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Consumer perceptions towards different retail formats in India

Monika Gupta*

Dr. Amit Mittal**

The study attempts to identify perceptions of consumers towards existing retail formats in

India. To have in-depth study of consumer perceptions, the basis on which consumers have

been segmented keeping in view the products to be sold need to be understood. Customers of

today carry out extensive research in gathering maximum information about product to be

purchased, occasion for which the purchase is to be made as well as from where the purchase

is to be made. Their evaluative criteria include price, brand reputation, distribution,

promotion, personal selling. The factors causing planned vs unplanned purchasing behaviour

and consumer decision process model need to be understood thoroughly. The customers

remain in dilemma about outlet choice vs brand choice.

Retail is an emerging sector in India. Marketers are leaving no stone unturned to influence

the customers by offering them in various ways, at various locations, in various forms

resulting in emergence of various retail formats throughout the country. Customers are highly

influenced by image of the retail outlet, its attributes, product range, variety, services,

employees behaviour, dcor, music and marketing strategies. For this, we need to

understand the process of outlet selection, consumer choice and shopping behaviour, the

shopping process, shopper types and shopping strategies, choice decisions during shopping

ocess, attempts made by marketers to close the gap between expectation and performance

and so on.

___________________________________________________________________________

* Assistant Professor and Research Scholar, MM Institute of Management, MM University,

Mullana-Ambala (Haryana) e-mail: [email protected]

**Professor, MM Institute of Management, MM University, Mullana-Ambala

e-mail: [email protected]
mailto:[email protected]:[email protected]

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The retailers should put in efforts focusing on attracting the customers towards the store

outlets on continual basis by focusing on their distinct features, thus, adding to the retail

formats, followed by persuasion of paying a visit to the store causing a positive impact on the

prospects by their effective formats, convincing them to make first purchase, in turn,

followed by repeat patronage.

Customers of today are not focusing only on the purchase, however, less it is; they are

equally concerned with external as well as internal environment of the retail format. Their

pre-purchase experience is highly influenced by family members, friends and channels of

communication in comparison to competitive offerings. Moreover, needs, perceptions and

experiences of customers vary to a great extent which a marker needs to identify and thus

make offerings accordingly.

INTRODUCTION

Retail sector in India is growing rapidly. As per Images F&R India Retail Report 2007 (Table

shown below), retail sector is growing at the rate of 5.7% attracting the major retailers such

as Walmart, Spencer from all over the world for expansion of their retail operations. Last

decade has seen sea-change in the sector. But, still only 4.6% of the sector, worth Rupees

47,500 crores is still organized.

Table 1: Growth of Indian Retail: 2004-2006

Growth of Indian Retail: 2004-2006 Growth of Organized Retail: 2004-20

Retail Segments Value

2004

Value

2005

Value

2006

Y.o.Y

Growth

04-06(%)

Value of

organized

segment 2006

(Rs crore)

%

Organized

in 2006

Year

Year

Growth

2004-06

Clothing, Textiles

& Accessories

(Apparel)

80 88.5 98 10.7 18,500 18.9 30.3

Jewelry 43.5 47.6 52 9.3 1,450 2.8 30.6

Watches/ Timewear 2.8 3.1 3.4 10.2 1,550 45.6 18.2

Footwear 10 10.9 11.9 9.1 4,500 37.8 34.2

Health & BeautyCare

2.5 2.9 3.3 14.9 350 10.6 52.9

Pharma 30 33 36.4 10.2 950 2.6 31.4

Consumer 32 36.4 41.5 13.9 4,300 10.4 31.2

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Electronics

MobileHandsets/Accessories

13 15.7 18.7 19.9 1,500 8.0 33.7

Furnishings,

Utensils, Furniture-Home & Office

33 34 35.1 3.1 3,200 9.1 20.6

Food & Grocery 615 628.5 642.2 2.2 5,000 0.8 30.8

Catering(F&B) 35 41.4 49.2 18.6 3,400 6.9 30.8

Books,Music &Gifts

8.2 9.8 11.5 18.4 1,450 12.6 34.9

Entertainment 25 28.7 32.8 14.5 1,350 4.1 44.1

TOTAL 930 980.5 1036 5.7 47,500 4.6 34.8

Source: Images F&R India Retail Report 2007; All values in Rs. 000 crores.

It is further supported by liberal government policies, FDI and increase in income level,

buying power, and rise in lifestyle, shift in attitude, cheap labour, better employment

opportunities, and availability of raw material, mass market and many more.

IMRB International on Urbanscape Report indicates:

Population Characteristics:The Indian urban landscape comprises of 66 million households

as per Indian Census 2001. Further analysis of the census data indicates that 29% of the

urban households live in metros followed by towns with less than 1 lakh population.

Economic Profile:The average monthly income of households in urban India is Rs 8,6821.

However, an estimated 40% of urban households earn below Rs.5,000 per month. As per

Socio economic classification (SEC), which takes education and occupation profile in

account, a majority of the urban population are households with an average monthly income

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of Rs 5894.Most households across urban India are dependent on fixed monthly salary as the

main source of income.

Living Standards: Majority of the urban households reside in self-owned homes. In the

North, only 11% households reside in rented houses. Two third of the households in urban

India reside in small houses with less than three rooms (including kitchen).

Buying Behavior: The urban Indian households are spending 33% more than what they used

to spend in 2005.Kirana/ Provision stores accounts for 43% of the total spends on groceries,

FMCG and general merchandise followed by dairy and vegetable vendors. A majority of the

households undertake shopping trips before 11.00 AM, followed by 5-7 pm slot when30% of

the households in North shop during weekdays. On an average, an urban household has 2.6

shopping trips for household shopping on a weekday as compared to 2.3 trips on a weekend.

64% of the households do their monthly bulk and planned shopping in the very first week of

the month. Location of the store and thus convenience in visiting it is the biggest choicedriver as almost all urban households prefer physical visit for monthly shopping.

To identify the underlying perceptions of the consumers and demographic correlates of

consumer preferences towards different retail formats, it is essential to understand that a

retail format is a store package that the retailer presents to the shopper.

A retail format is defined as a type of retail mix used by a set of retailers. It is a place,

physical or virtual where the vendor interacts with its customer.

As many new formats are emerging rapidly viz. supermarkets, hypermarkets, convenience

stores, departmental stores, factory outlets, category killers and many more, retailers of today

need to understand what customer, in actual, is seeking for? They need to segment, target and

position their products, communicate pricing and place via effective promotional strategies to

cultivate favourable retail outlet image via effective merchandise, service, clientele, physical

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facilities, convenience, promotion, store atmosphere, institutional factors, post-transaction

satisfaction and enabling them choose and visit the store. Advertising and sales promotions

are the most widely used forms of promotion. Effective sales promotional strategies include

Point-of-purchase/ point of sale, contests, coupons, frequent shopper, prizes, demonstrations,

referral gifts, two for the price of one, branded giveaways, samples, premiums and special

events. The other main forms include public relations and personal selling. Retail promotion

can be defined as any communication that informs influences and prompts the target market

about any aspect of retail sponsor.

Again, bringing the customer to the store will not be sufficient in achieving their ultimate

objective. Their evaluation criterion refers to tangible and/ or intangible benefits that

consumers use to compare product classes, brand, and vendors and so on. Persuading them to

buy again needs due emphasis on in-store promotions, ambience, design and social cues,

thus, enabling them to choose the brand and product from the store. Their consumption and

post purchase experience accompanied by various loyalty building initiatives can play a

major role in convincing them to make impulse buying, repeat purchases ultimately creating

store loyal customers.

REVIEW OF LITERATURE

Finlay (2007) in her study Grocery Shopping in the UK: A Study of Consumers

examined the underlying perceptions of consumers towards grocery and shopping outlets and

found price and location as two critical factors influencing grocery outlet choice. She

indicated that consumers are rarely prepared to change their shopping patterns to access

alternative outlets for grocery purchases being habitual nature, time constraint and low

cognitive processing characteristic. Further research is needed to consider different

demographic groupings in different localities in order to better understand the impact of

limited choice in an area.

Mittal and Mittal (2008) in their study Store Choice in the Emerging Indian Apparel

Retail Market: An Empirical Analysis investigated the evaluation of apparel store

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attributes by consumers in the context of apparel retail formats in India. They suggested

retailers to consider underlying perceptions and demographic correlates of local consumers.

According to them, retailers could use Loyalty Drivers and Shopping Experience Enhancers

to be integrated into the retail format to create sustainable store choice and hence, store

loyalty. Further research is needed to carry out research for other retail sectors such as food

and grocery, consumer electronics, gifts and so on and also to investigate the influence of

demographics and psychographics on store choice and shopping orientations.

Rajaguru and Matanda (2006) examined Consumer Perception of Store and Product

Attributes and its Effect on Customer Loyalty within the Indian Retail Sector and

observed that except product price, other store and product attributes have positive effects on

customer loyalty. Further research is needed to identify retail managers focus on product

quality, store convenience as well as assure quality and availability of new products in order

to enhance customer loyalty and also to compare consumers using various retail formats and

consumers perception of product and store attributes on retail formats keeping in view

demographic correlates.

Charles Dennis (2005) investigated Why do People Shop Where They do? The

Attributes of Shopping Centres that Determine Where Consumers Choose to Shop and

found that people are attracted to different centres for different reasons as shoppers have

different expectations. The attributes, though, which were significantly different between

centres, did not appear to be significantly influenced by income or socio-economic group.

Specifically, shoppers spend more at centres which more closely match their requirements.

Further research is needed to carry out studiesconsumers choices of more shopping centres

and more respondents.

Sinha (2003) studiedShopping Orientation in the Evolving Indian Market and analyzed

that the Indian shoppers show an orientation based more on the entertainment value than on

the functional value. The other distinct aspects of the Indian shoppers include post-purchase

information management, bargaining and convenience. The orientation is also found to be

affected by the type of store, frequency of buying and socio-economic classification. Further

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research is required to identify the retailers need to experiment with a format that attracts

both types of shoppers and also to find out the relationship of orientation with store variables

such as store format, merchandising, pricing, location, communication, and customer

retention.

Generalization of the Results of Previous Research Studies

It has been found that consumers are rarely prepared to change their shopping patterns to

access alternative outlets for grocery purchases being habitual nature, time constraint and low

cognitive processing characteristic. Retailers have been suggested to consider underlying

perceptions and demographic correlates of local consumers. Retailers could use Loyalty

Drivers and Shopping Experience Enhancers to be integrated into the retail format to create

sustainable store choice and hence, store loyalty. Shoppers spend more at centres which more

closely match their requirements. They suggested that current supermarket loyalty card

programs may be best categorized as a form of sales promotion. According to them, the

retailers need to formulate their innovative strategies and tactics to deliver desired value

proposition to consumers via a suitable vehicle such as retail format facilitating positioning

of the store. Their findings indicated that the existing retail outlets would be affected by the

development of departmental store, a kind of new retail format. A negative initial-trust image

causes mistrust while a positive initial-trust image causes trust.

RESEARCH PROBLEM

Indian shoppers, since beginning, are habitual of making purchases from corners shops such

as Kiryana Shops. Due to flooding of various retail formats, they are exposed to various

options to shop from, which basically are adaptation of western formats to a greater extent.

Since retailing in India is just entering growth phase and is still in gestation period, customers

perceive them differently based on their motives for purchase. That is why, it is becoming

essential for retail to understand what consumers perceive about various formats and why?

Once they become aware of underlying motives of buyers, it will become easier for them to

position themselves accordingly. This has motivated the researcher to carry out in-depth

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study of consumers perceptions towards different retail formats leading to first objective

of the study.

As we know, India is 2nd largest country in the world in terms of population which is crossing

1.2 billion at present, it indicates there are several thousand groups of customers existing at

present. It may not be feasible for retailers to understand underlying needs of various groups

and have so many segments catering the needs of all such groups but they can target specific

groups based on their strengths and product offerings. They can classify them on the basis of

age group, gender; income level, family size, and family life-cycle stage and so on and can

position them accordingly. For effective positioning and to create a place for themselves in

such a competitive environ filled with immense growth opportunities, they need to identify

the demographic correlates of customer preferences towards different retail formats

emerging rapidly leading the researcher to second objective of the study. For example, Indian

youth comprising nearly 50% of the population is responding to new retail formats due to

improved education level, better jobs, urbanization, influence of peer groups, working

women and many more.

OBJECTIVES OF THE STUDY

The study to be undertaken aims at Consumer perceptions towards select food & grocery and

apparel retail firms in India. This can lead the retailers to adapt their retail mix in order to

define, design and deliver integrated values across the formats. The integrated value would

involve the quality of communications emanating from the retail firm.

Specifically, the main objectives of the study are:

1. To study the consumer perceptions towards retail different formats

2. To identify the demographic correlates of customer preferences towards different retail

formats

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CONCEPTUAL FRAMEWORK

Feedback

Feedback

FF

An EightStep Process of Outlet Selection

Developed to describe retail store selection but applicable to other outlet types, the modelillustrates the role of image in driving outlet choice

Source:Based on A Path-Analytic Explanation of Retail Patronage Influences by Kent B. Monroe andJoseph B. Guiltinan in Journal of Consumer Research, Vol. 2, June 1975, p.21.

SIGNIFICANCE OF THE STUDY

The Indian retail market is expected to be about US $ 535 Billion by 2013.

For Managers: This study will help retailers in analyzing customers from various

perspectives for making store choice in an era of immense competition today with the entry

of national as well as international players. It will provide an insight in understanding

household/ buyer characteristics, arising shopping/ purchasing needs, underlying perceptions

Household/ BuyerCharacteristics

Shopping/Purchasing

Needs

StoreImage

In-storeInformation

Processing

AttitudeTowardsStores

Store

Choice

Product and

Brand

Purchase

Importance

of Store

Attributes

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of consumers towards rapidly emerging formats with special focus on food & grocery and

apparels. It will elaborately discuss store environment perceptions with due emphasis on

store atmosphere, design and social cues, identifying the demographic correlates of customer

preferences such as age, gender, income level, family size towards different retail formats

w.r.t. perceived merchandise quality, monetary price, interpersonal service quality, customer

density, efficiency, enjoyment, store operations, visual appeal and escapism. It will not only

provide information about various promotional strategies adopted by retail firms to

communicate how they best cater to their needs by offering suitable products in a favourable

environment to entire family making shopping fun but also provide an insight into devising

such strategies to inculcate customer loyalty by adopting innovative loyalty building

programs. It will make them aware of customer evaluation of loyalty building initiatives and

the promotional strategies of retail firms, motivating them to create favourable store image

by developing positive attitude towards the store, ultimately resulting in store choice. Now, it

will provide them ways to treat customers in a way that they feel motivated and inspired to

make actual purchase of desired product and brand from the store. It will further inspire them

to inculcate values in a way that after consumption of the actual product purchased from the

store, they gain such an experience resulting in repeat purchases from the same store for

particular products and brands, thus creating store loyal customers. In this way, the study will

be highly beneficial to store managers, marketing managers, floor managers, customer care

managers, operations managers, inventory managers etc.

For Retailers: It will help them in understanding, in detail, underlying perspectives of

customers before, during and after making decisions for store choice thus devising strategies

accordingly to cater them to their best.

For Customers: This study will provide deep insight into various ways the retailers and

managers adopt to motivate the customer in choosing their store, ultimately guiding them to

be aware of malpractices, if any, used to lure them to the store, ethics, consumer rights,

competitors, other consumers habits and behaviour etc.

For International Retailers: As retail sector in India is growing rapidly, retailing in India is

still in growth stage, retailers from all over the world are targeting India for expansion of

their retail operations. Only 4.6% of the sector, worth Rupees 47,500 crores is still organized

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indicating huge potential. It is supported by liberal government policies, FDI, increase in

income level, buying power, rise in lifestyle, shift in attitude, cheap labour, better

employment opportunities, availability of raw material, mass market and many more.

For Government: Liberalised government policies are attracting international retailers to

enter Indian retail sector causing an increase in earnings via Foreign Direct Investments.

For Architects and Developers: As retail sector is just entering the growth phase, it is

providing immense opportunities to explore the areas to expand further.

For Researchers, Academicians and Doctoral Students: It will make them aware of the

hands on information about the retailers and consumers perspective in detail, providing

them direction to move further.

For Industry: It will contribute to industry by providing information about latest

developments based on actual findings by the researcher.

For Suppliers and Logistic Companies: Immense growth opportunities owing to huge

growth potential leading to an emerging field of Supply Chain Management.

For conducting the study, both primary as well as secondary data will be collected. It will be

an empirical study.

Research Design

In data collection method, both field and documentary data shall be gathered to accomplish

the objectives of the study.

Scope of the StudyThe focus of the study shall be on Consumer perceptions towards various retail firms

dealing in Food & Grocery and Clothing, Texti les and Accessori esin Haryana & NCR

Region. The firms will be selected on the basis of products offered and retail formats. The

study will be focused on responses of head of the family who is actually taking decisions to

purchase. The selection criterion is their formats, loyalty building initiatives and the

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promotion strategies. The major firms include Pantaloon Retail (India) Ltd., Vishal Mega

Mart, Total, Ebony, Reliance Retail, More., Easy Day, Spencer and some modern format

independent stores.

BIBLIOGRAPHY

Books:

Berman & Evans, Retail Management- A Strategic Approach, Pearson Education

Charles Dennis, Objects of Desire: Consumer Behaviour in Shopping Centre Choices, Palgrave, 2005,

Chapter 3 Why do People Shop Where They do? The Attributes of Shopping Centres that Determine

Where Consumers Choose to Shop, pgs 41-60

Gilbert,David, Retail Marketing Management, Pearson EducationLevy, Weitz & Pandit, Retailing Management, 6

thedition, Tata McGraw Hill

Lindquist & Sirgy, Shopper, Buyer, and Consumer Behavior, Biztantra-Dreamtech

Pradhan, Swapna, Retailing Management, 3rd

edition, Tata McGraw Hill

Piyush Sinha, Dwarika Prasad Uniyal, Managing Retailing, Oxford University Press, N. Delhi

Kotler, Phillip, Marketing Management: Analysis, Planning and Control, Prentice Hall, New Delhi.

Schiffman and Kanuk, Consumer Behaviour, PHI, New Delhi.

Journals & Online Research Publications:

Ahmad, Nor, Rahman, Moen, Wel, Small Retailers and Entrepreneurs Perceptions on the Departmental

Store Development: A Malaysian Case Study, 2008, International Review of Business Research Papers,

Vol. 4 No.1 January 2008 Pp.1-10, http://www.bizresearchpapers.com/Paper-1.pdf

Brumley, Creating Loyalty in Relationship Marketing: A Descriptive Study of Supermarket Loyalty

Programs, 2002, http://wvuscholar.wvu.edu:8881//exlibris/dtl/d3_1/apache_media/6197.pdf

Chowdhury, Creation of Retailer Brand EquityFocus on Indian Retail, 2009,

http://ssrn.com/abstract=1372729

Finlay, Grocery Shopping in the UK: A Study of Consumers, 2007,

http://edissertations.nottingham.ac.uk/892/1/07mbalixlcf.pdf

Fullerton, The service qualityloyalty relationship in retail services: does commitment matter? Journal of

Retailing and Consumer Services 12 (2005) 99111

Kaul, A Conceptual Note on Influencing Store Loyalty: Implications for Indian Retailers, 2006,

http://www.iimahd.ernet.in/publications/data/2006-10-06_skaul.pdf
http://www.bizresearchpapers.com/Paper-1.pdfhttp://wvuscholar.wvu.edu:8881/exlibris/dtl/d3_1/apache_media/6197.pdfhttp://ssrn.com/abstract=1372729http://edissertations.nottingham.ac.uk/892/1/07mbalixlcf.pdfhttp://www.iimahd.ernet.in/publications/data/2006-10-06_skaul.pdfhttp://www.iimahd.ernet.in/publications/data/2006-10-06_skaul.pdfhttp://edissertations.nottingham.ac.uk/892/1/07mbalixlcf.pdfhttp://ssrn.com/abstract=1372729http://wvuscholar.wvu.edu:8881/exlibris/dtl/d3_1/apache_media/6197.pdfhttp://www.bizresearchpapers.com/Paper-1.pdf

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Kaul, Sahay & Koshy, Impact of Initial-Trust Image on Shopper Trust and Patronage Intentions, 2007,

http://www.iimahd.ernet.in/publications/data/2007-09-01SKaul.pdf
http://www.iimahd.ernet.in/publications/data/2007-09-01SKaul.pdfhttp://www.iimahd.ernet.in/publications/data/2007-09-01SKaul.pdf

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