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: monika18gupta@gmail.com **Professor, MM Institute of Management, MM University, Mullana-Ambala

e-mail: yashamitmittal@gmail.com

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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 Retail Segments Value 2004 Value 2005 Value 2006 Y.o.Y Growth 04-06(%) 10.7 Growth of Organized Retail: 2004-2006 Value of organized segment 2006 (Rs crore) 18,500 % Organized in 2006 18.9 Year on Year Growth 2004-06 30.3

Clothing, Textiles & Accessories (Apparel) Jewelry Watches/ Timewear Footwear Health & Beauty Care Pharma Consumer

80

88.5

98

43.5 2.8 10 2.5 30 32

47.6 3.1 10.9 2.9 33 36.4

52 3.4 11.9 3.3 36.4 41.5

9.3 10.2 9.1 14.9 10.2 13.9

1,450 1,550 4,500 350 950 4,300

2.8 45.6 37.8 10.6 2.6 10.4

30.6 18.2 34.2 52.9 31.4 31.2

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Electronics Mobile 13 15.7 18.7 19.9 1,500 8.0 Handsets/Accessorie s Furnishings, 33 34 35.1 3.1 3,200 9.1 Utensils, FurnitureHome & Office 5,000 0.8 Food & Grocery 615 628.5 642.2 2.2 Catering(F&B) 35 41.4 49.2 18.6 3,400 6.9 Books,Music & 8.2 9.8 11.5 18.4 1,450 12.6 Gifts Entertainment 25 28.7 32.8 14.5 1,350 4.1 47,500 4.6 TOTAL 930 980.5 1036 5.7 Source: Images F&R India Retail Report 2007; All values in Rs. 000 crores.

33.7

20.6

30.8 30.8 34.9 44.1 34.8

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

Electronic copy available at: http://ssrn.com/abstract=1948865

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 when 30% 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 choice driver 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

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

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 studies consumers choices of more shopping centres and more respondents. Sinha (2003) studied Shopping 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

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

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

CONCEPTUAL FRAMEWORK

Household/ Buyer Characteristics

Feedback

Shopping/ Purchasing Needs

Product and Brand Purchase

Importance of Store Attributes

In-store Information Processing

Feedback

Store Image

FF
Attitude Towards Stores

Store Choice
An Eight Step Process of Outlet Selection

Developed to describe retail store selection but applicable to other outlet types, the model illustrates the role of image in driving outlet choice
Source:Based on A Path-Analytic Explanation of Retail Patronage Influences by Kent B. Monroe and Joseph 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

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

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 Study The focus of the study shall be on Consumer perceptions towards various retail firms dealing in Food & Grocery and Clothing, Textiles and Accessories in 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

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 Education Levy, Weitz & Pandit, Retailing Management, 6th edition, 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 Equity Focus 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

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