Supermarkets Vs Small kirana stores

IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 10, Issue 1 (May. - Jun. 2013), PP 01-07
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Supermarkets Vs Small kirana stores
Ekta Rani
Abstract: With the emergence of supermarkets, kirana stores have been depleting day by day. Government is in
the grave situation to decide whether to allow 50% FDI or not in the retail sector. There are certain retail
outlets such as Walmart, Metro which are better in quality, cheaper in rates, and offering a range and variety of
products under one roof. These malls have entered in India but they are into cash and carry business only and
not in the multi brand retail sector. Many of them have entered through joint ventures. If government allow
them to enter in India, it can be said that all the small shops and kirana stores will not be able to stand in the
market. They cannot compete with them. Now the question arise how the kirana stores can be saved from these
big giants in the market. It is the need of the hour today to save these kirana stores because in a developing
country like India where the income of an average man is low, such types of small business can make them able
to earn their living. The present research is an attempt to find out the weaknesses of kirana stores as compared
to the malls and to find out the solutions for the betterment of the stores. The research is conducted on various
kirana stores in Punjab. The study identifies the problems being faced by kirana merchants such as recovery of
credit, inventory management, goodwill in terms of quality, low space, and lack of variety etc. But during the
research it has been found out that there are certain areas where these kirana stores have an edge over the
market such as emotional attachment with the customer, to fulfil the timely need of credit of the customer, easy
availability etc. It is concluded that both kirana stores and malls are important to the Indian economy. FDI is
important for the growth of the economy but it should come for the rescue of the existing business and not as a
threat. Secondly government intervention is seeked to make improvements in the functioning of the kirana
stores. If kirana stores starts using their strategic advantages to the optimum level, they can make can make
their existence strong in the market.
Key Words: supermarkets, FDI, Strategic advantage
I. Introduction to Retail sector
The retailing has been derived from the French word “retailor” which means to cut a piece off or to
break bulk. Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to
consumers for their personal or family use. The journey of the sale of a product begins with the producer from
whom a middleman acquires supplies of goods or services and delivers to the ultimate consumer by performing
different sets of activities. The job of retailing is done by the retailor who thus links the producers with a variety
of supplies of all the manufacturers.
II. Retail Scenario in India: Touching Meteoric Scales
The retail scenario in India is unique as compared to the world scenario. In the early 1980s the industry
was dominated by the unorganised sector largely comprised of peddlers, vegetable vendors, neighbourhood
kirana stores etc. It is only with the blessing of government policy of liberalisation, privatisation, globalisation
in 1991 that organised sector in India have been progressing day by day. The change in the demographic profile
of the Indian consumers and consumers buying behaviour gave momentum to the growth of retail sector in the
economy. The Indian consumer today has wide choice ranging from shoping centres to multiplex malls that
offer “everything under single roof”.
As the corporates – the Piramals, the Tatas, the Rahejas, ITC, S.Kumar‟s, RPG Enterprises, and mega
retailers- Crosswords, Shopper‟s Stop, and Pantaloons race to revolutionize the retailing sector, retail as an
industry in India is coming alive. Retail sales in India amounted to about Rs.7400 billion in 2002, expanded at
an average annual rate of 7% during 1999-2002. With the upturn in economic growth during 2003, retail sales
are also expected to expand at a higher pace of nearly 10%. Across the country, retail sales in real terms are
predicted to rise more rapidly than consumer expenditure during 2003-08. The forecast growth in real retail
sales during 2003- 2008 is 8.3% per year, compared with 7.1% for consumer expenditure. Modernization of the
Indian retail sector will be reflected in rapid growth in sales of supermarkets, departmental stores and hyper
marts. Sales from these large-format stores are to expand at growth rates ranging from 24% to 49% per year
during 2003-2008, according to a latest report by Euro monitor International, a leading provider of global
consumer-market intelligence. A Mc Kinsey report titled “Indian consumer market” estimated that the total
retail market in India is likely to increase to US dollar 833 bn by 2013 and by 2018 to 1.3 tn at a compounded
annual growth rate of 10%. A. T. Kearney Inc. places India 6th on a global retail development index. The

country has the highest per capita outlets in the world - 5.5 outlets per 1000 population. Around 7% of the
population in India is engaged in retailing, as compared to 20% in the USA. In a developing country like India, a
large chunk of consumer expenditure is on basicnecessities, 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 share of
food related items had, however, declined over the review period, down from 73% in 1999. This is not
unexpected, because with income growth, Indians, like consumers elsewhere, have started spending more on
non-food items compared with food products. Sales through supermarkets and department stores are small
compared with overall retail sales. Nevertheless, their sales have grown much more rapidly, at almost a triple
rate (about 30% per year during the review period). 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 due
to consumer demand and business potential. The factors responsible for the development of the retail sector in
India can be broadly summarized as follows:
• Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the
convergence of consumer tastes. Looking at income classification, the National Council of Applied Economic
Research (NCAER) classified approximately 50% of the Indian population as low income in 1994- 95; this is
expected to decline to 17.8% in the coming years.
• Liberalization of the Indian economy which has led to the opening up of the market for consumer goods has
helped the MNC brands like Unilever, Nestle, etc. To make significant inroads into the vast consumer market by
offering a wide range of choices to the Indian consumers.
• Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc.
• The internet revolution is making the Indian consumer more accessible to the growing influences of domestic
and foreign retail chains. Reach of satellite T.V. channels is helping in creating awareness about global products
for local markets. About 47% of India‟s population is under the age of 20; and this will increase to 55% by
2015. This young population, which is technology-savvy, watch more than 50 TV satellite channels, and display
the highest propensity to spend, will immensely contribute to the growth of the retail sector in the country. As
India continues to get strongly integrated with the world economy riding the waves of globalization, the retail
sector is bound to take big leaps in the years to come. The Indian retail sector is estimated to have a market size
of about $ 180 billion; but the organised sector represents only 2% share of this market. Most of the organised
retailing in the country has just started recently, and has been concentrated mainly in the metro cities. India is
the last large Asian economy to liberalize its retail sector. In Thailand, more than 40% of all consumer goods are
sold through the super markets and departmental stores. A similar phenomenon has swept through all other
Asian countries. Organised retailing in India has a huge scope because of the vast market and the growing
consciousness of the consumer about product quality and services. A study conducted by Fitch, expects the
organized retail industry to continue to grow rapidly, especially through increased levels of penetration in larger
towns and metros and also as it begins to spread to smaller cities and B class towns. Fuelling this growth is the
growth in development of the retail-specific properties and malls.
III. FDI Policy With Regard To Retailing In India
It will be prudent to look into Press Note 4 of 2006 issued by DIPP and consolidated FDI Policy issued in
October 2010 which provide the sector specific guidelines for FDI with regard to the conduct of trading
activities.
a) FDI up to 100% for cash and carry wholesale trading and export trading allowed under the automatic
route.
b) FDI up to 51 % with prior Government approval (i.e. FIPB) for retail trade of „Single Brand‟ products,
subject to Press Note 3 (2006 Series).
c) FDI is not permitted in Multi Brand Retailing in India.
IV. Organised sector Vs unorganised sector
The features of a kirana and supermarket are quite different. The following pointers explain to an extent why
both the kirana and the supermarket are essential to the Indian scenario:
 Kirana stores are owned and operated on a small scale, usually in a space of 500sq.ft. or less. These places
are easily available within residential localities. However, for a supermarket to operate, a minimum of 2000
sq. ft. would be required, and usually, so much space would usually be found in commercial localities.
 Supermarkets have the benefit of economies of scale over kirana stores.
 Kirana stores are operated by the owners themselves and thus provide the benefit of low operational costs.
Supermarkets are capable of eliminating the wholesalers from the chain and can provide benefits of saved
margins.

 Kirana stores target a much smaller market than supermarkets and thus, can be more responsive in terms of
their exclusive demands. Supermarkets often offer more variety to customers. Moreover, it is likely to
receive the newly launched products earlier than kirana stores.
 Kirana stores are likely to be in the immediate locality and thus have a better understanding of customer
preferences. Supermarkets often offer the best bargains, and experts from the company explain the usage
and care of a particular product to its potential buyers.
 Kirana stores are more likely to provide services like free home delivery. Supermarkets have big names
backing them; moreover they have stronger advertising, probably on national or state level. At the same
time, there have been instances of kiranas selling at prices higher than the MRP and tampering with the
quantity of loose products.
 Each of us knows our kirana store for a long time, probably from our birth or so. Thus, the customer-trust
ratio is very high. The billing is also very fast when compared to the supermarket.
V. Research Methodology
Identification of the Problem
With the emergence of supermarkets, kirana stores have been depleting day by day. Government is in
the grave situation to decide whether to allow 50% FDI or not in the retail sector. There are certain retail outlets
such as Walmart, Metro which are better in quality, cheaper in rates, and offering a range and variety of
products under one roof. These malls have entered in India but they are into cash and carry business only and
not in the retail sector. If government allow them to enter in India, it can be said that all the small shops and
kirana stores will not be able to stand in the market. They cannot compete with them. Now the question arise
how the kirana stores can be saved from these big giants in the market. It is the need of the hour today to save
these kirana stores because in a developing country like India where the income of an average man is low, such
types of small business can make them able to earn their living.
Objectives of the research
 To find out the problems being faced by the unorganised retail sector in India.
 To find out the solutions for the betterment and growth of unorganised retail sector.
 To find out ways to save kirana stores from the malls.
Sampling unit
Shopkeepers and consumers of different areas of Punjab have been selected for research.
Sampling technique
Convenient and random sampling has used for the purpose.
Sample size
A sample of 50 shops has been taken for the study.
Data collection
Data has been collected through primary and secondary sources.
Primary sources:-information has been collected through personal interview and observation method.
Secondary sources:-secondary sources like internet, magazines, and newspapers have been used.
Type of research
It is an analytical type of research which tries to find out the problems and at the same time provides solution for
it.
Research tools and techniques
Statistical tools like averages, percentages and factor analysis have been used to analyse the data.
Limitations of the research
 The study is confined to limited areas of Punjab only.
 Non serious and biased response of the respondents.
 Time and resource constraints.

VI. Analysis
Figure1 shows the reasons why people go for the business ofs kirana stores.
50% says they adopt the business because of low investment. Low entry barriers and easy to manage was the
reason given by 10% shopkeepers. 30% of the people do the family run business
Figure 2 shows the profit margin of kirana stores.
0
5
10
15
20
25
30
veryhigh
high
medium
low
verylow Series1
Series2
Series3
The above figure shows that the margins of kirana merchants are medium and even below average.
Figure 3 shows that no of kirana stores giving receipt after sales
It shows that most of the shopkeepers do not give receipt to customers
Figure 4 shows the no of kirana stores accepting Visa cards etc.
The above figure shows that only 10% of kirana shops accept mastercards, visa cards etc. This facility is hardly
provided by the shopkeepers.s

Figure 4 shows the performance of social responsibility by shopkeepers.
Most of the kirana merchants performed their social responsibility in terms of giving donations to charitable
institutes and by planting saplings. But there are some who do not know the importance of performing social
responsibility.
Facilities provided by kirana stores No of stores providing the facility
Credit facility 40
Home delivery 10
Free gifts 10
After sales service 25
Table 1 shows the facilities being provided by kirana stores.
It shows that most of the kirana stores are running on the basis on credit system only. It is the strategic
advantage tool in the hands of shopkeepers. Only 50% of the shopkeepers give after sales service. There is very
less provision for free gifts and home delivery.
Factor affecting sales of kirana stores Highly
affected
medium No effect
Opening up of the malls 20 15 15
Government regulation 50 0 0
Rapid changes in prices 50 0 0
Recession 0 20 30
Fair price shops 25 10 15
Table 2 shows the factors affecting the sales level of kirana stores.
Above table shows that only 20 respondents out of 50 replied that malls have highly affected the sales of their
stores. Government regulation and changes in prices affect has 100% impact on the sales of kirana stores.
Recession has affected the kirana business to a low extent. 50% shopkeepers are affected by opening up of fair
price shops.
Problems of kirana merchants Always sometimes never
Non timely payments 40 10 0
Inventory 25 15 10
Few loan facilities 35 15 0
Lack of knowledge of market 25 12 13
Table 3 shows the problems faced by the kirana merchants
Above table explains that 40 out of 50 kirana merchants are suffering from the problem of non timely payments
of credit by customers. Inventory is also a major source of problem for 50% kirana merchants as the size of the
shops are small.
VII. Findings
 Although supermarkets posed a great challenge before Kirana stores still the unorganised sector rules in
India.
 Kirana store has its own merits and demerits but there are still other areas such as inventory management,
modern styles of doing business, visual merchandising, variety which needs to be improved.
 Shopping from malls have become a status symbol for youth in India. So their trend of shoping is slanting
towards shopping malls than kirana stores gradually.
 Emotional attachment with the customers is the strongest point lies in the favour of kirana stores which is a
competitive advantage over the malls.

 Kirana stores suffer the most from the problems like huge changes in prices and low margines and low skill
level.
 Whereas it is a strong point in favour of kirana stores that it provides credit facility to its customer on the
other hand it is a weakest point also that there is no proper system set by the government for the recovery of
that credit which in terms puts the business in loss.
 It is a weakness on the part of Kirana stores that they rarely accept the mastercard or ATM. etc.
 Supermarkets and malls are also associated with the activities of corporate social responsibility but on the
other hand there a few shopkeepers who perform their social responsibility
 The facilities like Home delivery, free gifts, special discounts are rarely given by the shopkeepers.
 It has been found a general behaviour in the consumers that they think the products purchased from kirana
stores are not supposed to be original but they believe quality given in the malls.
 Government policy of fair price shops giving atta dal scheme has affected deeply the sales of the kirana
stores.
 The persons of low educational qualification can run a kirana store. But malls always preferred graduates
and under graduates. Shift in major retail trade to these big companies by 100% FDI will render small
traders and their employees unemployed.
VIII. Suggestions
 Kirana stores should start using modern methods of doing business. They should start taking the franchise
of famous brands to increase the variety in the shops.
 Visual merchandising can be an added advantage for the growth of kirana.
 Government should start some training programmes for kirana marchants and provide them with the low
rate loan facilities.
 Social responsibility should be performed by the shopkeepers to create a goodwill of their business.
 They should sale only the original material to create faith in the customers.
 They should start giving the facilities of free offer discount etc on special occasions or on bulk purchasing.
 Use a suggestion box and customer want slips.
 Extend the store hours.
 Accept Visa, Mastercard etc.
 Analyze complaints and take action to prevent recurrence.
 Train employees to service and work with customers in a professional manner.
 Call customers to let them know when new items have arrived.
 Have lots of convenient parking for customers to use.
 Set up an inventory control system in regards to shrinkage, performance, amount of merchandise, mark-up,
profit and turnover.
 Determine whether to price certain items below, at, or above the market.
 Government should make a policy that nobody can open a mall in the area where there are already more
than 5 shops in area nearby. Or it should establish certain zones within which the malls can operate. Malls
should be established outside the city.
 Foreign investment should come with alliances to these shopkeepers.
 There should be consolidation policy for the shopkeepers. It means instead of opening small shops, in a
particular area shopkeepers must unite and open up big showroom and divide the profit according to the
partnership.
IX. Conclusion
The Indian Retail sector operates in a unique and complex environment. Indian economy cannot deny
the positive effects of FDI and self owned business for growth. It should take lesson from the recent global
slowdown and should not forget the role of retail sector to save India from its drastic effects. The need of the
hour is to reengineer the operations of Kirana stores otherwise the big giants will leave no space for them to
grow. If the Kirana stores improve their functioning and the area of operation be specified by the government
then there will be win-win situation for both the parties.

References
[1]. Berman Barry, Evans R Joel, Retail Management: A Strategic Approach, edition 9th
, Prentice Hall.
[2]. Bajaj Chetan, Retail Management, Oxford University Press.
[3]. Annual Report 2006-2007, Ministry of agriculture, Department of Agriculture and cooperation.
[4]. ICRIER Report on Impact of Organised Retailing on the unorganised sector, May 2008.
[5]. Mattoo, A.D, Mishra, and A Narain, 2007, From competition at home to competing abroad: A case study of Indian Horticulture.
[6]. www.ibef.org/attachdisplay.aspx
[7]. www.en.Wikipedia.org/wiki/Retailing-in-india
[8]. www.slideshare.net/.../retail-scenario-india-and-global
[9]. www.indiafdiwatch.org/fileadmin/india
[10]. www.dnaindia.com/money/report-secretaries-panel-clears-51pact-fdi-in-multi-brand-reail-1568468
[11]. www.thehindu.com
[12]. www.legalindia.in/foreign-direct-investment-in-indian-retail-sector-an-analysis

Supermarkets Vs Small kirana stores

Supermarkets Vs Small kirana stores

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