

infrastructure. One approach to addressing these challenges is to increase the

number of distributors in rural areas by helping people to start their own small

store. Project Shakti, launched in 2000 as a partnership of Hindustan Unilever in

India with nongovernmental organizations, banks and the Indian government,

entailed enlisting women residing in villages to become direct to customer sales

distributors for Unilever's products such as laundry detergent, bath soap,

toothpaste and shampoo. The company provides training in areas such as selling

and bookkeeping to help rural residents become micro-entrepreneurs. After an

initial investment in stock, usually through a loan from self-help groups or micro-

finance banks facilitated by Hindustan Unilever, most Shakti entrepreneurs target

a monthly profit of 700-1000 rupees (US$15-22). This, coupled with the earnings

of a spouse working in the fields, typically doubles the household income. By the

end of 2007, there were more than 45,000 Shakti entrepreneurs covering three

million homes in over 100,000 villages in India.

In other words, Project Shakti has enabled Hindustan Unilever to distribute its

product offerings to millions of customers in rural India. Understandably, this is a

retailing system innovation initiated by a manufacturer rather than a retailer.

Nevertheless, it sheds insights into the kinds of retailing innovations that retailers

may have to come up with in order to make inroads into rural markets in emerging

and less developed markets. The retailing innovation does not entail a business

operating from a standalone retail outlet, but from the home of a female micro-

entrepreneur. Similar approaches have been applied by other big manufacturing

companies. For example, Procter and Gamble has started to work with so-called

"mom and pop" shops to overcome the distribution challenge in emerging markets

by offering their products in small package sizes to fit on crowded shelves and by

using a network of local representatives to keep the shops stocked.

In less developed markets, retailing innovations often entail being responsive to

specific local conditions. For instance, a broad cross-section of customers in a

number of less developed countries in Africa do not have bank accounts due to the

combined effect of their low income levels and a sparse network of hank branches

and ATMs. However, mobile phone service providers have made considerable

inroads and ownership of mobile phones is on the rise. This environmental

condition has provided the impetus for retailing innovations such as use of mobile

phones to facilitate retail transactions. Case in point is M-Pesa (M for mobile, pesa

in Swahili means money), a mobile phone based money transfer service that was

developed by Vodafone and sponsored by the UK based Department for

International Development. M-Pesa enables retail payments via mobile phone in

lieu of physical currency at participating retail outlets and even money transfer

between individuals. Here again, we have an illustration of a retailing innovation

but initiated by a mobile phone service provider and not a traditional retailer, but

nevertheless seems to be having a transformative effect on the retailing landscape.

In general, the relevance of a contingency perspective for studying innovations in

retailing is given importance. Main focus is on innovations in retailing from the

perspective of innovations geared to specific markets and not merely the adoption

of specific aspects of retailing practice in a country market that originated

elsewhere. For example, a number of retailing processes, technologies, formats

etc. that were initially rolled out in a particular country or a region (a cluster of

countries) tend to be subsequently launched in other countries. In his influential

article on the Wheel of Retailing, Hollander' pointed out that new types of retailing

follow evolutionary paths and discussed the possibility of a "natural law of

retailing" in the evolution of innovation) in retailing. Although used exclusively

on retail formats, his work was one of the first to systematically address

innovations in retailing.

A review of literatures suggest three broad categories of environmental factors as:

customer based industry based and legal and regulatory based innovations as an

opportunity to retailers. Customer based challenges refer to innovation challenges

and opportunities related to differences in the characteristics of customers in the

mature, emerging and less developed markets. The fact that the success of an

innovation is dependent on its ability to address the current needs of customers

better than existing offerings, or address the latent needs of customers, highlights

the importance of involving customers in developing innovations. Many

companies have recognized that getting customers engaged in innovation

processes is a crucial step.

Industry based challenges refer to innovation challenges and opportunities related

to differences in the nature of competition, technology and suppliers in mature,

emerging and less developed markets. In the industry context, particularly the

intensity competition market and supply chain management has been identified as

a major driver to success versus failure in innovation management. Similarly,

technological developments are at the very heart of innovations and have been

identified as a major force behind innovations in retailing.

Legal and regulatory based challenges refer to innovation challenges and

opportunities related to differences in governance and regulations in the different

markets. As discussed in writings on national innovation systems and the

competitive advantage of nations, regulatory constraints and the stability or

volatility of political and legal systems strongly affect innovativeness and R&D

performance. The role of the legal environment has also been recognized by

governments, particularly those which view innovativeness as a major objective.

For example, in order to learn more about major conditions for innovation to

flourish, the European Union conducts an annual review of innovation

performance of all EU member countries. Based on this review, a Scoreboard

assessing the innovation performance of all EU member countries is made. This

Scoreboard serves as a benchmark and to identify barriers to innovation in the

legal systems of individual countries.

in different types of markets through innovations and thereby enhance their

performance. The importance of branding as a dimension of retailing innovation

encompassing store brands and private labels has been discussed in literature.

Retailers' strategic decisions such as single versus multiple private label brand

names, their positioning and differentiation within and across market

environments are subsumed under branding as a dimension of innovations in

retailing. Notwithstanding some overlap with retail format and branding, specifics

of assortment such as variety, stock ownership and speed of replenishment have

also been identified as potential ways for a retailer to differentiate itself from

competitors.

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