RETAILING IN INDIA A CONSUMER PERSPECTIVE

Transcription

1 44 RETAILING IN INDIA A CONSUMER PERSPECTIVE Dr. K. Rajanath, Professor and Director MRM Institute of Management, Hyderabad, India. NP Mishra, Associate Professor MRM Institute of Management, Hyderabad, India. ABSTRACT Retailing involves understanding the needs of consumers, developing good assortment of merchandise and displaying the merchandise in an effective manner, to enhance the attractiveness and motivation of consumers to buy. In the recent past, the Indian retail market is witnessing revolutionary transformation and organized retail format is gradually overtaking the unorganized retail format. The FDI declaration by Govt. of India in multi brand retail has accelerated the growth of organized retailing with the flood gates being opened for foreign retailers to set up their shops in Indian markets. This will kindle a high level competitive environment. It means organized retailers need to be more consumer centric. Added to this, the spread of e Marketing, India becoming world s third largest internet user after US and China (The Hindu, 24 th Aug, 2013, Hyderabad edition, Pp24), will further enhance consumer awareness, knowledge and therefore their demands. The increased demands include quality products at competitive prices, better customer relationship, better service facilities such as credit card, parking, faster billing, better inventory flow, appealing lay out etc. It is in this context, a study was conducted to understand consumer perceptions on the above parameters presently provided by organized retailers in India and the study details are presented. Keywords: Organized retail format, Customer Satisfaction, e- Marketing, Quality Products.

2 45 Introduction: Retailing is defined as set of marketing activities designed to provide satisfaction to the end consumer and profitably maintain the customer base by continuous quality improvements across all areas concerned with selling goods and services (1). Retailing involves understanding the needs of consumers, developing good assortment of merchandise and displaying the merchandise in an effective manner, and thereby enhancing the attractiveness and motivation of consumers to buy. Retailing is one among the largest industries and is conducted through two different formats; Unorganized and Organized. Presently, 95% of Indian retail business operates through unorganized sector. In the recent past, it is witnessing revolutionary transformation. New forms of retail business such as Exclusive Brand Outlets, Hyper/Super Markets, though constitute a small percentage of the business are in the evolving stage. The new scenario has become possible due to the entry of corporates like the Piramals (Cross Roads), the Tata s (West Side Chain of Stores), the Rahejas (Globus and Shoppers Stop), ITC (Wills Life Style) and S. Kumar s RPG enterprise (Food World, Giant Music World and Health & Glow). According to a study by Confederation of Indian Industry, the present value of the Indian Retail Market is $ 180 billion with the organized sector representing a meager 2% market share. Organized retail, however, is on a high growth path and is expected to grow at a CAGR of 40% over the next few years. The factors that facilitate the high growth are: Changes in Demographics: India has the lowest median age of 24 years as compared to developed countries like USA, UK, and Japan etc. The composition of the Indian population is shifting towards the age group of i.e. the working population with increased purchasing power. Approximately 60% of the Indian population is below 30 years of age. Thus, India has the largest young population in terms of size and possesses higher affordability and willingness to spend. Changing Structure of Income: India is one of the fastest growing economies in the world. Faster urbanization leads to larger number of households getting listed to the elite and with increased structural changes of income in most families, both husband and wife working, coupled with reduced free time for shopping, retail sector in India is destined for higher and faster growth. Changes in consumer needs, attitudes and behavior: The growth of modern retail is linked to consumer needs, attitudes and behavior. Rising income levels, urbanization, education and global exposure, have contributed to the emergence of different life styles converging in to different modes of purchasing and shopping habits which are in tune with organized retail formats. Increased credit facility: There has been a radical change in the Indian credit lending facilities. The use of plastic money, credit and debit cards has significantly increased in the recent past and that has lead to an increase in total spending on shopping. Increased awareness among consumers: Increased literacy levels, spread of internet through mobiles has led to significant increase in consumer awareness with regard to the quality and performance of products/services offered by business enterprises and retail sector is no exception. Retailing in India: Till recently organized retail, in India, was largely confined, to urban regions with consumers purchasing specific product categories at modern retailing formats such as hyper markets, super markets etc. According to the Investment Commission of India, the country s retail industry, which currently accounts for around 15 percent of India s GDP, is expected to grow three times to $660 billion by The different formats of organized retailing in India include Super Markets/Convenience stores, Hyper

3 46 markets, Discount Stores, Specialty Stores and Departmental Stores. The space occupied by these in India is given below: Format No. of Stores Area in Sq.ft. (000s) Share in total space (%) Super Markets/Convenience Stores Hyper Markets Discount Stores Specialty Stores Department Stores Total Source: ICRIER and Technopak Advisers Pvt Ltd: Established in 1981 Government of India, on 20 th Sept (2), issued notification for allowing Foreign Direct Investment (FDI) in multi-brand retail along with insurance, airlines etc. Initially, there was The Hindu (2012), FDI in Multi Brand Retail, Hyderabad edition, 20 th Sept, Pp1. vehement opposition from several leading opposition political parties terming FDI declaration in multi brand retail as a sinister design to mortgage Indian markets, farmland, livelihood of laborers & hawkers and future of small industries and transporters at the hands of global retailers. Accordingly, a case was filed in the Hon ble Supreme Court. The Hon ble Supreme Court (3) upheld the declaration of Govt. of India stating that 51% FDI in multi-brand retail is aimed to eliminate middlemen, facilitating farmers a better price for their produce and finally benefiting ultimate customers. With this, the way has been cleared for global retail giants such as Wal-Mart, Carrefour and Tesco, to set up shop with a local partner and sell directly to Indian consumers. Further, the Mayaram committee (4) appointed by Ministry of Finance, Govt. of India, to review sectoral caps in FDI, recommended easing of ceilings in a host of sectors including single and multi brand retail. In the case of multi brand retail, which is already opened to 51% FDI under the Foreign Investment Promotion Board (FIPB), the committee recommended that the ceiling be raised to 74% so as to make the sector more attractive to foreign investors. This has further enhanced the scope and spread of organized retailing in the country and accordingly, large Indian players like Reliance, Ambanis, K Rahejas, Bharti Airtel, ITC and many others are making significant investments in retail sector. Literature Review: Several studies were conducted in the past, which are referred below: Times of India (2013), SC upholds 51% FDI in multi- brand retail biz, Hyderabad edition, 2nd May. 4. Mayaram committee(2013), Panel moots easing of FDI sectoral caps The Hindu, Hyderabad edition, 19 th June, Pp. 15. Dr. S.L. Gupta (5) has studied the preferences and perceptions of shoppers towards the different types of retail formats. It is observed that small retailers no longer remain the primary source for the basic monthly shopping basket. The consumer normally goes for better prices. V. V. Gopal & Dr A.Suryanarayana (6) observed that retail industry is definitely one of the pillars of the Indian economy, but it is very interesting to note that only 4.5% of this business is in the organized sector. In spite of such a tremendous scope for modern retailing, retailers cannot survive in the market if there is no value addition to the product or services Aditya. P. Tripathi (7) feels that retailers must understand what value shopper (consumer) is looking for and how the retailers can deliver the desired value to the customer and that they have to understand the shoppers dynamics. Barnes,(2001) (8), suggested that the retailers have to think in terms of product for price value, choice based value, information value, relationship value, association value and entertainment value. Retailers based on consumer s perception must decide a suitable vehicle to deliver that desired value to the consumer. Probably, in a growing market, no one finds difficulty in pulling

4 Dr. S.L. Gupta, A Study on Trends in Retailing Industry in India a Case Study on Shopping Malls. BVIMR Management Edge, Vol. 3, No. 2, Pp, V.V.Gopal & A. Suryanarayana, Growth Drivers and Challenges for Organized Retailing in India, 2010, International Conference on Business and Economic Research, Vol , IACSIT Press, Kualalumpur, Malaysia. 7. Aditya.P.Tripathi, Emerging Trends in Modern Retail Formats & Customer Shopping Behavior in Indian Scenario; a Meta Analysis& Review. 8. Barnes, James G, (2001) Secrets of customer relationship management; It s all about how you make them feel, McGraw Hill, Newyark. Deepika Jhumb & Ravi Kiran (9) modern Indian consumer is seeking more value in terms of improved availability and quality, pleasant shopping environment etc. This has created a rapid growing opportunities for the organized retail sector. Retailing, according to Michel Levy & Barton (10) is a set of activities, each activity generating value addition on its conclusion and the sum total value addition at the end of retailing is the value delivered to the customer. Piyush Kumar Sinha & Sanjaya Kumar Kar (11), observed that till now, most retailers in India have invested in the front end, but relatively very negligible on the back end and supply chain. Customer into store, but that may not be sufficient to operate profitably. Retailers need to examine what matches consumer requirement and offer better than the competitor. Objectives of the Study: Briefly, the above literature review describes the emerging trends in retailing and therefore, the retailers need to focus on consumers perceptions of organized formats, since that will lead to the Deepika Jhumb & Ravi Kiran (2011), Organized Retail in India Drivers Facilitator SWOT Analysis, Asian Journal of Management Research, Vol. 2, Issue1, Pp 264, 265 and Michel Levy & Barton (2004), Retailing Management, Tata McGraw Hills, 5 th edition, Pp Piyush Kumar Sinha & Sanjaya Kumar Kar, (2007), An insight into the growth of retail Formats in India, W.P. No; (March-2007.), IIM, Ahmadabad. formulation of appropriate business strategies in a competitive environment. Retailers must understand what value consumer is looking for and how to deliver that demanded value. Understanding the consumer s perception is the basic source for developing competitive advantage for any industry and retailing industry is no exception. One of the leading U.K. based retailers Tesco Inc. has shown how understanding consumer has led to redefining business and gaining sustainable advantage. In view of the above, the objective of the study is to examine to what extent the organized retailing in India is delivering the desired expectations of the consumers. Research Methodology: Sources of Information: The study is based on primary source of information. Data was collected through a pre designed questionnaire, administered to 400 respondents. The questionnaire was open ended and ranking technique was used in most of the questions, while a few of them were Yes or No type also. The survey was confined to the twin cities of Hyderabad. The questionnaire was designed to elicit information on the following parameters: i. Frequency of visit to a Retail Outlet, ii. Value Addition they derive from that Retail Outlet, iii. Comparison of products purchased from different Retail Outlet, iv. Extent of fulfillment of their requirements by a particular Retail Outlet, v. Extent of satisfaction vi. Facilities extended by Retail Outlet, vii. Views of consumers on the price offered by Retail Outlet,

5 48 viii. Sources of communication about the Retail Outlet, ix. Parameters considered by consumers to select a particular Retail Outlet, x. Frequency of visit to a selected Retail Outlet, xi. Parameters considered for preferring a Retail Outlet, xii. Expected role of personnel of a Retail Outlet, Sampling: Simple random sampling technique was adopted. The sample size was 400, the profile of which is given below in a tabular form below. It included employees, house wives and students. Most of the responses were obtained directly through personal discussions and a few were through mails. Profile of the Sample Segmentation of respondents by gender and profession Sample Size Gender Composition Employees (200) House Wives (80) Students (120) M F T M F T M F T M: Male, F: Female, T: Total Data Analysis: The data, thus, obtained was tabulated. Using statistical tools such as averages and percentages the analysis was carried out. Analysis is given table wise and each table is followed with a brief summary of the findings of that analysis. Summary of the Study Analysis: The data thus obtained was analyzed, parameter wise, and presented in the following tables and each table is followed by a brief summary of the findings: Frequency of Visit to Various Retail Outlets (ROs): Table I Type of outlet Supermarkets Hypermarkets Departmental Stores Specialty Store Factory Outlets Score 100% 86% 86% 71% 57% Ranking First Second Second Third Fourth In the context of frequency of visit to various retail outlets, the Super Markets score the highest, followed by Hyper Markets / Departmental Stores, Speciality Stores, Factory Outlets in that order. Ranking with regard to Value Addition from different ROs: Table 2 Type of outlet Supermarkets Hypermarkets Departmental Stores Factory Outlet Specialty Stores Ranking of Outlets First Second Third Fourth Fifth With regard to Ranking of the outlets in terms of additional value for money, it is observed that the customers find the highest value addition from Super Markets, followed then by Hyper Markets, Departmental Stores, Factory Outlets and Specialty Stores in that order.

6 49 Frequency of Comparison between products of different ROs: Table 3 How Often Always Most of the times Sometimes Rarely Hardly Response Ranking Third First Second Third Nil With regard to ranking of comparison of the products purchased from different outlets it is observed that the respondents compare most of the time with products purchased from other outlets followed by sometimes and rarely / always in that order. Parameters for Comparison of products purchased from different ROs: Table 4 Parameter Price Quality Both Percentage Nil Nil 100 All the respondents (100%) affirmatively responded that the comparison is with regard to Price and Quality put together. Improvement in delivery performance of Retail outlets: Table 5 Improvement in delivery performance Yes No Percentage Majority of the respondents positively confirmed that the retail outlets are improving their delivery performance, while a very few gave negative response. Extent of fulfillment of Customer requirements by organized retail out lets: Table 6 Parameter Maximum extent Moderate extent Least extent Percentage Ranking Second First Third While 57% respondents positively responded that the retail outlets are fulfilling the customer requirements to a moderate extent, about 28% confirmed to the maximum extent, where as 15% responded that the fulfillment is to the least extent. Extent of Satisfaction derived: Table 7 Parameter Maximum extent Moderate extent Least extent Percentage Nil Ranking Second First Nil With regard to the extent of customer satisfaction, only 14% give maximum satisfaction is accruing, while the remaining (86%) confirming moderate satisfaction only.

7 50 Facilities provided by Retail Outlets: Table 8 Facilities Rest Room Change Room Parking Credit Cards Product Returns Ambience Provided availability availability facilities acceptance facilities Percentage Ranking Fourth Fifth Third Second First Third The analysis indicate that while the Credit Card facility was viewed as number one facility requirement, followed by Parking, Change Room/Product return, Ambience and the last is Rest Room facility. Product satisfaction versus price paid (Value Addition): Table 9 Value Addition High Satisfactory Moderate Partially Hardly satisfied Percentage % respondents confirmed high satisfaction, about 29% said that they are partially satisfied and 14% responded that they were hardly satisfied. Customer Service rendered by Retailers and Satisfaction derived: Table 10 Customer Service High Satisfactory Moderate Partially Hardly satisfied Percentage While only 43% expressed satisfaction, 28.6% expressed moderate to partial satisfaction. However, an equal respondent, 28.6%, expressed dissatisfaction with the customer service provided by the retail outlets. Source of communication on retail outlets: Table 11 Sources of Communication Media Friends Outlet itself Percentage While majority of respondents equally shared that media and word of mouth communication is the major sources of communication on retail outlets, only 14% responded that they get the communication directly from the outlets. Ranking of Parameters adopted by mostly visited Retail outlet: Table 12 Parameters Inventory Shelf Position of products Hygienic environment Speed of billing Percentage Ranking Third Second First Fourth Hygienic environment has been given the highest ranking followed by Shelf position of products (eye contact), Inventory in that order and the last priority accorded to Speed of billing. Ranking of Parameters provided by a mostly visited retail out let: Table 13 Parameters Customer Customer sensitivity Complaint Attentiveness by relationship and concern handling the retailer Percentage Ranking First Third Second Third

8 51 Top ranking was given to Customer Relationship maintained by the personnel or management of that retail out let, which is closely followed by second ranking to Complaint Handling and the third ranking equally to Customer Sensitivity and Attentiveness. Assessment of important physical facilities: Table 14 Facilities by the outlet Lighting and layout Accuracy of signage, displays etc Safety and security Percentage Ranking Third Second First Lighting & Lay out and Accuracy of Signage captured the mind of the customer as of highest importance, Safety & Security are given second priority. Frequency of visit to a Retail outlet: Table 15 Parameter Daily Weekly Fortnightly Monthly On special occasions Rarely Percentage Ranking Nil First Second Third Nil Nil Ones a weekly Visit is given the top ranking, Fortnight and Monthly Visits are given second and third ranking respectively. Parameters considered for Preferring a particular outlet: Table 16 Parameter Shopping Product Central Product Parking Entertainment Quality Location Price Offers/Discounts Percentage Ranking Nil First Nil Nil Nil Nil All the respondents uniquely responded that they have chosen the same retail outlet because they are satisfied with Product Quality provided by that outlet. Attributes that the customers prioritize in a particular Retail outlet: Table 17 Facilities by the outlet Variety Quality Service Price Discounts Schemes/Offers Percentage Ranking Second First Third Fourth Fifth The attribute of Quality occupied the top position in the customer minds, followed by attributes such as Variety, Service Rendered, Price Discounts and the least to the attribute Schemes/Offers. Ranking of offers offered by retail outlet: Table 18 Facilities by the outlet Discount on MRP for Product discount Cash every product (e.g. buy 2, get 1 free) Discount Percentage Ranking First Second Third Most preferred type of offer is Discount on MRP for every Product, followed by Product Discount (e.g. buy 2, get 1 free) and the least to Cash Discount offer.

9 52 Ranking of advantages associated with Retail outlet: Table 19 Parameters Parking space Convenience Central location All the above Percentage Ranking Nil Second Nil First While all the respondents expected a combination of various factors associated with retail outlets such as Convenience to reach, Location, and Parking Space etc. but on individual parameter, they responded highest priority to the ease with which they reach the out let and other parameters on individual basis are not given any weightage. Benefits expected from retail outlet often visited: Table 20 Parameters More variety Quality enhancement Quantity discount Various schemes Percentage Ranking First Second Nil Third Wide (more) Variety assumed highest significance followed by Quality Enhancement and the least to Various Schemes offered by retail out let influenced them to repeat visits to that retail out let. Role of Sales Personnel in the retail out let: Table 21 A. In the case of Costly Items B. In the case of Technological Products Parameter % Rank Parameter % Rank To maximum extent 71.4 First To maximum extent 14.3 Second To moderate extent 28.6 Second To moderate extent 85.7 First To lesser extent 0 Nil To lesser extent 0 Nil The analysis of response indicates that in the case of costly items such as jewellary etc. the role of sales personnel is given highest ranking and with regard to the technical products, they play moderate role. Extent of Satisfaction derived by the customer from Retail Out let: Table 22 A. Speed of transaction B. Flow of goods Parameter % Rank Parameter % Rank Maximum Extent 28.6 Second Maximum Extent 14.3 Second Moderate Extent 42.8 First Moderate Extent 71.4 First Least Extent 28.6 Second Least Extent 14.3 Second The analysis of response on satisfaction with regard to the Speed of Transaction (Billing) and Flow of Goods in the Store (Inventory), is considered to be moderate or average. Conclusions: Most of the customers visit Super Markets, since they get higher Value Addition in these outlets. Customers generally Compare their Purchases with other outlets and the comparison is generally confined to price and quality. Majority of customers opined that the retail outlets are improving in their Delivery Performance. However, much more is expected since majority of customers are moderately satisfied. Credit Card facility provided by retailers is of great significance to customers, which is then followed by Parking Facility.

10 53 With regard to the Product Specification and Services Rendered, the customer satisfaction levels are moderate only. As on date, Media and Word of Mouth communication are the two major sources of information about the outlets. Hygienic Conditions prevailing in the retail outlet is considered significant, while Shelf Position and Inventory Management are given lesser importance. Customer Relationship and Complaint Handling by the management/personnel of the outlet are found to be the most influencing factors for the customers to visit the same outlet. Similarly, the factors such as Lighting and appropriate Signage are found to be the motivating factors for the customers to frequently visit the same outlet. With regard to frequency of visit, Weekly Ones scores the top and the Selection criteria for an outlet are mainly based on Quality and Variety of Products offered by the retail outlet. Sometimes the Ease with which they reach the outlet also plays an important factor in deciding a retail outlet. Customers observe that the outlet personnel are more concerned with the Valuable Items and where as the Technical Competency/Knowledge is found to be average. Customers feel that the Flow of goods in the outlet and the Speed of Billing to be moderate/average. Suggestions: Consequent to the declaration of the Government of India s policy on FDI in multi brand retailing, the organized retail format is growing faster and the state of the art of the present organized retailers need to be further modified to develop the so called competitive edge and accordingly, the following suggestions are made. The delivery performance of organized retail outlets in terms of flow of goods, faster billing needs to be enhanced to improve upon its brand image. Better inventory management techniques are to be adopted to reduce the price and enhancement of quality of the products, Personnel of retail outlets need to be trained on technical aspects of the products as well t for better understanding and appreciation by the customers New methods of communication such as websites, on line presentations may be adopted for faster and effective communication. References: [1] Biplab. S. Bose, (2007), Marketing Management (Text & Cases), Chapter 20, Himalaya Publishing House, First Edition, Pp 509. [2] The Hindu (2012), FDI in Multi Brand Retail, Hyderabad edition, 20 th Sept, Pp1. [3] Times of India (2013), SC upholds 51% FDI in multi- brand retail biz, Hyderabad edition, 2nd May. [4] Mayaram committee(2013), Panel moots easing of FDI sectoral caps The Hindu, Hyderabad edition, 19 th June, Pp. 15. [5] Dr. S.L. Gupta, A Study on Trends in Retailing Industry in India a Case Study on Shopping Malls. BVIMR Management Edge, Vol. 3, No. 2, Pp, [6] V.V.Gopal & A. Suryanarayana, Growth Drivers and Challenges for Organized Retailing in India, 2010, International Conference on Business and Economic Research, Vol , IACSIT Press, Kualalumpur, Malaysia. [7] Aditya.P.Tripathi, Emerging Trends in Modern Retail Formats & Customer Shopping Behavior in Indian Scenario; a Meta Analysis& Review. [8] Barnes, James G, (2001) Secrets of customer relationship management; It s all about how you make them feel, McGraw Hill, Newyark. [9] Deepika Jhumb & Ravi Kiran (2011), Organized Retail in India Drivers Facilitator SWOT Analysis, Asian Journal of Management Research, Vol. 2, Issue1, Pp 264, 265 and 270. [10] Michel Levy & Barton (2004), Retailing Management, Tata McGraw Hills, 5 th edition, Pp.6. [11] Piyush Kumar Sinha & Sanjaya Kumar Kar, (2007), An insight into the growth of retail Formats in India, W.P. No; (March-2007.), IIM, Ahmadabad. ****