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Impact of Modern Retail on kirana stires

The document discusses the impact of modern retail on traditional kirana stores in India, highlighting that while the organized retail sector is growing, small kirana shops face challenges but may still coexist due to consumer preferences for convenience. It presents findings from a survey of kirana store owners, suggesting that despite the growth of large retailers, there's potential for kirana shops to benefit from the overall economic growth. The report emphasizes the need for kirana stores to adapt and strategize to retain customer loyalty in the changing retail landscape.

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Impact of modern Retail on Kirana stores ACKNOWLEDGEMENT We would like to thank our College Dr. V. N. Bedekar Institute of Management Studies, Thane, for giving us an opportunity to do a seminar course project on the RETAIL INDUSTRY and to learn various aspects of retailing. We would like to extend our gratitude to our Project Guide, Asst. Prof Ms. Shobhana Panikar, whose timely help, valuable suggestions, encouragement and guidance has helped us throughout our project. We are also very thankful to our Seminar Course Coordinator, Asst. Prof Ms. Pallavi Chandwaskar, for her valuable inputs, time and motivation. We are also thankful to all the kirana shop owners, who participated in our survey, for their valuable time in providing response and being cooperative. We also want to thanks our friends and colleagues, who have directly or indirectly helped us in the compilation of our project. Lastly, we would like to thank the entire Teaching and Non teaching staff at Dr. VN BRIMS for their support and co-operation during our project. __________________ ______________ (Ms. Shobhna Panikar) (Neelam Devre) _______________ (Sandeep Singh) Dr.V.N.BRIMS PGDM (2012-14) Page 1
Impact of modern Retail on Kirana stores ABSTRACT (EXECUTIVE SUMMARY) Retailing consists of all activities involved in selling goods and services to consumers for their personal, family or household use. Sales of goods to intermediaries who resell to retailers or sales to manufacturers are not considered a retail activity. The Indian retailing industry, which was traditionally dominated by small and family-run stores, has come of age. The retail sector is the second largest employer after agriculture in the country and also the second largest untapped market after China. There are some 12 million retail outlets in India. Besides, the country is also dotted with low-cost kiosks and pushcarts. Organized retailing is only 8% of the total retail industry. Over the past couple of years there have been sweeping changes in the general retailing business. Traditional markets are transforming themselves in new formats such as Departmental stores, hypermarkets, supermarkets and specialty stores. In the last few years, as modern retail concepts begin to make an appearance across urban India, the debate on their impact on the traditional Indian retail businesses including the so-described "mom & pop" stores and the neighbourhood “kirana stores” gets shriller. Small Indian "Kirana" Shopkeepers Are Already Feeling the Heat from the Malls. The opposition to large retail shops seems to be growing, and broadening to take in domestic retail chains as well as the international giants that want to enter the Indian market. Admittedly, such opposition flies in the face of the received wisdom: studies based on extensive field surveys have concluded that the spread of organised retailing will not hurt Millions of small mom-and-pop, or kirana, stores across the country. But the experience so far (and it is early days yet) suggests that this may not be entirely true. News reports have cited instances of small shops closing down or losing business in areas where large retailers have set up shop. Analysts are still working out the odds on the kirana v/s organized retail major battle, vacillating between saying that the two sets of entities will co-exist happily, each serving different needs and predicting doom for the kirana store, who perhaps would find the pace daunting. But only as long as the Indian consumer weighs his options in favour of the kirana – paying MRP at an outlet that’s a stone’s throw away versus paying better prices,but at the cost of a longer trip to the nearest retail outlet. In any case, Dr.V.N.BRIMS PGDM (2012-14) Page 2
Impact of modern Retail on Kirana stores most of India still prefers to walk to the nearby kirana store for nearly everything! This will change if and when the biggies set up outlets in every other street, in every neighbourhood – which they will, if the numbers make sense. However, Kiranas has opportunities to grow in India in spite of the growth of malls because these kirana shops will also get benefit of the growing economy. The argument that the kirana shops will be affected by these malls is only myth. Therefore both the malls and kirana stores can play simultaneously in India. Dr.V.N.BRIMS PGDM (2012-14) Page 3
Impact of modern Retail on Kirana stores INDEX Sr.No. 1. 2. 3. 4. 5. 6. Particulars Background Of Study Importance of Study Objective of Study Methodology Research Methodology • Definition of Retail • 7. 8. 9. 10. 11. 12. 13. 14. 13. Page No. Current scenario of retail industry in India • Market size Changes in Consumer Buying Behavior Key Players How Modern retail have Impacted Kirana Stores Primary Research & Analysis Recommendations Conclusion How to win during slowdown Referencing Annexure LIST OF CHARTS USED Figure Particulars No. 1. 2. 3. 4. 5. 6. Page No. Kirana Shop size Product sold by Kirana shops No. of people working in kirana store Factors in favors of kirana store Perception of kirana towards modern retail Strategy adopted by kirana stores GENESIS OF THE PROJECT This project is based on change in business practices of Kirana stores, due to modern retailing. Since 2006, when most big retailers either entered the retail space or began expanding their network, sales in local kiranas have grown in the low single digits even less Dr.V.N.BRIMS PGDM (2012-14) Page 4
Impact of modern Retail on Kirana stores than the GDP growth rate, while modern trade has grown in strong double digits, though at a much lower base. "The Indian Shopper has discovered modern retail and is increasingly shopping there," says Nielsen's Executive Director for Retail and Shopper Practice Dipita Chakraborty. This trend is fueled by the growth in number of modern stores, she adds. Reliance Retail President Bijou Kurien attributes this to more options that big retailers offer to consumers. "In mom-and-pop stores, customer has to be very specific with what they want, but they can get more options in a modern store, and that's where we are gaining," he says. In fact, an inter-ministerial group set up by Prime Minister Manmohan Singh to suggest ways to tackle high inflation has said that organised retail will reduce the margin between the price farmers get and what consumers pay by eliminating traders, and this will bring down prices Multinationals like Wal-Mart and Carrefour, which are lobbying for entry into the big and fast-growing Indian retail market, also say big investments in cold storages will cut wastage of fruits and vegetable in the country, estimated at 130 crore every day, or about half the total production.1 While doing our Seminar Course Project, We got an opportunity to conduct a survey on how kirana Store owner are fighting against Big Retailers, A Questionnaire was designed to get feedback from the Kirana Shop Owners. The project was chosen to find out that, kirana stores view towards modern retail, which is growing at very fast pace. New strategies Kirana stores have implemented to ensure high level of customer satisfaction & loyalty. BACKGROUND OF STUDY Retail sector in India is dominated by unorganised players, and even today’s time of modern super market and Hyper market customers are buying products from kirana stores, but the frequency of purchase from kirana stores is going down day by day. Today a customer does 1 Modern retail outgrowing Kirana stores in India: Nielsen Study Sagar Malviya & Maulik Vyas, ET Bureau Jun 15, 2011, 03.18am IST Dr.V.N.BRIMS PGDM (2012-14) Page 5
Impact of modern Retail on Kirana stores not simply buys a product; they look for variety, Best quality product at lowest possible price and convenience in purchase. Organised retail out-competes traditional retail on prices, variety and quality and offers greater convenience. A article published by The Hindu on Sep 21, 2012, Prime Minister’s Economic Advisory council Chairman C Rangarajan said that when large retailers come into operation, then small retailers need to strengthen themselves. This is something that the small retailers will have to do on their own. He further said that once the share of overall modern retail in food reaches about 25 to 30 per cent, it is bound to affect the kirana traders first and then the small and marginal traders. They (small retailers) will continue to remain. In fact, the international experience shows that even in advanced countries where there are large scale department stores operating, the ‘mom and pop’ stores have not disappeared. They continue to exist.” He also suggested that These kirana stores and street hawkers can also become part of the modern retail change story if they can be assimilated into organised retail, organise themselves under their banner through franchisees, upgrade through infusion of capital, better training,”2 Another article published by The Economic Times states that ET visited popular kirana stores across Kolkata, Gurgaon, Delhi, Mumbai, Bangalore, Hyderabad and Chennai to compare their prices of day-to-day items with big retail chains in their cities. Modern retail won hands down. In branded items such as detergents, wheat flour and edible oil, modern trade prices were 420% lower than general trade, which primarily sold them on MRP. And in unbranded staples such as sugar and onions, larger stores were cheaper anywhere between 10-35% in different cities. Take the case of onion. In Bangalore, Aishwarya department store sells it for Rs 20 per kg, while Aditya Birla Retail's More on the same road charges Rs 16.90. In Chennai, Star Bazaar, a hypermarket chain run by Tata's Trent in a franchise agreement with UK's Tesco, sells onion at Rs 18.50/kg, but at Jyothi Kirana at T Nagar it costs Rs 24. The reason for this, say big retailers, is that they are able to cut through various levels of middlemen while sourcing. Also, these chains can bargain for lower prices with manufacturers because of their large purchase orders and pass on the savings to the consumer. 2 http://www.thehindu.com/business/Industry/organised-retail-outcompetes-kirana-pmeac/article3922709.ece Dr.V.N.BRIMS PGDM (2012-14) Page 6
Impact of modern Retail on Kirana stores Kishore Biyani of Future Group feels that kiranas are essential to service the breadth of Indian consumers. Analysts agree that consumers need both the formats, to always have an option to choose between the convenience of a neighbourhood store and value deals of a big retailer. They say consumers will always prefer around the-corner kiranas for low-volume purchases. "Kiranas deal with consumer goods brands in low volumes. Since these firms do not share good margins, kiranas make it up by charging the MRP without discount," says Anand Ramanathan, associate director at management consultancy KPMG. Organised retailers, however, have to make it worth the consumer's while to drive out, brave traffic and parking hassles and shopping queues. This is where their unique selling point of low prices comes in. "To draw consumers, retailers squeeze suppliers and ensure efficiency in categories that drive footfalls. They balance it out by enjoying higher margins in categories where impulse buying is high," says Ramanathan.3 While modern retailers make their purchase in bulk, and due large to quantity they can easily negotiate with their suppliers. Small retailers don’t enjoy these benefits from suppliers. 3 http://articles.economictimes.indiatimes.com/2011-12-01/news/30463099_1_kiranas-big-retail-chains-starbazaar Dr.V.N.BRIMS PGDM (2012-14) Page 7
Impact of modern Retail on Kirana stores IMPORTANCE OF STUDY This report can be referred by students to understand the impact of Modern retail on Kirana stores. Kirana store owners can also refer this report to get an idea that how modern retailers are pulling crowd for them, & most importantly, what they can do to retain their customers, Providing Service and better customer satisfaction, so that customers should not come to them only for small purchase but also for bulk purchase. In Retail, organised sector share is only 8%, where as unorganised retailing’s is near around 92% of total retail value. It’s true that most of unorganised players don’t pay Income tax to government, but government gets a large portion of its money, through unorganised retailing by indirect taxes such as sales tax, LBT etc. Unorganised retailing provides employment to a large no. of people. If unorganised retail would not have been there, our government would have faced a swear problem of unemployment. So it’s high time that govt. should come forward and take some initiative to protect unorganised retailers, from modern retailers. This report can be used govt. Organisations and other institutes to understand how Kiranas are fighting with big retailers and what steps they need to take in helping kiranas to fight with modern retailers. Dr.V.N.BRIMS PGDM (2012-14) Page 8
Impact of modern Retail on Kirana stores OBJECTIVE OF STUDY • To study the attitude of kirana stores towards modern retailers operating in their locality • To analyse the impact modern retail on the business of kirana shops • To understand how modern retail has changed customers’ attitude towards kirana shops • To identify ways in which kirana stores are competing with modern retailers Dr.V.N.BRIMS PGDM (2012-14) Page 9
Impact of modern Retail on Kirana stores APPROACH OF STUDY Given below is the manner in which we approached this study. Dr.V.N.BRIMS PGDM (2012-14) Page 10
Impact of modern Retail on Kirana stores RESEARCH METHODOLOGY We used both Primary and Secondary research for this project. I] SECONDARY RESEARCH: • For secondary research we referred to various articles published in: o Newspapers like o Reports published by different Institutes and Agencies. II] PRIMARY RESEARCH . Tools Used: • Questionnaires were used for primary data collection through Personal Interviews Sampling Method: • The sampling method chosen is Convenience Sampling (as response of only shops nearby Korum Mall was taken) Convenient sample: A statistical method of drawing representative data by selecting people because of the ease of their volunteering or selecting units because of their availability or easy access. This type of sampling are the availability and the quickness with which data can be gathered. (Source: http://www.businessdictionary.com/definition/convenience-sampling.html#ixzz2hlbfBPns) • Sample Size: 25 Kirana shop owners were interviewed for their responses • Sample Area - Shops located near Panchpakadi area as that is the area surrounding Korum Mall • Sample Unit: Kirana Shops Tools and techniques used for to represent observations and findings: • Graphical Analysis Dr.V.N.BRIMS PGDM (2012-14) Page 11
Impact of modern Retail on Kirana stores • Pivot table Dr.V.N.BRIMS PGDM (2012-14) Page 12
Impact of modern Retail on Kirana stores INTRODUCTION AND STUDY OF INDIAN RETAIL MARKET Dr.V.N.BRIMS PGDM (2012-14) Page 13
Impact of modern Retail on Kirana stores DEFINITION OF RETAIL • The term Retail is derived from French word “Retaillier” meaning to cut a piece off or to break bulk. • According to Cundiff and still, “Retailing consists of all those activities involved in selling directly to ultimate consumers”. • According to Mc. McCarthy, “Retailing is selling to final consumer products to households”. CURRENT SCENARIO OF RETAIL INDUSTRY IN INDIA The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the country GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry.4 Online retail still only accounts for a minuscule $600 million (around Rs.3,600crore), compared with India’s $518 billion brick and mortar retail industry. according to a report published by Technopak. E-commerce sector has a potential to grow to as much as $76 billion by 2021.5 Retail market is growing at an annual rate of about 20 per cent, is largely dominated by small shops and stores as of now. The organised segment is in its nascent stage and has huge potential to harness in the sub-continent. Foreign giants like Wall-mart and IKEA have recently received the Government’s nod to enter the Indian market, after making all the necessary compliances. 4 http://www.fibre2fashion.com/industry-article/free-retail-industry-article/indian-retail-industry-its-growthchallenges-and-opportunities/indian-retail-industry-its-growth-challenges-and-opportunities1.asp 5 http://www.livemint.com/Industry/JI8YmK2GistPUKQimV4f9N/Indias-ecommerce-retail-sector-faces-cashcrunch.html Dr.V.N.BRIMS PGDM (2012-14) Page 14
Impact of modern Retail on Kirana stores MARKET SIZE India’s retail market is majorly dominated by the unorganised sector. Organised segment accounts for 8 per cent of the total retail landscape, according to a study by Booz & Co and RAI. In the developed countries, the organised retail industry accounts for almost 80% of the total retail trade The Indian retail industry has expanded by 10.6 per cent between 2010 and 2012 and is expected to increase to US$ 750-850 billion by 2015, according to another report by Deloitte. Food and Grocery is the largest category within the retail sector with 60 per cent share followed by Apparel and Mobile segment.6 Luxury Retailing is gaining importance in India. This includes fragrances, gourmet retailing, accessories, and jewellery among many others. Indian consumer is ready to splurge on luxury items and is increasingly doing so. The Indian luxury market is expected to grow at a rate of 25% per annum. This will make India the 12th largest luxury retail market in the world. Rural retailing is now the focus for many retailers. It is observed that the rural regions registered saw consumption even during the economic slowdown. Rural India accounts for 2/5th of the total consumption in India. Thus, the industry players do not want to be left out and are devising strategies suited especially to the rural consumer. • The sector can be broadly divided into two segments: Value retailing, which is typically a low margin-high volume business (primarily food and groceries) and Lifestyle retailing, a high margin-low volume business (apparel, footwear, etc). The sector is further divided into various categories, depending on the types of products offered. Food dominates market consumption followed by fashion. The relatively low contribution of other categories indicates opportunity for organised retail growth in these segments, especially with India being one of the world’s youngest markets • Historically, Indians have been conservative spenders, thus food forms a huge chunk of India’s consumption needs. Transition from traditional retail to organised retailing is taking place due to changing consumer expectations, demographic mix, etc. With 6 http://www.ibef.org/industry/retail-india.aspx Dr.V.N.BRIMS PGDM (2012-14) Page 15
Impact of modern Retail on Kirana stores the revival in consumer spending, expansion plans of retailers are back in full swing. The convenience of shopping with multiplicity of choice under one roof (Shop- in Shop), and the increase of mall culture etc. are factors appreciated by the new generation. These are expected to be the growth drivers of organised retailing in India over the long run.7 7 http://www.equitymaster.com/research-it/sector-info/retail/Retailing-Sector-Analysis-Report.asp Dr.V.N.BRIMS PGDM (2012-14) Page 16
Impact of modern Retail on Kirana stores EVOLUTION OF INDIAN RETAIL Before the decade of eighties, India with hundreds of towns and cities was a nation striving for development. The evolution was being witnessed at various levels and the people of the nation were learning to play different roles as businessmen and consumers. The foundation for a strong economy were being laid, youth were beckoning new awareness in all spheres. And this brought in an opportunity for retail industry to flourish. First in the metros and major cities later to impact sub urban and rural market as well. In olden days there used to be weekly Markets and village fares from where people used to make purchase. Weekly markets and melas are, even in existence. After some time Mom? Pop kirana & continence Store came into existence. Convince stores are usually located near roads and petrol pumps and they used to charge a little higher prices. During the time of independent fight , the concept of khadi Bhandars came in existence. Cooperatives were formed to provide products at lower prices to customers. 8 http://www.equestindia.com/eq/article_3.asp Dr.V.N.BRIMS PGDM (2012-14) Page 17
Impact of modern Retail on Kirana stores Then came the concept of Hyper markets and shopping malls. Experts believe that modern Retail is going to be future of retailing. To our surprise there was not a single mall in India a 15 years back and just a few years ago only a handful of them were striving, today there are more than 50 malls across different cities and 2 years from now around 500 malls are predicted to come up.9 9 http://www.equestindia.com/eq/article_3.asp Dr.V.N.BRIMS PGDM (2012-14) Page 18
Impact of modern Retail on Kirana stores CHANGES IN CUSTOMER’S BUYING BEHAVIOR Consumer behavior in retailing is more unpredictable and volatile. Due to the change in lifestyle consumers are demanding very large selection of producers and they expect more discount. Consumer are no longer influenced by brand name but they are very cautious about quality and value. 34% consumer prefers unorganized retail shopping while 26% consumer prefers organized retail shopping but 40%consumers are still in dilemma. 37% consumers purchase daily groceries from local kirana store While 26% customer Shop from Supermarkets,21% consumers from convenience store and rest 16% customer’s prefer hypermarket. Thus, highest percentage is still with local kirana stores however the difference between supermarket and local kirana is less. 40% customer’s visit fortnightly to the malls for various different purposes, 30% customers visit weekly, 20% monthly and rest 10% daily.(ICRIER Report, 2013) • 60% customers are satisfied with the pricing strategy of the malls after considering various discounts, sales and other offers, while 40% customers are not satisfied. During the survey • It was found 64% consumer’s finds best shopping deals in malls with various discount offers, gift packages etc.28% customer’s are satisfied with the shopping deals served by the local kirana stores while 8% customers has no opinion. 32% of consumer’s declared an increase in spending, 21% indicated decrease and the balance no change. • Thus the arrival of organized retail has enhanced spending in general. The reasons indicated for higher spending have been mainly the purchase of larger quantities due to wider range of products, availability of attractive offers like discounts and promotional schemes, and access to better quality products with higher price. (Source: Indian Council for Research in International Economic Relations (ICRIER), Vol. 2, No. 3, July 2013) Dr.V.N.BRIMS PGDM (2012-14) Page 19
Impact of modern Retail on Kirana stores Unorganized retailers in the vicinity of organized retailers have been adversely affected in terms of their volume of business and profit. Unorganized retail has maintained employment levels perhaps as a result of competitive response. The major factors that attract unorganized retailers to consumers are proximity, goodwill, credit sales, bargaining, loose items, convenient timings, and home delivery There is clear evidence of a competitive response from traditional retailers who are gearing up to meet the threats from organized retailers. Consumers have generally gained with the emergence of organized outlets through the availability of better quality products, lower prices, one- stop shopping, choice of additional brands and products, family shopping, and fresh stocks. Lower income consumers have saved more from purchases at organized outlets. These results are not indicative of the countrywide scenario. For the country as whole, unorganized retail is growing at a reasonable rate and will continue to do so for many years to come. India is however a latecomer to organized retail expansion and the picture still remains unclear as to its future direction. 10 10 http://www.equestindia.com/eq/article_3.asp Dr.V.N.BRIMS PGDM (2012-14) Page 20
Impact of modern Retail on Kirana stores KEY PLAYERS x Dr.V.N.BRIMS PGDM (2012-14) Page 21
Impact of modern Retail on Kirana stores BIG BAAZAR: Future Group, led by its founder and Group CEO, Mr. Kishore Biyani, is one of India's leading business houses with multiple businesses spanning across the consumption space About Big Bazzar Hyper mart Out let Parent Group Owner Founded Head Quarter Industry Website Tag Line Chain of development store in india 104 out lets located in india Future Group Kishore Biyani(CEO) 2001 Jogeswari,Mumbai Retail WWW.bigbazar.com “Is se sastaaurachhakahinahi”. Introduction: Big bazaar is a chain of shopping malls in India. Currently, there are 214 big bazaar stores across 90 cities and towns in India. Big Bazaar offers a wide range of merchandise including fashion and apparels, food products, general merchandise, furniture, electronics, books, fast food and leisure and entertainment sections. Food Bazaar, a supermarket format was incorporated within Big Bazaar in 2002 and is now present within every Big Bazaar as well as in independent locations. local brands of popular commodities, like diapers, sugar, wheat flour garments etc, are very popular in Big Bazaar stores¬ Also, the quantity for each product is not limited to large packs only¬Big Bazaar offers the maximum variety for each category of product. Dr.V.N.BRIMS PGDM (2012-14) Page 22
Impact of modern Retail on Kirana stores Key Facts No of Stores No of Cities with presence 214 90 A total retail space covered 16 million sq.ft. Focus of Marketing Initiatives Engage the customers by adapting to local culture Focus on the lowest price guarantee in all the campaigns Key Driver of Footfall Large Product Mix Growth rate 19%-22% • Price is the main value proposition for Big Bazaar. Prices are usually 5 to 60 percent lower than the market price. • The Average Size of Big Bazaar store is 50,000 sq.ft and the Big Bazaar family centre is 80,000-120,000 sq. ft • Stocks 3,000 to 4,000 SKUs (stock-keeping units) of merchandise • Food and groceries account for 40% of Big Bazaar’s revenue, whereas fashion and apparel make up for about 30% of the overall revenue. The remaining 30% comes from the other units such as electronics. (February 23, 2013)11 11 www.bigbazar.com Dr.V.N.BRIMS PGDM (2012-14) Page 23
Impact of modern Retail on Kirana stores Product List: Target market :Big Bazar specially targets working women and homemakers′ The large and growing young working population is a preferred customer segment′ Big Bazar targets higher and upper middle class customers′TARGET MARKET Dr.V.N.BRIMS PGDM (2012-14) Page 24
Impact of modern Retail on Kirana stores Reliance Fresh: Reliance Industries Ltd is an India-based company. The company is India's largest private sector company on all major financial parameters. They are the first private sector company from India to feature in the Fortune Global 500 list of 'World's Largest Corporations' and ranks 117th amongst the world's Top 200 companies in terms of profits. The company operates world-class manufacturing facilities across the country at Allahabad, Barabanki, Dahej, Hazira, Hoshiarpur, Jamnagar, Nagothane, Nagpur, Naroda, Patalganga, Silvassa and Vadodara About Reliance Fresh a convenient store format, is governed by the MukeshAmbani and is the most important part of Reliance Industries retail Business. Reliance Ltd. has planned to invest more than Rs. 25000 crores in the retail division. It also comprises more than 560 reliance fresh stores all over the country. The outlet sells fresh fruits, staples, dairy products, fresh juice bars, groceries and vegetables. A distinctive Reliance Fresh outlet is around 3000 to 4000 sq. feet and accommodates catchment area of one to three Kilometers. History of Reliance Fresh The Reliance Retail had to face various difficulties before the launch of Reliance fresh, because of the various circumstances prevailing in Orissa, West Bengal and UP, along with the news focusing on the dearth of vegetables and fruits stocks. The retail business of Reliance then minimized its exposure in vegetable and fruit business, as a result established Reliance fresh positioning a pure super market play focusing on various categories like IT, consumer durables, home, FMCG and food. The retail company of Reliance may not supply the vegetables and fruits in a few states, the Reliance Fresh decided to not to race with local wholesalers partly because of the political reasons as well as its incapability to maintain a healthy supply chain. 1213 About Reliance Fresh Supermarket Out let Parent Group Owner Founded Chain of development store in india 784 cities and 6,000 towns in india Reliance ltd Mukesh Dhirubhai Ambani (CEO) 30Oct 2006 12 http://www.indiainfoline.com/Markets/Company/Background/Company-Profile/Reliance-IndustriesLtd/500325 13 http://ekikrat.in/Reliance-Fresh Dr.V.N.BRIMS PGDM (2012-14) Page 25
Impact of modern Retail on Kirana stores Head Quarter Industry Website Tag Line Revenue $ 19.9bilion Mumbai,India Retail WWW.rilfresh.com “Growth through value Creation”. Dmart: About Dmart Departmental store Outlets Parent Group Owner Founded Head Quarter Industry Website Tag Line Chain of development store in india 64 outlets located in india Avenue Super Marts Ltd (ASL) R K Damani 2000 Mumbai,india Retail WWW.dmartindia.com “Mehnat hamari bachat aapki” The company has over 2800 employees located across 50+ offices in the country Target group: Value conscious Upper /Lowe middle income customers. Over 12 milion outlets operation the country and only 4 of the being larger than 500 Sq (46 m2) in size 14 14 http://www.dmartindia.com/about.html Dr.V.N.BRIMS PGDM (2012-14) Page 26
Impact of modern Retail on Kirana stores More retail: Aditya Birla Retail Limited is the retail arm of Aditya Birla Group, $40 billion corporation. The Company ventured into food and grocery retail sector in 2007 with the acquisition of a south based supermarket chain. Subsequently, Aditya Birla Retail Ltd. expanded its presence across the country Under the brand “more”. With 2 formats supermarket and hypermarket About More Supermarket ,Hypermarket Chain of development store Country 509 supermarkets and 15 hypermarkets across the Outlets country Mr. Kumar Mangalam Birla Owner Founded Parent companey Head Quarter Industry Website Tag Line Employee 2007 Aditya Birla group Mumbai,india Retail WWW.morestore.com “Hamesha Extra” Over 11,000 Supermarket: more. - Conveniently located in neighbourhoods, more. supermarkets cater to the daily, weekly and monthly shopping needs of consumers. The product offerings include a wide range of fresh fruits & vegetables, groceries, personal care, home care, general merchandise and a basic range of apparels. Currently, there are over 512 more. supermarkets across the country. Hypermarket: more.MEGASTORE - is a one-stop shopping destination for the entire family. Besides a large range of products across fruits & vegetables, groceries, FMCG products, more. MEGASTORE also has a strong emphasis on general merchandise, apparels & CDIT. Currently, sixteen hypermarkets operate under the brand more.MEGASTORE in Mysore, Vadodara, Indore, Mahadevpura, Old Madras Road, Marathalli, Bull Temple Road & 4th Block Jayangar in Bengaluru, Thane, Saroor Nagar, Kukatpally & Banjara Hills in Hyderabad, Rohini & Kirti Nagar in New Delhi & Nashik. Own label food brands more feasters,kitchen’s and best of Indian home & personal care brands more,Enrich, 110% pestex paradise and Germe. Vision & Values Dr.V.N.BRIMS PGDM (2012-14) Page 27
Impact of modern Retail on Kirana stores Vision : "To consistently provide the Indian consumer complete and differentiated shopping experiences and be amongst India's Top retailers, while delivering superior returns to all stakeholders". Values: • Integrity • Commitment • Passion • Seamlessness • Speed 15 15 http://www.morestore.com/abt_retail.html Dr.V.N.BRIMS PGDM (2012-14) Page 28
Impact of modern Retail on Kirana stores HOW MODERN RETAILERS HAVE IMPACTED KIRANA STORES Modern retailers offer customers quality products at 6 to 20% prices lower as compare to traditional retailers because modern retailers eliminate many layer of intermediary and since their purchase quantity is big so they are in better position to negotiate with their suppliers. Apart from lower prices also offers large choices and better merchandising of products. Today customers don’t simply just shop they also think about shopping experience thats where modern retailers win the race. They usually operate in specious shops where products are segregated as per their category so customers can easily pick up the products they want. Whereas traditional retailers operate in small shops. 16 16 http://articles.economictimes.indiatimes.com/2011-12-01/news/30463099_1_kiranas-big-retail-chains-star- bazaar Dr.V.N.BRIMS PGDM (2012-14) Page 29
Impact of modern Retail on Kirana stores FINDINGS FROM PRIMARY RESEARCH Dr.V.N.BRIMS PGDM (2012-14) Page 30
Impact of modern Retail on Kirana stores PRIMARY RESEARCH size of the shop Area in Sq.ft 150 200 250 300 350 Above 350 No of Respondent 7 7 4 2 3 2 Figure 1 . What is the size of your shop? (In sq.ft.) Interpretation: The majority of the kirana shop said that they operate in the area of 150 to 200 sq.ft and we observed that most of the kirana shops were attached to owners home and only 8% of kirana shops operate in the area above 350 sq.ft so we can say that most of the kirana shops still operate in smaller area. Dr.V.N.BRIMS PGDM (2012-14) Page 31
Impact of modern Retail on Kirana stores Q-2: Which products do you sell in your shop? Prodct Category Grocery Dairy Confectionery Food Products Cosmetics Home Care Personal Care Stationery Any other (Please mention) No of respondent 25 21 21 21 9 22 24 7 0 Figure 2. Product sold by kirana store Interpretation: All retailers that they sell Grocery products and personal care products and almost all retailers sell dairy, Confectionery, food product and we also observed that many retailers sell other products like Vegetables, Recharge coupons and some other products. We can say most of the Kirana retailers sell all the products that are sold by modern retailers, But stationery and cosmetics are two product categories, where kirana shops can improve to attract more customers. Dr.V.N.BRIMS PGDM (2012-14) Page 32
Impact of modern Retail on Kirana stores Q3- No. people of working in store including People working No in Shop Up to 2 less than 5 more than 5 of respondent 16 7 2 Figure 3. No of people working in kirana store Interpretation: Most of the kirana shops are operated by the owner of the shop because most of the kirana shops operate in small area. And those who have more than 200 sq.ft .They have more than 2 people work in the shop. Only 2 shops had more than 5 people working in shop. Dr.V.N.BRIMS PGDM (2012-14) Page 33
Impact of modern Retail on Kirana stores Q-4: Why do you think customers come to your shop? Please rate the following factors on a scale of 1 to 5 as per their importance. (1 being least important & 5 being most important). Store Emergency Discounts Customer Home Product Timing Factors Not at Credit Facility Purchase & Offers Relationship Delivery Range Service all Important 0 Low Importance 1 Neither important 0 7 0 1 0 9 0 0 0 3 0 4 nor unimportant Very Important Extremely 10 18 12 18 8 18 10 0 12 18 16 6 8 12 Important Total 48 77 4 41 44 71 0 19 52 82 8 33 12 36 Figure 4. Factors in favor of kirana store Interpretation: The most important factor for pulling customers towards kirana is store timing, because Big retailers normally operate between 10.00 am to 10.00 pm, and Kirana shops operate from 7.00 am to 11.00 pm, when consumer requires any product in morning or after 10.00 pm ,they have come to kirana shop because it opened at 7.30 am. Store timing, Emergency purchase, and customer relationship these factors are extremely important. Discount and offers, home Delivery and product range these factors does not plays an important role in bringing customers to shop. And also for the dairy product people prefer to buy from kirana shops because they purchase dairy products like milk on regular basis. Dr.V.N.BRIMS PGDM (2012-14) Page 34
Impact of modern Retail on Kirana stores The most important factor is Customer relationship which attracts customer toward kirana store. Dr.V.N.BRIMS PGDM (2012-14) Page 35
Impact of modern Retail on Kirana stores Q-5: Do you feel insecure due big retailers opening their shops in your locality? Option Yes No No of Respondents 17 8 Figure 5.No of Kirana store feel insecure due to big retailers. Interpretation: The 68% retailers feel insecure due to big retailers opened in their locality. and 32 % retailers told that they don’t feel insecure because they thought that for small purchase, customer will not go in organized retail they will go to small shops, which are located at a stone throw distance from their home. Dr.V.N.BRIMS PGDM (2012-14) Page 36
Impact of modern Retail on Kirana stores Reasons for Kirana Retailers feeling Insecure: • Discounts & offers • Lower prices • Packaged food • More convenient shopping • wide Choice • More product range Reasons for Not n ot feeling insecure: • For small or Daily purchase consumer will come to retailers. • For dairy, food products they buy from kirana store. • Convenience • Some retailers feel that prices in modern shops are higher as compare to traditional retail. • Some Retailers said that middle class people always go to kirana shops. Dr.V.N.BRIMS PGDM (2012-14) Page 37
Impact of modern Retail on Kirana stores Q-6: What are the new strategies that you have adopted to face competition from big and modern retailers? Adopted Strategy Store Renovation Increasing Product range More Discount Home Discount Improved Display Customer Relationship Credit Facility Improved packaging Not adopted any strategy No of respondents 10 8 6 5 6 10 5 8 10 Figure 5 Strategy adopted by Kirana store to face competition. Interpretation: 68% retailers told they adopted strategy like store renovation, customer relationship. and also they started to provide home delivery and also they change packaging style. and 40% retailers said that they haven’t adopted any strategy to fight with modern retailers. Dr.V.N.BRIMS PGDM (2012-14) Page 38
Impact of modern Retail on Kirana stores RECOMMENDATION During our primary research, we observed that most of kirana shop owners are not taking much efforts to attract customers, they feel that customers will come to them just only because their shop is located nearby customer home, when ever customers wants to make a small purchase they will go to kirana shops. Kirana shop owners feel that they can’t do much to fight with modern retailers. Kirana shop owners can attract more customers by increasing their product range, they reduce their margin and offer products at lower prices, offering credit facility in only area, where kirana stores have edge over modern retailers, and kirana stores can also offer better packaging and display of products. Since kirana stores have less no. of customers they are in a better position to maintain relationship with customers. Kirana store can also organize themselves by forming some association or franchise system. Under this system all retailers will come together, that will in better position to negotiate with wholesalers and manufacturers. Small store owners can upgrade their shops to emulate practices of large retail chains, thus they can become more profitable than their bigger counterparts, who continue to cut costs, consolidate and review operations on the back of poor consumer sentiment in a sluggish economy. “Local retailers are growing profitably much faster than large retailers,” said the India Retail Report 2013, which was released on Wednesday. The Report also mentions that about 57,000 local retailers in the country resorted to modern retail practices in the past two years. There are some kirana stores who have adopted modern retail look and they can also help other retailers to upgrade their stores to follow modern retail look and practices. For ExSarvodaya Super Market—a 40-year-old 2,500 sq. ft food and groceries store in Dadar West, Mumbai has helped close to 60 other traditional retailers in Gujarat, Uttar Pradesh and Maharashtra to upgrade their stores to follow modern retail look and practices. “We are seeing more and smaller store owners interested in converting their traditional stores to modern retail. The other area where kirana shops can improve in Inventory, they need to manage inventory more efficiently. Dr.V.N.BRIMS PGDM (2012-14) Page 39
Impact of modern Retail on Kirana stores CONCLUSION Both the formats of retail kirana and modern are essential to fulfil customer needs. Modern retail will see tremendous growth in future but they wont be able to replace kirana store. Even today middle class people prefer to make purchase from kirana stores. Even the customers who don’t grocery and other products on a monthly basis prefer to buy from kirana stores. Given the time of recession modern retailers are putting their expansion plan on hold. The growth of modern retail will hurt the profits of kirana stores but kirana store owners will able to make their bread and butter due to increasing population. The entry of foreign players in Indian market will make their job more difficult. But customer relationship and store timing will help them to retain customers even during the time of slowdown. Factors that are playing a role in fuelling the bright future of the Indian Retail are as follows: • The income of an average Indian is increasing and thus there is a proportional increase in the purchasing power. • The infrastructure is improving greatly in all regions is benefiting the market. • Indian economy and its policies are also becoming more and more liberal making way for a wide range of companies to enter Indian market. • Indian population has learnt to become a good consumer and all national and international brands are benefiting with this new awareness. • Another great factor is the internet revolution, which is allowing foreign brands to understand Indian consumers and influence them before entering the market. Due to the reach of media in the remotest of the markets, consumers are now aware of the global products and it helps brands to build themselves faster in a new region However despite these factors contributing to the growth of Indian retail Industry, there are a few challenges that the industry faces which need to be dealt with in order to realize the complete scope of growth in Indian market. Foreign direct investment is not allowed in retail sector, which can be a concern for many brands. But Franchise agreements circumvent this problem. Along with this regulations and local laws and real estate purchase restrictions bring up challenges. Other than this lack of integrated supply chain and management and lack of trained workforce and flux of the market in terms of price and product choice also need to be eliminated. Dr.V.N.BRIMS PGDM (2012-14) Page 40
Impact of modern Retail on Kirana stores Despite these challenges many international brands are thriving in the Indian market by finding solutions around these challenges. A company that plans to enter Indian market at this time can definitely look forward to great business if it analyzes and puts efforts on all parameters. Dr.V.N.BRIMS PGDM (2012-14) Page 41
Impact of modern Retail on Kirana stores WINNING STRATEGY FOR MODERN RETAILERS Modern retailers can rebuild their assortment strategy and that has seen better traction from consumers. They can increase the share of fashion category in store to drive margins. We also believe that constant store renovations will help them to increase stores productivity. The retailers can also restructure the store format and make effective utilization of space. "To fight with recession and earn profit in retail business, large retailers have to revamp their smaller formats with a mix of merchandise similar to that offered by kirana and differentiated ones like those offered by global convenience stores. in order to cut the cost of real estate. Modern retails can also promote private labels in food category, since private labels gives more margins to retailers. Retailers can offer can provide more attractive offer to attract offer. Dr.V.N.BRIMS PGDM (2012-14) Page 42
Impact of modern Retail on Kirana stores ANNEXTURE Questionnaire I______, a student of Dr.V.N. Bedekar Institute of Management Studies, Thane, is conducting a survey on Kirana shops. Could you please spare five minutes to answer a few questions. (TO BE FILLED BY ONLY OWNER/PARTNER OF SHOP) Instruction: Please circle the correct selected by respondent. Date:__________ Name of respondent: ____________________________________________________ Name of the shop:___________________________________________________ Address of the shop:___________________________________________________ Contact details (optional):______________________________________________ Q-1: What is the size of your shop? (In sq.ft.) Q-2: Which products do you sell in your shop? 1. 150 1. Grocery 2. 200 2. Dairy 3. 250 3. 4. 300 4. Food Products 5. 350 5. 6. Above 350 6. Home Care 7. Confectionery Cosmetics Personal Care 8. Stationery 9. Any other (Please mention) ________________________ Q3- How many people are working in your store? 1. Up to 2 2. less than 5 3. more than 5 Dr.V.N.BRIMS PGDM (2012-14) Page 43
Impact of modern Retail on Kirana stores Q-4: Why do you think customers come to your shop? Please rate the following factors on a scale of 1 to 5 as per their importance. (1 being least important & 5 being most important). Factor 1 2 3 4 5 (Not at all (Low (Neither important (Very (Extremely Important) Importance) nor unimportant) Important) Important) A-Store Timing B-Credit Facility C-Emergency Purchase D-Discounts & Offers E-Customer Relationship F-Home Delivery Service G – Product Range Q-5: Do you feel insecure due big retailers opening their shops in your locality? (a):YES - If yes then why? __________________________________________________________________________________ (b): NO - If no, then why? __________________________________________________________________________________ _________________________________________________________________________________ Q-6: What are the new strategies that you have adopted to face competition from big and modern retailers? 1. Store Renovation 2. Increasing product range 3. More Discounts 4. Home Delivery 5. Improved Display 6. Customer Relationship 1. Credit Facility 2. Improved Packaging Dr.V.N.BRIMS PGDM (2012-14) Page 44
Impact of modern Retail on Kirana stores 9. Not adopted any strategy Thank You. ( Please thank respondent and terminate interview) Dr.V.N.BRIMS PGDM (2012-14) Page 45