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Emerging Trends in Modern Retail Formats

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    Emerging Trends in Modern Retail Formats &Customer Shopping Behavior in Indian Scenario: AMeta Analysis & Review

    If at first the Idea is not absurd, then there is no hope for it.-Albert

    Einstein

    Aditya P. Tripathi*

    Abstract

    The Indian retail sector is going through a transformation and this emerging market is witnessing a significant change in its growth

    and investment pattern. Both existing and new players are experimenting with new retail formats. Currently two popular formats

    hypermarkets and supermarkets are growing at a rapid pace. Apart from the brick mortar formats, brick -click and click-click formats are also increasingly functional on the Indian retail landscape. Consumer dynamics in India is also changing and the

    retailers need to take note of this and formulate their strategies and tactics to deliver the exact expected value to the customer. In the

    backdrop of all these developments the present paper makes an attempt to:

    Explain the emerging trends in the development of Modern Retail formats in Indian Context and Highlights the emergingRural Retail Landscape and also,

    Reveals the Consumer Shopping Behavior (Across the Country) among the Modern Retail Formats with special reference

    to Delhi & NCR.

    The empirical data has been collected with the help of Primary as well as secondary resources.

    Key Words: Hypermarket, Convenience Store, Retailing, Malls, Shoppers

    Introduction

    India has witnessed a frenetic pace of retail development over thepast five years. Goldman Sachs has estimated that the IndianEconomic growth could actually exceed that of China by 2015. It isbelieved that the Country has potential to deliver the faster growthover the next 50 years. (1)As we all know that India has been a nation of Dukandars, having approximately 12 million retailers. Obviously retailing is in our blood either as a shopkeeper or as a shopper. The Indian Retail market isestimated to grow from the current US $ 330 billionto US $ 427 billion by 2010 & U. S. $ 637 by 2015. Retail whichcontributes 10% of our GDP is the largest source of employment after

    agriculture. (Annexure: 10)

    In the year 2004, ratio of organized-Unorganized retail was 3:97 whichis expected to be 9:91 by 2010. (Annexure: 9 It is not just the globalplayers like Wal-Mart, Tesco and Metro group are eying to capture a pieof this galloping market but also the domestic corporate behemothslike Reliance, NeelKamal, KK Modi, Aditya Birla group, and Bharti grouptoo are at the same stage of retail development...

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    * Lecturer in Management, Department of Management Studies, Delhi School of Professional Studies &

    Research, G.G.S.I.P.University, Delhi. He can be reached at [email protected]

    1. Indias Economic Growth May Beat China by 2015: Goldman Sachs, Asia Pulse,February 7, 2005.

    There is increased sophistication in the shopping pattern of customers,which has resulted to the emergence of big retail chains in mostmetros; mini metros and towns being the next target. Customer tasteand preferences are changing leading to radical transformation inlifestyles and spending patterns which in turn is giving rise to newbusiness opportunities.

    The generic growth is likely to be driven by changing lifestyles and by

    strong surge in income, which in turn will be supported by favorabledemographic patterns.

    Development of mega malls in India is adding new dimensions to thebooming retail sector. There is significant development in retaillandscape not only in the metros but also in the smaller cities. Even ITCwent one step ahead to revolutionize rural retail by developingChoupal Sagar; a rural mall, for the Rural India. On one hand thereare groups of visionary corporate working constantly to improve uponurban shopping experience and on the other hand some companies aretrying to infuse innovative retail experience into the rural Set up. Given

    the situation we can say that Indian Retailing is at boom.The Macro Picture:

    Retailer inspired by the wall-mart story of growth in small town America, are tempted tofocus on smaller towns and villages in India. However, a careful analysis of the town

    strata-wise population, population growth, migration trends of customer spending

    analysis reveals a very different picture of India

    As per the NCAER estimates,( Annexure 7& 8) the share of the 35 towns with a present

    population of greater than 1 million in Indias total population would grow much faster

    than their smaller counterparts, from 10.2 % today to reach 14.4 % by 2025.

    Simultaneously, the share of these towns in retail market would grow from 21 % today to

    40 % by 2025. Within these top 35 towns, an estimated 70 to 80 % of retail trade wouldbe in the organized sector. This is similar to the experience in China where in cities like

    Sanghai and Beijing, the organized sector accounts for 70 to 80 % of overall retails trade

    in certain categories. Retailers should therefore focus on top 37 towns in the next decade,

    as the opportunity in smaller towns and rural India would be smaller and morefragmented as compared to the larger towns. But again this is the one side of the coin.

    only.

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    mailto:[email protected]:[email protected]
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    Classification of India (Customers) on the basis of Research: Research Conducted by

    Future Group future group2 research classifies Indian Customers into three sets and

    provides a base to the retailers in segmenting the Indian market. The research shows thatserving class consists of approximately 55% of the population, the major one & only 14%

    are in the upper middle class, regarded as consuming class..2. Future Group Research, Published in It Happened in India by Kishore Biyani, 2007

    It indicates that retailers should target this segment (India 2) rather than focusing onIndia one only, and should formulate their strategies according to the needs and

    expectations of serving class, to flourish in the market

    Classification of Customers

    India 1 India 2 India 3

    Consuming Class Serving Class Struggling class

    Constitutes only 14 %

    of the countryspopulation

    Most of these customers

    have a substantialdisposable income and

    they form part of

    usually called as the

    upper middle and thelower middle class

    Includes people like

    drivers, house holdhelpers, office peons,

    liftmen, washer man etc.

    These people make life

    easier and more

    comfortable for the

    consuming class or

    India 1. Research indicates that

    for every India one at

    least three India Twosare there, making up

    approx. 55 % of the

    population but due to

    low income they have avery little disposable

    income to spend on

    buying aspirational

    goods & services .

    It lives hand-to-mouth

    existence, so can notafford to even aspire for

    good living.

    Unfortunately this

    segment will continue to

    be on the peripheries of

    the consumption cycle

    in India, in years tocome.

    Source: Future Group Research, Published in the Book It Happened in India by Kishore Biyani, 2007 issue.

    Emerging Trends in Consumers Income & Consumption Pattern: NCAER studyand some other data published by different research & consulting sources indicate the

    following trend in Consumer income and put the following projections about the Indian

    retailing:

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    1) Growing Prosperity: Making Indian Consumers Great: As perIndias Marketing White book (2006)3 by Business world, India hasaround 192 million households. Of these, only a little over six millionare affluent that is, with household income in excess of INR215,

    000. Another 75 million households are in the category of well offimmediately below the affluent, earning between INR45, 000 and INR2, 15,000. This is a sizable proportion which offers excellentopportunity for organized retailers to serve.3. Marketing White book, 2006, Business World, pp.114-152) Increase in the Sizable Disposable Income: Businesscommunities believe that sizable disposable income in India isconcentrated in the urban areas and well off and affluent classes;income distribution in India is unequal compared to other Asianeconomies. In fact, the 20 million middle class home in rural Indiaequals the number in urban India4 and thus have the same

    purchasing power.

    Therefore, there is significant and considerable opportunity fororganized retailers in the rural areas as well. There is no denying thatthe rural market holds immense promise for the organized retail butcompanies ponder over, how to serve that market profitably. Unlike theurban market, it is less developed in terms of infrastructural facilities.

    3) Place is no more important: The Major issue is to find out asuitable business model and retail format to fit local taste andpreferences. Of course, cost of doing business in rural market would be

    lesser, as compared to urban market but reaching out to the mass is aconcern. For example the most successful and the largestincorporation, Wal-Mart started in the rural market where ascompetition started in the urban market. This retailer has proved that itis important to understand how do you operate your business modelrather than where you do it. Given the increasing urban exposure ofrural India, the urban and the rural upper-income groups can form aninteresting continuum market, giving it a scale of 23 millionhouseholds, or 115 million consumers.4) Increasing Potential in Rural Markets: NCAER data shows thatfor 1998-99, for a basket of 22 FMCG products it tracks, a total of over

    Rs 91,500 crore was spent. Of this, 37% was spent by the two lowest-income groups in rural India, and only about 20% by the top twoincome groups in urban areas.This is, perhaps, the best and only statement of the structure andpotential of the Indian market. Hence, marketers have to worry aboutpurchasing power of consumers not where do they reside. For examplethere are nearly 42,000 rural haats,average number of sales outletsper haatis 300 and average sales per outlet is INR 900 and averagefoot fall in a haatis about 4,500. In rural India there are 50 million

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    Kisan Credit Card (KCC) holders. These are some of the indicators howrural India is performing well & coming up.

    5) As per NCAER data no. of Household having income of


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