INDIAN RETAIL TRANSFORMING FROM …pezzottaitejournals.net/pezzottaite/images/ISSUES/V4N2/...A recent McKinsey study titled “India’s Retailing Comes of Age” has predicted a retail

Volume 4, Number 2, April – June’ 2015

ISSN (Print):2279-0934, (Online):2279-0942

PEZZOTTAITE JOURNALS SJIF (2012): 3.735, SJIF (2013): 5.020, SJIF (2014): 5.996

International Journal of Retailing & Rural Business Perspectives © Pezzottaite Journals. 1518 |P a g e

INDIAN RETAIL TRANSFORMING

FROM UNORGANIZED RETAIL TO ORGANIZED RETAIL

Dr. M. K. Kulshreshtha1 Preeti Dhingra2 Dr. Neeraj Chitkara3

ABSTRACT

Retailing is counted as one of the biggest industry in the Indian Market. It has numerous opportunities for the growth for the

growth of the country. It has changed its face from unorganized retailing to organize retailing; posturing as second largest employer after agriculture. Contributing 15% of GDP and 8%-10% of employment, liberalization of Indian economy,

improved infrastructure, and rise in per capita income and growing consumerism. The Indian market is currently witnessing a retail boom with organized retailers, is going through a transition phase in India. For a long time, the corner grocery store was

the only choice available to the consumer. This is slowly giving way to international formats of retailing. This paper tries to explore the way organized retail has dramatically changed not only traditional retailing structure by also the consumption

behavior. The consumption behavior was examined with the help of a structured questionnaire. The result shows that, for

consumers, the shopping mall or variant of organized retail format is the preferred type of retail store, due to convenience variety.

KEYWORDS

Retail Sector, Traditional Retail Format, Indian Retail, Organized and Unorganized Retail etc.

INTRODUCTION

The word "Retail" originates from a French-Italian word “retaillier” which means to break bulk. Organized Retailing refers to

trading activities undertaken by licensed retailers and Unorganized retailing refers, on the other hand, refers to the tradit ional

formats of low-cost retailing, for example, the local kirana shops, convenience stores, hand cart and pavement vendors, etc. Retailing is the set of activities that markets products or services to final consumers for their own personal or household use. It

does this by organizing their availability on a relatively large scale and supplying them to customers on a relatively small scale. Retailer is a person, Agent, Agency, Company, or Organization who is instrumental in reaching the goods, merchandise, or

services to the end user or the ultimate consumer.

Retailer is any person or an organization instrumental in reaching the goods, merchandise, or services to the end users. Retailer is

necessary in the process and cannot be eliminated. The Indian retailing industry is becoming extremely competitive, as more and more players are targeting for the same set of customers. The major retail players are Pantaloon Retail, Shoppers Stop, Reliance,

etc. RETAILING IN INDIA

Retailing is the most active and attractive sector of the last decade. While the retailing industry itself has been present since ages in our country, it is only the recent past that it has witnessed so much dynamism. The emergence of retailing in India has more to

do with the increased purchasing power of buyers, especially post-liberalization, increase in product variety, and increase in

economies of scale, with the aid of modern supply and distributions solution. Indian retailing today is at an interesting crossroads. The retail sales are at the topmost point in history and new technologies are improving retail productivity. Though there are many

opportunities to start a new retail business, retailers are facing numerous challenges.

India has witnessed a frenetic pace of retail growth over the past five years. Goldman Sachs has estimated that the Indian Economic growth could actually exceed that of China by 2015. The generic growth is likely to be driven by changing lifestyles

and by strong surge in income, which in turn will be supported by favorable demographic patterns. Development of mega malls in India is adding new dimensions to the booming retail sector. There is significant development in retail landscape not only in the

metros but also in the smaller cities. Even ITC went one-step ahead to revolutionize rural retail by developing ‘Choupal Sagar’; a

rural mall, for the Rural India. On one hand, there are groups of visionary corporate working constantly to improve upon urban shopping experience and on the other hand, some companies are trying to infuse innovative retail experience into the rural Set up.

Given the situation, we can say that Indian Retailing is at boom. India’s retail sector appears backward not only by the standards of industrialized countries but also in comparison with several other emerging markets in Asia and elsewhere. There are only 14

companies that run department stores and two with hypermarkets. While the number of businesses operating supermarkets is higher (385 in 2003), most of these had only one outlet. The number of companies with supermarket chains was less than 10.In a

1Principal, GGS College of Management & Technology, Punjab, India, [email protected] 2Assistant Professor, Department of Management, Geeta Engineering College, Haryana, India, [email protected] 3Assistant Professor, Faculty of Management, Samalkha Group of Institution, Haryana, India, [email protected]

mailto:[email protected]







developing country like India, a large chunk of consumer expenditure is on necessities, especially food related items. Hence, it is not surprising that food, beverages and tobacco accounted for as much as 71% of retail sales in 2002. The remaining 29% of retail

sales are non-food items. The share of food related items fell, over the review period, down from 73% in 1999. This is to be

expected as, with income growth, Indians, like consumers elsewhere, spent more on non-food items compared with food products.

Sales through supermarkets and department stores are small compared with overall retail sales. However, their sales grew much more rapidly (about 30% per year during the review period). As a result, their sales almost tripled during this time. This high

acceleration in sales through modern retail formats is expected to continue during the next few years with the rapid growth in numbers of such outlets in response to consumer demand and business potential.

The retail sector in India is witnessing a massive revamping exercise as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores. Rated the fifth most attractive emerging retail market, India

is being seen as a potential goldmine. A recent McKinsey study titled “India’s Retailing Comes of Age” has predicted a retail revolution in India. While India is the last among the large Asian economies to liberalize its retail sector, the ‘licensing raj’ has

well and truly passed. Hence, focusing on two aspects of retail marketing i.e. Store Retailing and Non-store Retailing. Store Retailing as the departmental store, which is a store or multi brand outlet, offering an array of products in various categories under

one roof, trying to cater to not one or two but many segments of the society and Non-store retailing as the direct selling, direct marketing, automatic vending. Most of these stores believe in creating not just a marketing activity with its customers, but rather

favor relationship building with him to convert first time customers into a client. Shopping in India has witnessed a revolution

with the change in the consumer buying behavior and the whole format of shopping also altering. Industry of retail in India, which has become modern, can be seen from the fact that there are multi- stored malls, huge shopping centers, and sprawling complexes,

which offer food, shopping, and entertainment all under the same roof.

India retail industry is expanding itself most aggressively; as a result, a great demand for real estate is being created. Indian retailers preferred means of expansion is to expand to other regions and to increase the number of their outlets in a city. It is

expected that by 2016, India may have 600 new shopping centers. UNORGANIZED RETAILING IN INDIA

In India, the most of the retail sector is unorganized. In India, the retail business contributes around 15 percent of GDP. Of this,

the organized retail sector accounts only for about 8 percent share, and the left over share is contributed by the unorganized sector, which is mostly a family owned business in India. The major challenge facing the organized sector is the competition from

unorganized sector. Unorganized retailing has been there in India for centuries, these are named as mom-pop stores. The major advantage in unorganized retailing is consumer familiarity that runs from generation to generation. It is a low cost structure; they

are mostly operated by owners, has very low real estate and labour costs and has low taxes to pay.

ORGANIZED RETAILING IN INDIA

In late 1990, the retail sector has witnessed a level of transformation. Retailing is being perceived as a beginner and as an

attractive commercial business for organized business, i.e. the pure retailer is starting to emerge now. Organized retail business in India is very small but has tremendous scope.

Organized retailing will grow faster than unorganized sector and the growth speed will be responsible for its high market share,

which is expected to be $ 17 billion by 2010-11. Retailing will show fine prospects in cities like Mumbai, Delhi, Chennai,

Kolkata, Bangalore and Kanpur. After Dubai, Singapore and Hong Kong, In India Delhi will be the next big retail destination, According to Confederation of Indian Industries whose findings have shown that Delhi has the good resources and suitable

conditions for the retail sector. Out of the total earnings of the Government of Delhi Rs 11,000 crore, Rs 6,500 crore is achieved from the retail sector. The organized sector is expected to grow faster than GDP growth in next few years driven by favorable

demographic patterns, changing lifestyles, and strong income growth. This organized retail sector mix includes supermarkets, hypermarkets discounted stores and specialty stores, departmental stores.

REVIEW OF LITERATURE

The recent changes in the demographic system of consumers, and the awareness of quality conscious consumption, consumers preferred to buy different products from the organized and unorganized retailers, Ramanathan & Hari (2011).

The unorganized retailers in the locality of organized retailers were adversely affected in terms of their volume of business and

profit. According to him with the emergence of organized outlets consumers gained through the availability of better quality products, lower prices, one-stop shopping, choice of additional brands and products, family shopping, and fresh stocks Joseph,

Soundararajan, Gupta, & Sahu, (2008).





“Organized and unorganized retail not only coexist but also grow substantially. “The reason behind that the retail sector is gradually growing on an overall basis hence the benefit of this growth goes to both the sectors, according to report of ICRIER.

The traditional markets are transforming themselves in new formats such as departmental stores, hypermarkets, supermarkets and specialty stores Kearney, (2006). The kirana shops‟ being affected by malls is only a myth. He further concluded that in spite of

the available opportunities to the organized retail to grow in India these kirana shops also were benefited from this growing economy Munjal, Kumar, & Narwal, (2011).

The impact of organized retailers was clearly visible on the business of unorganized retailers in terms of sales, profit and

employment. Due to their financial infirmity, these small retailers continuously struggled to introduce changes in their exis ting retail practices. Some kind of intervention was required for their future existence Sivaraman P, (2011). The consumers shopping

behaviour was influenced by their income and educational level while gender and age had no significant impact on their behaviour Ali, Kapoor, & Moorthy, (2010).

The perception of service quality was influenced by various natures among various customers and some of the general factors like personal interaction, physical aspects on which customer perception remained constant and common Nair & Nair, (2013). The

customer preferences for grocery shopping were gradually shifting from local kirana stores to organized convenience stores. Brand choice and credit card facilities were the main determinants, which influenced preferences from kirana to organized retail. Payment through credit cards increased purchases from organized retail store Singh & Agarwal, (2012).

“The customer perception of retail service quality is an important segment to the emerging and the existing retailers in the market

as the study reveals that perception of service quality influenced by the various nature with various customers even some of the general factors like Personal interaction, physical aspects are the dimensions on of the customer perception remains constant and

common to all the customer on a majority basis so the retail outlets have to frame their own strategies In order to attract the customers on a longer basis” William & Prabakar (2012).

NEED OF STUDY

It is clear from the above-mentioned facts, that there is an urgent need to know the changing scenario of Organized Retail. Hence the problem titled “Indian Retail Transforming from Unorganized Retail to Organized Retail” is taken foe the present study.

OBJECTIVES OF STUDY

With the view to achieve the aim of the present study, the researcher has made the following objectives:

To study the transformation of Indian Retail Industry from Unorganized Retail to Organized Retail.

To study the Changing structure of Retail Industry in India.

To study the consumers’ behavior towards organized retail.

DATABASE AND METHODOLOGY OF RESEARCH

To make the findings of the present study, more practical and accurate, the researcher would like to use both types of data, i.e.

primary and secondary information of related field.

Table-1

Research Design Descriptive Research Sample Design

Sampling Frame Consumers from organized as well as unorganized Retailer Stores. Sampling Unit Consumers from different age groups, gender, occupation, Income levels and

educational backgrounds.

Sampling Size 100 customers Sampling Methods Convenience Sampling

Data Collection Methods Primary Data Survey Method (The entire schedule is standardized and formalized)

Secondary Data Data were collected from respondents and journals and from previous study related to the retailing sector.

Type of Schedule Structured Questionnaire with suitable scaling. Type of Questions Close ended and multiple-choice questions.

Statistical Tool Used

For analyzing the findings and to draw inferences the appropriate statistical

and mathematical tools are used.





FACTORS RESPONSIBLE FOR CHOICE REGARDING RETAIL FORMAT

Because of several policy initiatives undertaken since liberalization in early 90 is the industry has witnessed fast growth in most of

segments.

Changing consumer preferences due to increased disposable income. Consumers are demanding wider range and unique

merchandise with consistent quality - ‘all under one roof’.

Gradual increasing transformation effect of Indian population due to western influence and internationalization of

palates.

Table-2

Sources: Authors Compilation

Application of Tests of Hypothesis (Chi-Square Test = X2)

Table-3


H0: There is no significant difference between the observed and the expected values.

Ha: There is significant difference between the observed and the expected values.

Based on the Null Hypothesis, we calculate the expected frequencies by using the following formula, where:

Expected Frequency = (R)*(C) / N Table-4: Applying Chi-square Test

O E (O-E) (O-E)2 (O-E)2/E

40 25 15 225 9

10 25 -15 225 9

10 19.5 -9.5 90.25 4.62

29 19.5 10 100 5.12

6 18 -12 144 8

30 18 12 144 8

14 21 -7 49 2.33

28 21 7 49 2.33

30 16.5 13.5 182.25 11.04

3 16.5 -13.5 182.25 11.04

X2 (Calculated value) = 70.48


X2=∑ (O-E) 2/E (Calculated Value) = 70.48 X2 (Table Value) = 9.49

We Reject, the Null Hypothesis (HO) and conclude that there is significant difference in consumers buying behavior regarding

choice of retail format i.e. organized and unorganized retail.

Factors Affecting Choice Regarding Retailing

Variables Organized Retailing Unorganized Retailing

Appropriate Prices 40 10

Home Delivery 10 29

Deferred Payments 6 30

Shop Loyalty 14 28

Sales Promotional Activities 30 3

Factors Affecting Choice Regarding Retailing


Appropriate Prices 40 10

Home Delivery 10 29

Deferred Payments 6 30

Shop Loyalty 14 28

Sales Promotional Activities 30 3





Problems Faced In Retailing

Organized Retailing in India, although efforts have been made by the policy makers and government even execution of the

operations could not prove up to the satisfactory level, thus the following problems in organized retailing are:

There is problem of trained work force and low skill level for retailing management.

Despite the growing protests against Organized Retailing in various parts of the country.

Table-5

Problems Faced by Customers


Residential Distance 26 16

Deferred Payment 44 10

Location Problem 15 40

Price Discrimination 5 20

Time Consuming 15 14


CONCLUSION

Although, we are getting many advantages of organized retail sector and it is also taking our nation towards progress and development. There should be liberalization policy for domestic retailers to become organized. In the nutshell, we can say that

they should join their hands and convert this unorganized retail business into well planned and organized retail business, so that ‘REORGANISATION OF RETAIL BUSINESS’ can take place and India can step ahead in retail sector.

REFERENCES

1. William, John, & Prabakar, S. (2012, September). A study on customer perception on retail service quality in select organized retail stores in Coimbatore City. International Journal of Retail Management and Research, 2(3), 1-10.

ISSN: 2277-4750.

2. Azhagan, Thirumal, & Nagarajan, P. S. (2011, July-December). Analytical study on retail service quality of organized retail sector in Trichy. Amet Journal of Management, 75-83.

3. Parikh, Darshan. (2006, April-June). Measuring retail service quality: An empirical assessment of the instrument. Vikalpa, 31(2), 45-55.

4. Singh, Ajmer. (2013). Relationship between service quality and customer satisfaction in organized retail outlets. Developing Country Studies, 3(1), 84-95. ISSN: 2224-607X.

5. Kumar, R., & Barani, G. (2012). Appraisal relationship between service quality and customer satisfaction in organized retailing at Bangalore City, India. Industrial Engineering Letters, 2(2), 61-70. ISSN: 2224-6096.

6. Kumar, R., & Barani, G. (2012, January). Examination of organized retailing service quality in attire specialty stores in Bangalore City, India. International Journal of Computing and Business Research, 3(1), 1-15. ISSN: 2229-6166.

7. Dinesh Kumar, U., & Vikkraman, P. (2012, September-October). Customers’ Satisfaction towards Organized Retail Outlets in Erode City. IOSR Journal of Business and Management, 3(4), 34-40. ISSN: 2278-487X.

8. Varley, Rosemary, & Mohanned, Rafiq. (2004). Retail Industry and its Environment. Principles of Retail Management,

3-69.

9. Retrieved from http://www.slideshare.net/JavedKhan6/1511-consumer-behaviour-in-the-indian-retail-sector

10. Retrieved from https://www.scribd.com/doc/12864214/Economic-Significance

11. Retrieved from http://www.indianmba.com/Faculty_Column/FC460/fc460.html

12. Retrieved from http://www.articlesbase.com/social-marketing-articles/new-era-in-retailthe-road-challenges-ahead-597...

13. Retrieved from http://www.uniassignment.com/essay-samples/information-technology/information-technology-it-can-

be-d...

*****

http://www.slideshare.net/JavedKhan6/1511-consumer-behaviour-in-the-indian-retail-sector

https://www.scribd.com/doc/12864214/Economic-Significance

http://www.indianmba.com/Faculty_Column/FC460/fc460.html

http://www.articlesbase.com/social-marketing-articles/new-era-in-retailthe-road-challenges-ahead-597...

http://www.uniassignment.com/essay-samples/information-technology/information-technology-it-can-be-d...

http://www.uniassignment.com/essay-samples/information-technology/information-technology-it-can-be-d...

Documents

INDIAN RETAIL TRANSFORMING FROM …pezzottaitejournals.net/pezzottaite/images/ISSUES/V4N2/...A recent McKinsey study titled “India’s Retailing Comes of Age” has predicted a retail