www.theinternationaljournal.org > RJSSM: Volume: 05, Number: 2, June 2015 Page 139 Service Quality and Ethics of Food Retailing in India-An Analytical Approach Dr B Rose Kavitha Dean-MBA PG Centre, Jyoti Nivas College Autonomous [email protected]Prof Ravinder Rena University of Stellenbosch, PO Box 610, Bellville 7535, South Africa [email protected]Abstract: Food retailing is one of the fastest growing sectors in the world. Food industry has always been a passionate and emotional business. Food and grocery retail is going to be the major driving force for the Indian retail industry as the total food production in India is likely to double in the next ten years. Food retail market is getting matured in India and importance is given to service quality, health, hygience, ethics and flavor. There is an increased need for food retailing players to differentiate with each other through innovation. Contemporary food retail sector is now altered by way of multiplex- malls, sprawling shopping centers, entertainment and food all under one roof. This paper first provides an insight into an analysis and examination of the service quality on customer satisfaction and loyalty of customers in Indian unorganized food retail outlets. Second, it identifies the level of adherence of ethics and spiritual quotient (SQ) followed by food retailers with respect to government rules and regulations. The study is carried out in five major cities in India and food retail outlets are chosen based on location, ownership, investment and number of employees employed, leading to a total of 246 outlets as sample size. Multi-stage random sampling method has been adopted for the selection of sample food retailers and data collection is done through two structured questionnaires. First questionnaire tests for retail service quality and second tries to indentify the level of adherence of retail outlets to government rules and regulations. Inference is provided based on two factors: service quality of customers in unorganised food retail sector and measurement on seven dimensions of the food retailers in terms of adherence to government rules. Z-test, F-test and Multivariate statistical techniques like factor analysis are used for inference and discussion. Key Words: Service quality, Food retailing, Ethics, Spiritual Quotient and Government. 1. Introduction: Retailing is one of the most rapidly growing and promising industries in India. In this industry there is a huge employment potential and it is estimated that relating industries provides 8% of employment in India. The food retail industry alone contributes over 10% of the country’s GDP. Purchasing power of Indian consumers in the urban, semi-urban and rural areas has shown magnificent growth over the past two decades. Branded merchandise in categories like apparels, cosmetics, shoes, watches, beverages, food and even jewellery are slowly becoming lifestyle products in India and they are widely accepted by the Indian consumers. Retailing sector consummates the requirements of the consumers in this regard. As per various research literatures it is observed that many retailers are not adhering to rules with ethics in their business activities. In many instances not much care is given in services benefits of food retail employees though the employee’s role is very critical in the business. The literature also supports that food retail industries are functioning by forgetting the government rules and regulations. 1.1 Indian Retail Scenario: Retailing is a set of business activities that adds value to the products and services sold to consumers for their personal or family use. A retailer is a business person who sells products or services to consumers for personal or family use. Total private consumption expenditure in India is Rs.3, 75, 00 crores and in retail sale it is Rs.20, 500 crores (55%). The organized retail contribution is 3% and the overall retailing contribution is 35% of GDP and the growth is depicted in Fig: 1.1 as per Technopark analysis. The outlet estimates is over Rs.120 crores and the outlet format is only 4 % larger. The Indian
Prof Ravinder Rena University of Stellenbosch, PO Box 610, Bellville 7535, South Africa
[email protected] Abstract: Food retailing is one of the fastest growing sectors in the world. Food industry has always been a passionate and emotional business. Food and grocery retail is going to be the major driving force for the Indian retail industry as the total food production in India is likely to double in the next ten years. Food retail market is getting matured in India and importance is given to service quality, health, hygience, ethics and flavor. There is an increased need for food retailing players to differentiate with each other through innovation. Contemporary food retail sector is now altered by way of multiplex- malls, sprawling shopping centers, entertainment and food all under one roof. This paper first provides an insight into an analysis and examination of the service quality on customer satisfaction and loyalty of customers in Indian unorganized food retail outlets. Second, it identifies the level of adherence of ethics and spiritual quotient (SQ) followed by food retailers with respect to government rules and regulations. The study is carried out in five major cities in India and food retail outlets are chosen based on location, ownership, investment and number of employees employed, leading to a total of 246 outlets as sample size. Multi-stage random sampling method has been adopted for the selection of sample food retailers and data collection is done through two structured questionnaires. First questionnaire tests for retail service quality and second tries to indentify the level of adherence of retail outlets to government rules and regulations. Inference is provided based on two factors: service quality of customers in unorganised food retail sector and measurement on seven dimensions of the food retailers in terms of adherence to government rules. Z-test, F-test and Multivariate statistical techniques like factor analysis are used for inference and discussion. Key Words: Service quality, Food retailing, Ethics, Spiritual Quotient and Government. 1. Introduction: Retailing is one of the most rapidly growing and promising industries in India. In this industry there is a huge employment potential and it is estimated that relating industries provides 8% of employment in India. The food retail industry alone contributes over 10% of the country’s GDP. Purchasing power of Indian consumers in the urban, semi-urban and rural areas has shown magnificent growth over the past two decades. Branded merchandise in categories like apparels, cosmetics, shoes, watches, beverages, food and even jewellery are slowly becoming lifestyle products in India and they are widely accepted by the Indian consumers. Retailing sector consummates the requirements of the consumers in this regard. As per various research literatures it is observed that many retailers are not adhering to rules with ethics in their business activities. In many instances not much care is given in services benefits of food retail employees though the employee’s role is very critical in the business. The literature also supports that food retail industries are functioning by forgetting the government rules and regulations. 1.1 Indian Retail Scenario: Retailing is a set of business activities that adds value to the products and services sold to consumers for their personal or family use. A retailer is a business person who sells products or services to consumers for personal or family use. Total private consumption expenditure in India is Rs.3, 75, 00 crores and in retail sale it is Rs.20, 500 crores (55%). The organized retail contribution is 3% and the overall retailing contribution is 35% of GDP and the growth is depicted in Fig: 1.1 as per Technopark analysis. The outlet estimates is over Rs.120 crores and the outlet format is only 4 % larger. The Indian
retailers are the second largest employer after agriculture. The Indian retailer employs 8 % of the total employment and there are 15 million retail outlets in India.
The following are the main advances and reasons for modernization in retailing. Increased pressure on opening up FDI in retail sector
ü Retail space is no more a constraint for magnified growth ü Rapid evolution of young Indian consumers ü Rising incomes levels ü Emergence of modern retail formats ü Increased awareness level among consumers ü Exposure to international brands ü Rapidly increasing middle class
1.2 Food Retailing In India: In India, food retail can be viewed as incipient institutions after agribusiness. Agribusiness provides a new market linkage for the primary producers of fruit and vegetable crops in which India ranks second and Wal-Mart ranks first. There are many large domestic players who have entered the food retail sector during the last decade. They have set up systems of interface with primary producers which vary in design and practice across all food chains. Food Retailing is growing at 30% rate which makes it a major driving force of the economy. Modern state of food retailing is a supply led and not a demand led. Food has the most consumption in the Indian economy and will remain the single most colossal category. There are concerns about the impact on farmer livelihoods and the impact of modern food chains on traditional retailers. Fruit and vegetable crops are considered more congruous for food retailers as they have high value markets , they are more labour intensive, provide recurring income, offer value addition possibilities and provide a fortification on risk management against field crop failure. Food Industry is more input intensive, require more post-harvest handling, are more perishable and their profitability is dependent on market acceptance. This industry suffers from high wastage and rejection of food products. There is no Minimum Support Price (MSP), and local markets are thin. According to the Ministry of Urban Development and Poverty Alleviation, there are 10 crores of street vendors in India, of which 6 crores only sell food. The street vendors contribute over 50% of country’s savings
and 63% of GDP comes from these street vendors. Indian consumers are blissful with store goods than branded goods. The main issues to understand and examine in food retailing are:
• From simple trading activity, food retailing is now heading to the status of an industry. • Food retailing process has transformed a lot as the food items were sold in small road side
grocery shops are now being sold through supermarket stores. • Shopping for groceries is no longer a strenuous and uncomfortable affair anymore. • Food retail has surpassed the dominating apparel and accessories sector. • Food and beverages are the major segment, in organized retail of India is worth Rs.8,97,000
crores. 2. Indian Economy and Policy Environment: India is one of the world’s fastest growing large economies and, it is projected to become the world’s third largest economy by 2025. In 2010, annual Gross Domestic Product (GDP) growth reached 8.9 %. In 2013, it slipped to 4.7 % growth. As per the Indian Central Statistics Office, India’s GDP grew 5.3 % in the last quarter ending September 2014, compared with 5.7 % in the previous quarter (April to June). Nominal wages, which grew around 17 to 19 % until 2012, perceived no increase in 2014, and experts expect this to have an impact on medium-term demand trends. The Reserve Bank of India has taken measures to control inflation and the year-on-year Wholesale Price Index (WPI) was zero for November 2014, meaning that wholesale prices in November 2014 were identical as in November 2013. At 4.4 % in November 2014, the Consumer Price Index (CPI) registered its lowest rate of inflation since January 2012. Currently, the economy is challenged by depreciation of the rupee and a looming fiscal deficit.
2.1 KPMG report: KPMG is the result of merger of Peat Marwick International (PMI) and Klynveld Main Goerdeler (KMG).It is a global network of professional firms providing Audit, Tax, and Advisory services operating in 144 countries and have more than 1,04,000 offices worldwide. According to KPMG report the food and grocery market in India in expected to reach 48,200 crores in 2020. The overall food and grocery segment contributes to about 60 per cent of the retail sales in India. Food and grocery products include dairy products, edible oils, farm products, sugar, fruit juices, packaged food, concentrates, hot and cold beverages, breakfast foods, biscuits, and confectionery. Food retail is expected to grow at 25-30 per cent in the coming years and reach 40% by the year 2025 though presently it comprises less than 10 per cent of the modern retail sector. In India, about 60 % of food quality is lost in the supply chain from the farm to the final consumer. Consumers actually end up paying approximately about 35 % more than what they could be paying. A farmer in India gets around 30 % of what the consumer pays at the retail stores and causing receive up to 70 % of the final retail price and wastage levels are low ranging from 4-6 %. 2.2 Market size of food retail: The Indian food industry was Rs 2, 47,680 crores in 2013 and is expected to grow at a rate of 11 per cent and will reach Rs 4, 08,040 crores in 2018. To the surprise India has 85,000 bakery units, of which 75,000 operate in the unorganised sector, garnering a 65 per cent market share. The per capita consumption of bakery products alone comes to 1-2 kg per annum. Srivastava (2009) has extensively used the reports of Mckinsey, HSBC, Technopak, Confederation of Indian Industry (CII) and others to capture the growth of organized retail and shopping malls in India. Also, he gives an account of the different organised formats promoted by the Indian business houses. He finds that the malls are more developed in Northern and Eastern part of India. Malls are becoming centre for outings for the families and they spend about 1-3 hours in malls. Food, groceries and apparel purchases by customers contributed to 52 per cent of these organised retail formats in 2006. He added that the time spent by the customers in the malls is more and the food courts, play places, in the malls are becoming the attractions for family outings. He perceives that the small retailers in order to compete and to retain their customers offer better service by means of credit and home services. 2.4 Government Initiatives on Improvement of Food Industry: Few of the major government initiatives to improve the food processing sector in India are:
• To enhance the incomes of farmers and export of agro based goods and processed foods, the government has approved setting up of five numbers of Mega Food Parks in the states of Bihar, Maharashtra, Himachal Pradesh and Chattisgarh.
• The Government in addition has provided Rs 2,000 crore corpus for NABARD to help lend to food processing units at a lower interest rate. The fund will be provided to large food chains, food units and for creating infrastructure in these parks.
• The Indian Institute of Packaging (IIP) has planned have planned to install automatic vacuum packaging system for the packaging of ‘Laddu’ with higher shelf life.
• The State Government of West Bengal has decided to arrange land for any investment in agriculture-related units. The government has also taken up a hands-off policy regarding procurement of land for setting up industrial projects.
• The Government has set up the Expenditure Management Commission to rationalise subsidies. India incurs nearly one per cent of food subsidy annually, generally utilised under the existing Public Distribution System (PDS) consisting of Food Corporation of India (FCI) and nearly five lakh Fair Price Shops (FPSs).
2.5 Neighbourhood Stores: In India about 90% of food purchases are made within a distance of 1.5 km from the customer’s home. The outlets closest to a neighbourhood store in India are Safal outlets operated by Mother Dairy in Delhi, Margin Free in Kerala and Subhiksha. Different format are there in food retailing:
Department Stores Hypermarkets Supermarkets and Convenience Stores
§ Well established, limited competition § Entrenched in Indian Mindset § Score on shopping experience § Stress on branding § Price not critical as they cater to upper income class
§ Relatively new concept, but already as big as department stores § Growing fast, but competition to intensify § Price Discount and Wide Varieties act as key attractions § Key to success will be efficient Supply Chains and Store locations
§ Main challenge to mom and pop stores § How to compensate for facilities that mom and pop stores provide namely Home Delivery and Monthly Credit? § Immense competitions, building scale to achieve cost efficiencies will be critical
Fig 1.2: Three modern food retail formats
• The first format is Supermarkets that caters to the consumers need for choice and variety. These stores cater to the consumers in a catchment area with a radius of 3 to 4 km. Examples of supermarkets already in India are Food World, Trinetra and Nilgiris.
• The second is Hypermarkets are essentially destination stores catering to the consumers bulk shopping needs in both food and non-food categories. Spencer’s, Big Bazaar, Pantaloons and Star India Bazaar.
• The third is convenience stores or Cash & Carry stores and these stores sell their products to their members only. The members are typically retailers and institutions. The key added value is a wide range of products under one roof, available at wholesale prices. Metro has started the first Cash and Carry store in India in Bangalore. The typical area of a Cash and Carry store is 70,000 to 100,000 sq. ft.
2.6 Modus Operandi of Major Channel Intermediaries The retailers in food and grocery business work on wafer-thin margin business and competition among them is excruciating. The food supply chain is complex with perishable goods and involves numerous small stakeholders and it starts at the farm and ends with the consumer. Efforts are being taken up by the big retailers in India like the future group with retail stores like Big Bazaar and Food Bazaar, TATA’s Star Bazaar, Reliance retail’s Reliance fresh and Wal-Mart and Bharti to ameliorate the
efficiency and effectiveness of supply chain and logistics. Few of the prosperous food supply chain models in India are as follows: v Amul: Amul operates a supply chain which handles a highly perishable commodity like milk in huge quantities. It acts as a cooperative using a simple hub and spoke model and is highly successful. Surplus milk is sent to factory performing a reverse logistics and the surplus is converted to other milk products. v Wal-Mart and Bharti: The joint venture’s warehouse store is expected to help drive efficiencies across the supply chain and work towards the betterment of India’s farmers, retailers and small manufactures as Wal-mart being one of the world’s largest retailers. v McDonald’s has both cold and dry storage facilities with capability to store products up to -22 degree Celsius as well as delivery trucks to transport products at temperatures ranging from room temperature to frozen state. It is one of the few companies which epitomize supply chain management. v GATI’s model for distribution of Alphonso mangoes throughout the country with the Information Technology support has been quite successful. v E-choupal which is ITC success supply chain story of procurement of products from small farmers where earlier, the supply chain was traditional and it constituted of farmers who sold the products to the nearby mandis (local market) and to the middlemen who clearly exploited the farmers. Now, through e-choupal, the farmers are well informed by Sanchalak (leader) and though Samyojak (ITC’s agent). They supply their products to the mandis and to choupal sagar ,the distribution center of ITC and create a win-win situation for both. Even food bazaar is expected to take advantage of the infrastructure by partnering with local dealers through ITC’s choupal fresh for the supply of fruit & vegetables. v Adani Agri logistics provides complete supply-chain from grain storage to transportation to the last mile connectivity. 2.7 The objectives of the study are four fold:
1. To understand the economics of unorganised food retailing in India. 2. To measure the level of satisfaction on retail customer service quality in unorganised food
retailing. 3. To examine and measure on ethics and spiritual quotient of selected food retailers on their
adherence to government rules. 4. To suggest on the significance of food retailers in top five cities in India and answer in what
direction is the food retailing industry is moving with respect to ethics and spirituality. 2.8 Significance and Scope of the Study The present study’s premise has a greater significance, due to analyses of service quality on customer satisfaction from unorganised food retail outlets. It study attempts to identify the level of adherence of Government rules and regulations by the food retail industry in five cities in India. The scope of the present research work is restricted to study ethics and spirituality dimensions of food retail units functioning in five cities in India. The focus is on food retailing and seven dimensions regarding the adherence of Government rules and regulations on the part of food retail industry. 3 Literature Review: Parasuraman (1990) explains in his study on superior customer service and marketing excellence. He discusses the meaning and quantification of service quality, and offers managerial guidelines for delivering superior service by invoking key insights from a multi-year, multi sector stream of research on customer service. He developed a model called SERQUAL, which consisted of five dimensions like reliability, responsiveness, assurance, empathy and tangibles. He concluded that reliability to be the most important of the five SERQUAL dimensions. He additionally concluded that a company should effectively blend on external marketing with customer service to distribute superior service to customers. Chetan Ahya (2006) discusses on rising scale of organized retail distribution network and increasing competition that will coerce retail players to focus on restructuring the whole supply chain to improve productivity and to provide a better returns to customers. He criticises the organized retail chains
ability to offer customers the right price for staple vegetables during the crisis situation because of disorganized supply chain. He assures that unavailability of cheap funds for investment in the back-end infrastructure for aggregating the fresh produce, grading, packaging and storing in cold storage are the primary reasons. M.N.Malliswari (2007) in her study “Emerging trends & strategies in Indian retailing” explored that the customers are influenced by the west due to their exposure to media. The social networking sites and internet as a whole has changed the shopping pattern and behaviour of the customers. Sengupta A, (2008) discusses the birth of the first supermarket, Nilgiri’s established in Bangalore in 1971.He adds that emergence of modern retail in India is not just a result of increasing consumer buying power but manufacturers and unorganized retailers also have an important role to play in the process at macro‐level. Leen and Ramayah (2011) in their study on ‘Validation of the RSQS in Apparel Specialty Stores’ found that all five dimensions of Dabholkar et.al (1996) scale on physical aspects, reliability, personal interaction, problem solving, and policy are highly suited for quantifying retail service quality in clothing stores. Subhashini Kaul (2005) concluded that consumers satisfied with the store’s service quality are most likely to remain loyal. Service quality is being increasingly perceived as a tool to increase value for the consumer, as a means of positioning in a competitive environment to ensure consumer satisfaction, retention and patronage. Despite its strategic importance, Indian retailers did not have an appropriate instrument to measure service quality. This study examined the Retail Service Quality Scale (RSQS) developed in the U.S for applicability to Indian retail and the scale had been found appropriate. 4 Research Methodology: The present study is both empirical and descriptive in focus and it is purely based on survey method. The five cities selected for study are based on first five ‘densely populated cities’. They are Mumbai, Delhi, Hyderabad, Bangalore and Chennai. 4.1 Sources of data: Primary data-The primary data for the present study were collected from, retail industry, customers from selected food retail industries units and employees from selected food retail industry units. Secondary data-The secondary data were collected from sources like text books, journals and periodicals, websites of food retailers, annual reports, published reports and records of food retailers, reports and other official publications of government departments, Memorandum of Association and Articles of Association of the retailers, Licenses for commencing of business, Pollution control, Safety and welfare measures, Maintenance of Muster Roll and Wage Register. 4.2 Sampling Framework: As the customer involvement is found to be more in retail business in the case of food products, the present study is confined to unorganised retail outlets in India dealing with food products. The multi-stage random sampling method has been adopted for the selection of sample food retailers. Two questionnaires are distributed for analyzing the framed objectives. The first questionnaire is used to test the retail service quality of unorganized retail outlets. Sample size is 50. Dabholkar et al. (1996) scale was developed on Retail Service Quality Model (RSQS). Based on SERVPERF, RSQS includes 28 –item scale, of which 17 items are from SERVPERF and 11 items are developed by qualitative research. The scale has five dimensions and is used to provide an extensive research on retail service quality.
1. Physical aspects 2. Reliability 3. Personal Interactions 4. Problem Solving 5. Policy
Physical aspect dimension included the appearance of the physical facilities as well as the convenience of the stores layout. Reliability dimension is concerned with the stores ability to keep promises and do things right. Personal Interaction is concerned with whether or not the retail outlet has courteous and helpful employees who inspire confidence and trust. Problem solving dimension includes assessing retail outlet performance on the basis of its ability to handle potential problems. Policy aspect proves the impact of service quality based on retail outlet’s policy in services. The second questionnaire framed by the researcher is structured and has 2 sections .Section A with both close and open ended questions regarding adherence of government laws. In section B has a rating scale of 5-‘Strongly following’-SF, 4-‘Following’-F, 3-‘Moderately Following’-MF 2-‘Not Following’-NF and 1-‘Neutral’-NU This scale helps to identify and understand the ethics and spiritual quotient of food retailers. The scale is tested for validity and reliability. Seven variables were identified for validating the follow up of stringent adherence by food retailers in five cities to government rules and regulations .They are 1) Issue of license for commencing business, 2) Pollution control, 3) Safety and welfare measures, 4) Maintenance of muster roll and wage registers, 5) Provision for employee benefits like ESI and EPF, 6) Maintenance of business accounts and 7) Payment of tax on time to government. The statistical tools like Z-test and F-test are used for analysis and testing the significance. 4.3 Sample Size: Five major cities in India were selected based on first five ‘densely populated’ cities in India. Based on location 52 and ownership 17, Investment 125 and number of employees greater than 20 retail outlets with a total of 246 food retail outlets in India were taken for study. A T-test conducted on the sample size proves that the sample size taken for study is reliable. 4.4 Hypotheses H0-There is significant application of spiritual quotient and ethics followed by food retail industry in adhering to Government rules and regulations of the five cities in India. 4.5 Terminology: • Retailing Industry: It signifies retail outlets where consumer value and satisfaction are
fundamental to building consumer loyalty and shopper loyalty and to increase sales and category profitability.
• Ethics: It consists of the standards of behavior that our society accepts and seeks how these standards apply to lives of people and whether these standards are reasonable or unreasonable.
• Retail service quality is the customer’s overall impression and satisfaction of the relative inferiority or superiority of the organization of its services and which is prime important to retail outlets.
• Spiritual Quotient (SQ): Spiritual Quotient is the authentic cognition of real self, the relation of individual soul and cosmic soul, self actualization, perception of the own self and the self of other, the feeling of brotherhood and positive interpersonal relations, the consciousness and cosmology and cosmic energy.
4.6 Analysis of the Instrument by Dabholkar et.al (1996) The general information of sample respondents (customers) taken for analysis are gender, education level, occupation, annual income and purchase experience. The sample is selected in random and the overall sample size of the customers are 50 from all the 246 selected unorganised retail units for study.
The collection of data and research analysis on Retail Service Quality (RSQ) is based on primary data and of course supported by secondary data like reports and journals. Results on Retail Service Quality (RSQ) Cronin, Jr.J.J and Taylor, S.A (1992) examines that consumer’s service experience and consumer’s perceived quality are treated as two different paradigms and measured in two different ways. Consumer perceived service quality measurement is objective in nature and it’s assessment focuses on consumer’s cognitive and attitudinal reflection towards functional and technical benefits of a service provider’s external service environment. Majority of the unorganised retail outlets are females and middle aged between 21 and 30.39 % of the respondents were graduates with occupation of house wife and 21 % are private sector employees and 65 % are married. The characteristics and parameters for this research is loyalty status of the customer, share of purchase, frequency of visit, ideal time for shopping source of information and mode of payment. The discussion and result of the analysis are represented in table 4.6 in detail. Table: 4.6: Representation of Various Factors Regarding Customer Satisfaction Loyalty Status
Total 50 Total 50 Total 50 Total 50 Total 50 Total 50
Source: Primary Data
Factor analysis: Principal component analysis is used for extracting factors. As it is a standardized instrument , from the 27 factors only eight factors are retained depending on the communalities values and Eigen values. Small values (<0.5) indicates that variables that do not fit well in the factor solution and is dropped from the analysis. In 27 factors, no factor is below or less than (<0.5).In order to enhance inference and further discussion the 27 factors are rotated as the rotation increases the value and quality of factors increase. Varimax rotation method is used to get better interpretation. The factor analysis is condensed and simplified the 27 factors into eight factors with 71.124 % of the variability of all eight factors. The eight important factors to be considered from the inference are: 1) Product availability at all times 2) Wider product range 3) Loyalty programs 4) Collection of international brands 5) Premier quality merchandise 6) Parking facility 7) Recreational facilities 8) and door delivery. These eight factors influenced the respondents towards purchasing in unorganised food retail outlets. Discussion on Retail Service Quality: From the ranking it is vivid that unorganised retailers need to keep a wide variety of goods for customer’s choice. The shopping environment needs to be kept clean and the retailers need to adopt
various strategies for retaining existing customers and pull various new customers. Customer’s feedback for open end question on seeking suggestion is facility of card swapping machine needs to be extended for easy payment. The main problems faced by customers in unorganised retailing are, selling expired food products, unavailability of goods all the time and parking facilities. This is listed in table 4.7. Table: 4.7 Ranking Order on Problems faced by Customers.
Problems of Customers Staff Physical Appearance Accessibility
Parameters Mean Score
Rank Parameters Mean Score
Rank Parameters Mean Score
Rank
Poor reply on enquiry
53.1 V Location 52.96 V Non-availability of Goods
64.7 I
Poor Co-operation
54.26 IV Parking 68.98 I Non-availability of branded Products
61.96 II
Lack of Knowledge
55.12 III Cleaning 59.58 IV No Home Delivery
53.1 III
Selling Expired Goods
66.48 I Arrangement of Goods
63.45 II Poor After Sales Service
49.52 IV
Adulteration 59.88 II Space Management
60.92 III Opening on Holidays
47.1 V
5 Laws Governing the Food Retail Industry in India: The Indian food processing industry is regulated by several laws which govern the aspects of sanitation, licensing and other necessary permits that are required to start up and run a food business. The legislation that dealt with food safety in India is the Prevention of Food Adulteration Act, 1954 (PFA). PFA establishes a new national regulatory body, the Food Safety and Standards Authority of India (FSSAI), in order to develop science based standards for food and additionally to regulate and monitor the manufacture, processing, storage, distribution, sale and import of food so as to ensure the availability of safe and wholesome food for human consumption. a) The Packaging and Labeling Regulations: This provides the general requirements for labeling of food products issued from FSSAI.
The particulars of declaration required under these Regulations to be specified on the label shall be in English or Hindi in Devnagri script: Provided that nothing herein contained shall prevent the use of any other language in addition to the language required under this regulation. Every package of food shall also carry the following information on the label: (i) name of the food; (ii) list of ingredients; (iii) nutritional information; (iv) declaration regarding vegetarian and non-vegetarian; (v) declaration regarding food additives; (vi) name and complete address of the manufacturer; (vii) net quantity; (viii) lot/code/batch identification; (ix) date of manufacturing or packing; (x) best before and use by date; (xi) country of origin for imported food; and (xii) instructions for use.
Since a large variety of food products are being imported into India, under the Packaging and Labeling Regulations, it becomes necessary to mention the country of origin of the food on the label of food imported into India, and when a food undergoes processing in a second country which changes its nature, the country in which the processing is performed shall be considered to be the country of origin for the purposes of labeling. The above are the statutory and regulatory requirements that are to be complied with regard to labeling of products that are sold in the Indian market as "pre-packaged goods".
b) Signage and Customer Notices: The term "advertisement" is defined as any audio or visual publicity, representation or pronouncement made by means of any light, sound, smoke, gas, print, electronic media, internet or website and includes through any notice, circular, label, wrapper, invoice or other documents. Section 24 of the FSSA provides that no advertisement shall be made of any food which is misleading or deceiving or contravenes the provisions, rules and regulations made there under. No person shall engage himself in any unfair trade practice for purpose of promoting the sale, supply, use and consumption of articles of food or adopt any unfair or deceptive practice including the practice of making any statement, whether orally or in writing or by visible representation which:
i. falsely represents that the foods are of a particular standard, quality, quantity or grade-composition;
ii. makes a false or misleading representation concerning the need for, or the usefulness; iii. Gives to the public any guarantee of the efficacy that is not based on an adequate or scientific
justification thereof, provided that where a defense is raised to the effect that such guarantee is based on adequate or scientific justification, the burden of proof of such defense shall lie on the person raising such defense.
c) Licensing Registration and Health And Sanitary Permits: Under Regulation 2.1 of the License and Registration Regulations, all food business operators are required to be registered or licensed in accordance with the License and Registration Regulations. No person shall commence any food business unless a valid license is possessed by the food business operator, and the conditions with regard to safety, sanitary and hygienic requirements are to be complied with at all times. d) Penalties: The FSSAI provides for penalties in case of any non compliance. The non-compliance with various provisions of the FSSAI may attract penalty of up to INR 2, 00,000.
e) Other Licenses: India being a big market, each state may have their local laws which may also need to be complied with. Some of the other approvals and licenses that a food operator may be required to obtain from various authorities under other laws include: health and trade licenses from the municipal corporation of the relevant area, environmental clearance, no-objection certificate for fire prevention and safety, registration under the police act of the respective city/state, verification certificate under the Standards of Weights and Measures Act, 1976 for each of the outlets issued by the Department of Legal Metrology of the respective areas, registration under the shops and establishments act of the respective state, eating house license and liquor license.
Adherence of Government Rules and Regulations It is imperative on the part of food retail industry to adhere to India’s government rules and regulations. Seven variables were identified for this purpose .They are 1) Issue of license for commencing business,2) Pollution control,3)Safety and welfare measure,4) Maintenance of muster roll and wage register,5)Provision for employee benefits like ESI & EPF,6) Maintenance of proper accounts and 7)Payment of tax on time to Government. Analysis is made and suggestions are provided based on the seven variables identified. 5.1 License for Commencing Retail Business: The retail industry has to obtain licenses from various government departments based on the nature of their business for commencing business. Table: 1- Characteristics-wise classification of food retailers showing the adherence in respects of licenses for commencing business.
Source: Primary Data Table 1 infers characteristics-wise classification of food retailers showing adherence in respect of licenses for commencing business with a test of significance. From the table it is clear that 87.76% of respondents who says “yes” adhere to ethics and spiritual quotient in availing licenses for commencing food retail business. The Z-test signifies that there is no significant variation in the level of adherence in availing license for commencing food retailing business. 5.2 Pollution Control The level of ethics and SQ enable the retail industry to adhere government rules and regulations for pollution control is identified from the rules and regulations of pollution control department. The pollution control department has strict guidelines regarding the protection of environment in shops and establishments. The retail business should not be free from environmental pollution. All shops and establishments must provide hygiene environment in every respect, so that, retail industry have to comply with the requirements of state pollution control department for obtaining pollution control license.
Characteristics
Stat
istic
s
Frequency
F-Test
Sign
ifica
nce
Scor
e
NU NF MF F SF TOTAL
MEAN SD
1 2 3 4 5 246 4.21 0.83
Loca
tion
Urban N 0 0 9 22 21 52
4.23 0.73
0.700
0.498 % 0.0
0 0.00
17.31
42.31
40.38 100.00
Ow
ners
hip
Company
N 0 0 3 3 11 17 4.47 0.8
0 1.77
4 0.13
5 % 0.00
0.00
17.65
17.65
64.71 100.00
Inve
stm
ent 20 Lakhs
N 2 1 22 52 48 125 4.14 0.8
0 1.12
4 0.32
7 % 1.60
0.80
17.60
41.60
38.40 100.00
No.
of
Empl
oyee
s
20 N 2 1 10 14 25 52
4.13 1.05
0.358
0.699
% 3.85 1.9 19.2 26.9 48.0 100.00
Table 2 represents characteristics-wise classifications of industry showing adherence in respects of pollution control. It is vivid that the level of ethics and spiritual quotient among the retail industry in adhering of government rules and regulations for pollution control is higher in urban area. The F-test
reveals that there is no significant difference to the adherence level in case of location, ownership, investment and number of employees. 5.3 Safety And Welfare Measures
Regarding the safety and welfare measure in retail business, the rules and regulations of labour department, employees state insurance corporation and employees provident fund departments have to be satisfied. The labour welfare departments across India are quite particular about employee’s safety issues in retail business. Table: 3-Classification of Food Retailers Showing Adherence in Respects of Safety and Welfare Measures
Characteristics
Statistics Frequency
Sign
ifica
nce
Score NU NF MF F SF TOTA
L MEA
N SD F-test
Location Urban N 0 2 5 19 26 52
4.33 0.81
1.080
0.341
% 0.00
3.85
9.62
36.54
50.00 100.00
Ownership
Company
N 0 0 1 3 13 17 4.71 0.5
9 1.16
5 0.32
7 % 0.00
0.00
5.88
17.65
76.47 100.00
Investment
20 Lakhs
N 1 1 9 55 59 125 4.36 0.7
2 6.05
7 0.00
3 % 0.80
0.80
7.20
44.00
47.20 100.00
No. of employee
s 20
N 0 2 2 17 31 52 4.48 0.7
5 2.15
1 0.11
9 % 0.00
3.85
3.85
32.69
59.62 100.00
Source: Primary Data Table 3 provides in detail the classification of food retailers exhibiting adherence in respect of safety and welfare measures with test of significance. It is inferred that majority of retailers adhere to government rules and regulations. Ethics is followed in the area of safety and welfare measures provided the food retailers are investing huge amount in their business. The F-test signifies that there is a significant difference identified in one characteristic namely investment.
5.4 Maintenance of Muster Roll And Wage Register
All the food retailers have to accomplish the rules of Mica Mines Labour Welfare Fund Act 1946, which gives strict guidelines for the maintenance of muster roll, wage register and wage slips in retail units. Employees in retail business are motivated to deliver their duties with morale. They are informed to adhere to ethics and increase spiritual quotient with government in respect of entries in registers.
Table: 4-Characteristics-Wise Classification of Sample Retailer Showing Adherence in Respect of Muster Roll and Register:
Characteristics
Statistic
s
Frequency
MEAN
SD F-Test
Sign
ifica
nce
NU NF MF F SF
Score 1 2 3 4 5
Location Urban N 4 6 18 21 52
3.96 1.17
0.601
0.549 % 7.6
9 11.5
4 34.6
2 40.3
8 100.0
0
Ownership
Company
N 1 0 8 8 17 4.35 0.7
9 0.93
6 0.44
4 % 5.88 0.00 47.0
6 47.0
6 100.0
0
Investment 20 Lakhs
N 10 19 44 49 125 4.01 1.0
4 1.20
9 0.30
0 % 8.00
15.20
35.20
39.20
100.00
No. of employees 20
N 2 5 18 26 52
4.27 0.93
3.314
0.038 % 3.8
5 9.62 34.62
50.00
100.00
Source: Primary Data Table 4 shows adherence measures for maintaining of muster roll and wage register with test of significance. It is inferred that majority of retailers adhere government rules and regulations of SQ and Ethics in maintaining muster roll and wages register. F-test shows significant difference that is visible in one characteristic namely number of employees. 5.5 Provision For Employee Benefits Like ESI and EPF
The adherence level of ethics and spiritual quotient enables the retail industry to adhere to government rules and regulations and this is reflected in retail industry in order to accomplish the rules of Employee State Insurance Act (ESI) and Employee Provident Fund Act (EPF). It is observed that in retail shops having more number of employees have to abide with the rules and the regulations of ESI and EPF departments. All the employees are made to come under the preview of ESI and EPF schemes. It is the duty of retail industry to deduct the salary of each employee and remit it to the ESI and EPF departments together with employer’s contribution. Table: 5-Characteristics-wise Classification of Food Retailers Showing Adherence towards of ESI & EPF Benefits.
Source: Primary Data In table 5 the percentage of positive responses is not mentioned as, directly it can be inferred that the characteristics of food retailers towards adherence measures in availing ESI and EPF benefits. The Z-test reveals that in case of investment characteristic the adherence level is high among retailers.
5.6 Maintenance of Business Accounts The adherence level of ethics and spiritual quotient enables the retail industry to adhere government rules and regulations to keep appropriate business accounts in retail business. They submit returns to sales tax and income tax departments on time. The retail industry should prepare the correct financial statement analysis to submit the government authorities in times of need. All the retailers need to maintain correct accounts without misappropriation regarding their business as per the norms of sales tax and income tax departments. Table: 6-Character-Wise Classification Of Sample Retailer Showing Adherence Measures to Keep Business Accounts.
Characteristics Responses Percentage
of positive responses
Z Significance Yes (92%) No (8%) Total
Location Urban N 45 7 52
86.54 1.239 0.219 % 86.54 13.46 100.00
Ownership Company N 17 0 17
100.00 1.212 0.226 % 100.00 0.00 100.00
Investment 20 Lakhs N 115 10 125
92.00 0.000 1.000 % 92.00 8.00 100.00
No.of employees 20
N 49 3 52 94.23 0.548 0.589 % 94.23 5.77 100.00
Source: Primary Data The food retail owners have to prepare the tax return statement based on the book of accounts and maintain the real balance sheet records audited by a standard auditor. The Z-test proves that there is a significance difference visible in the characteristics of ownership and investment of retailers in adherence to government rules. 5.7 Payment of Tax
The adherence level of ethics and spiritual consciousness guide the food retailers in the payment of tax on time to the sales tax department. The retail industry have to prepare the correct fund flow and cash flow statements to submit to the sales tax authorities and pay the CST ( central sales tax) and the norms of VAT ( value added tax).The retailers can pay tax in advance and the excess tax paid has to be returned back. This exploration is reflected in Table: 7. Table: 7-Character-Wise Classification Of Sample Retailer Showing Adherence Measures with respect to Tax payment.
% 94.23 5.77 100.00 Source: Primary Data In the area of investment the adherence level is high among the retailers with investment ranging between Rs. 5 to 20 lakhs. Retailers who provides good environment, adhere to the level of proper accounts is high and it is very high with less than 10 employees. Overall the Z-test reveals that majority of retailers adhere to government rules in paying the tax on time. 6. Analysis and Inference of Food Retailing Survey:
Hypotheses: Based on the above analysis and inference, there is significant application of spiritual quotient and ethics followed by food retail industry. This clearly specifies the significance level of food retailers in adhering to Government rules and a regulation of the five cities in India are quite strong and hence H0 is accepted. Indian retail industry is witnessing a tremendous rise in the organized food retailing by reaching 2, 48,431 crores in 2015 where it was 28,000 crores in 2004. Retailing of food increases the convenience by having more outlets to purchase various food products, less time-consuming, changing lifestyle, value for time and value for money. The Indian government that launched value added tax (VAT) nationwide in April 2005 and its implementation is helping organized food retailers. This was in favor of organized food retailers given their multi-location presence. Food retailers today are offering a package of convenience, freshness like grinding coffee fresh at the store, idli batter and cut vegetables. Packaged food companies need to drive down prices to 40% to be comparable on cost with homemade food. Diversity of tastes and preferences is additionally another an important factor with multiple cultures, languages and religions. 6.1 Challenges of Supply Chain for Food and Grocery Retail: One of the major impediments in managing supply chain effectively for food retailing is the infrastructure connecting the stakeholders which is very weak in terms of improper road, low connectivity of rail and air links, ineffective ports, shortage of power supply and inefficient warehousing facilities. Moreover, each stakeholder such as the farmers, wholesalers, food manufacturers and food retailers all work independently rather than being interdependent. In India, very few food retailers manage the supply chain process and it is still in nascent stage. Following are some major challenges and possible suggestions provided to improve the supply chain effectively for food retailing in India.
1. Challenge: The gap in terms of effective mode of transportation and warehousing, which forms crucial situation of supply chain. Suggestion: The farmer-corporate model relationship works best and helps both the farmers and the
corporate in bringing their high quality, low cost product to retail shelf. The centre and state government could act as a catalyst by providing assistance to the farmers. With the emergence of private Label, even the retailers need to work with the farm community in developing an efficient supply chain and to serve the population with value added food while simultaneously ensuring remunerative prices to the farmers. 2. Challenge: Due to large retail market and scattered stakeholders of supply chain , there is
Suggestion: The competition needs to be promoted and focus needs to be created on creating a lean supply chain so that a coordinated effort among stakeholders eliminates waste across supply chain. 3. Challenge: Lack of visibility in supply chain. Suggestion: Investment in commercial vehicles and having tracking system is a must so as to create
a better visibility in supply chain. Approximately 3000 vehicles only have the tracking system. 4. Challenge: Limited use of technology in food retail. Suggestion: Modern retailing is a ‘technology–intensive’ industry. Information sharing is a must for
managing a robust food supply chain. Sharing of POS-point of sale data, data warehousing, Efficient Consumer Response (ECR) will act not only as a differentiator for the successful retailer, but will be a classic example for minimizing distortions due to bull-whip effect and reducing perceived variability of demand by the partners in the chain and help in being more responsive to consumer demand. Moreover, use of RFID,WI-FI, Bar Code, electronic article surveillance, smart card are some of the e-based technologies which provide food retailers to process information about their operations and also prevent theft and promote store goods. For example in 2003, Wal-Mart deployed the radio frequency distribution through a pilot approach and witnessed 1% improvement in inventory control. 5. Challenge: Lack of expertise in managing supply chain. Suggestion: Establishing a core and dedicated logistics team to manage the supply chain is essential.
Delivery success in the short term won’t exist based on technology only, but would also rely on relationships and communication. Training, coaching, counseling and mentoring needs to be extended to all stakeholders in supply chain. 6. Challenge: Role of third party Logistics is limited. Suggestion: As food retail grows, assistance of customized solutions in transportation by third party
logistics is required to make supply chain more effective. 7. Challenge: Innovative techniques of managing supply chain are limited. Suggestion: As competition intensifies innovations in distribution rather than following the
traditional techniques of supply chain for distribution of products is required to build competitive advantage. 8. Challenge: Shrinking product life span and managing returns. Suggestion: Focus on reverse logistics is required and mapping of supply chain backwards is
essential for efficient supply chain network of food items with respect to time, quality and quantity. 6.2 Suggestions and Emerging Trends in Food Retailing: Food retailing is becoming bigger in size .It drives profitability, not just through economies of scale in operations but also through higher bargaining power. The growth stage will be characterized by rapid expansion and consolidation among these players. Rise of organic foods and health and wellness segment. Consumer attitudes and preferences are undergoing a shift. Factors like increased disposable incomes, changes in lifestyle patterns, shift in age structure, increased number of working women and multi cultural exposure and increasing health consciousness in the future. More number of Organic foods and wellness products and increasing focus on private labels. 6.3 Future of food retailing: More innovations are expected in food retail and this can happen by targeting specific customer segments and serving their needs for customers like working women and single office goers. Future food retail depends on by changing the product mix on entirely private label stores, exclusively fresh produce stores, by offering new forms of convenience and wider ranges to the customer tele-retail and internet retail. Technological Innovations can take place on self-scan checkouts. Customers can use RFID tags and web-enabled POS systems, e-SCM systems, e- Procurement systems and warehouse management systems. All these may be introduced for better utilization of cutting edge analytics. Conclusion: Retail industry in India will be worth 1750 to 2000 crores by 2016. A unified act like Food Safety and Standards Authority Act of 2006 (FSSA) enables unidirectional compliance towards food retailing. The administrative control of FSSA has been assigned to the Ministry of Health and Family Welfare thereby establishing a single reference point for all matters and eradicating any possibility of multiplicity of orders or the chance that any coordination problems that may be caused. Thus, the
adherence food retail industry may see FSSA as a mixed blessing but the practical application of this legislation, being at its nascent stage, will require some time to come into full force. Food retail is a sunrise industry and perhaps one of the biggest industries having potential for employees and in India there is no past experience of this type and of its magnitude. Government challenges are so tough that now it requests the private sector to take an active part in food retailing and advices the private sector to take the prime responsibility. To conclude government has to lay down the policy, which has to be industry friendly but real role has to be played by the private sector, especially by the voluminous domestic players in food retail industry. References: 1. Chetan Ahya (2006) “The Retail Supply Chain Revolution”, Economic Times, 7th December. 2. Cronin, Jr.J.J and Taylor, S.A (1992). “Measuring Services Quality: A Re examination and Extension,” Journal of Marketing, 55 (3), 55-68. 3. Debasis, Pradhan, & Mangaraj, K. B. (2008). Reliance Fresh Stores in Food Retailing. London Business School: A. V. Birla Centre. 4. Dimas Harlan (2008) “Street Vendors:Urban problem and Economic Potential” working paper in Economics and Development studies. June Issue. 5. Dr.C.Gupta & Mitali Chaturvedi(2007) in their study “Retailing : An Emerging trend in India”, Indian journal of Marketing, Vol. XXXVII,No10,pp 26-29. 6. Dabholkar, P.A; Thrope, D.I and Rentz, J.O (1996),”A Measure of Service Quality for Retail Stores: Scale Development and Validation,” Journal of Academy of Marketing Sciences, 24(1), 3-16. 7. Malliswari, M. (2007), “Emerging trends and strategies in Indian retailing”, Indian Journal of Marketing, Vol. 37, No.11, pp. 21-27. 8. Michelle, A., (1997) "Retail market structure change: implications for retailers and consumers", International Journal of Retail & Distribution Management, 25(8): 269 – 274. 9. Sengupta A (2008), “Emergence of modern Indian Retail: an historical perspective”, International Journal of Retail & Distribution Management, Vol. 36 Issue No. 9, pp. 689-700.
10. Srivastava, R.K. (2009), “Changing retail scene in India”, International Journal of Retail & Distribution Management, Vol. 36 No. 9, pp. 714-721. 11. Jasmine Yeap Ai Leen, T. Ramayah, (2011) "Validation of the RSQS in apparel specialty stores", Measuring Business Excellence, Vol. 15 Iss: 3, pp.16 – 18
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RESEARCH REPORTS
• Mathew, J., Soundararajan, N., Gupta, M. & Sahu, S. (2008), “Impact of Organized Retailing on the Unorganized Sector”, ICRIER Retail Report, pp 2, 8, 60.
• Suhasini Kaul (2005), Measuring Retail Service Quality: Examining Applicability Of International Research Perspective in India, IIMA Working Papers.
BOOK P. Madhusoodanan Pillai and B.Vijayachandran Pillai (2012) on “Retail Marketing” ISBN-978-8411-412-6, Sonali Publications. WEBSITES Bailay, R. (2010), “Carrefour announces first wholesale outlet in India”, available at: http://www.livemint.com [accessed 19th March 2015]. www.indiatogether.org Kuncheria, CJ. (2011), “India says no decision yet on opening retail sector,” available at: http://www.reuters.com [accessed 19th March 2015].
