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Table of Content

Acknowledgement …………………………………………………..……2



An introduction………………………………………………………………5

The global retail industry…………………………………………………...6

Retail scenario in India……………………………………………………..8

Different forms of retailing ………………………………………………..15

Classification of Indian retail sector……………………………………….21

FDI in retail…………………………………………………………………..23

Indian middle class people…………………………………………………25

Opportunity challenges and emerging trends…………………………….27

Retail as an employment generator……………………………………….38

Objective of the survey……………………………………………………..39

Research methodology…………………………………………………….40






Total no of Tables------7
Total no of Figure------10

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 1


O n the completion of the dissertation report, I owe a great deal too many
people at the very outset; I would like to express my profound sense of
gratitude to Mr. Manoj Dash, Professor Of Institute of Technology & Science,
Ghaziabad. For providing me opportunity and valuable time he gave me during
my Dissertation from his busy schedule. I do acknowledge courtesy during my
stay there.
I would like to pay my special thanks to Prof. Shekhar Ghose. He had
contributed to this being a much better project that it couldn’t possibly have been
without his guidance.
I express my sincere thanks to all the respondents who filled up the
questionnaire because of only them this report has been made possible.
With a deep sense of reverence I would like to express my wholehearted thanks
and deep gratitude to my parents who have always been a source of inspiration
of mine. Their everlasting cooperation and smiling affection inspired me to rise up
to what I am today.
So many others who have been associated with this work directly or indirectly, all
have many sincere thanks.
The greatest achievement of the project was the realization of the fact that
Mukesh Kumar
PGDM (2006-2008)

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 2


P rogress is a continuous process. It is relative and absolute. We cannot stop

at a certain destination and declare that target has been achieved and we
need not go further.

The Dissertation programs are designed to give managers the future of the
corporate happenings and work culture. These real life situations are entirely
different from the stimulated exercises enacted in an artificial environment inside
the Dissertation are designed, so that the managers of tomorrow do not feel ill
case when the times comes to shoulders responsibilities.

The experience that I have gathered during this period has certainly provide me
with an orientation which I believe will help me to shoulder my assignment
successfully in near future. During this period I have collected all the information
regarding organized retail industry, their effect on the Preference of middle class
for purchase of daily need items.
On the basis of my Dissertation program, I tried my best to arrange the work in
the systematic and chronological way. However the cover every detailed
information of organized retail industry in such a short period was not possible.
Despite the inherent shortcomings of the study, a genuine was made on my part
to see that study was carried in the right respective.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 3


T he Indian retail industry is now beginning to evolve in the line with the
transformation that has swept other large economies. The liberalization of
the consumer goods industry initiated in the mid-80 and accelerated through the
90’s has begun to impact the structure and conduct of the retail industry.

The concept retail which includes the shopkeeper to customer interaction, has
taken many forms and dimensions, from the traditional retail outlet and street
local market shops to upscale multi brand outlets, especially stores or
departmental stores.
The objective being to assess the various parameters that influences a buyer to
visit or shop at departmental store thereby contributing to its turnover (in terms of
sales and profits) hence leading to its overall success.
The extensive research brought me to conclude that departmental stores are
soon emerging on the top priority lists, amongst the shopping spree in Delhi and
NCR, as they seem to derive immense pleasure of convenience and exposure to
variety under one roof, in their extremely busy lives, when they don’t have time
for things.
Though some of the customers perceive departmental stores to be expensive
and only high income category’s cup of tea, the stores make constant efforts to
induce them to at least visit the store at once during the sale period, or discount
Hence this document entails me through these aspects in great detail, helping
me to understand the concept of retail marketing through departmental stores in

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 4


R etail comes from the French word retailer which refers to "cutting off, clip
and divide" in terms of tailoring (1365). It first was recorded as a noun with
the meaning of a "sale in small quantities" in 1433 (French). Its literal meaning for
retail was to "cut off, shred, paring". Like the French, the word retail in both Dutch
and German (detail Handel and Einze handle respectively) also refer to sale of
small quantities or items.

Retailing consists of the sale of goods or merchandise, from a fixed location such
as a department store or kiosk, in small or individual lots for direct consumption
by the purchaser. Retailing may include subordinated services, such as delivery.
Purchasers may be individuals or businesses. In commerce, a retailer buys
goods or products in large quantities from manufacturers or importers, either
directly or through a wholesaler, and then sells smaller quantities to the end-user.
Retail establishments are often called shops or stores. Retailers are at the end of
the supply chain. Manufacturing marketers see the process of retailing as a
necessary part of their overall distribution strategies.
Shops may be on residential streets, or in shopping streets with few or no
houses, or in a shopping center or mall. Shopping streets may or may not be for
pedestrians only. Sometimes a shopping street has a partial or full roof to protect
customers from precipitation. Retailers often provided boardwalks in front of their
stores to protect customers from the mud. Online retailing, also known as e-
commerce is the latest form of non-shop retailing (cf. mail order).
Shopping generally refers to the act of buying products. Sometimes this is done
to obtain necessities such as food and clothing; sometimes it is done as a
recreational activity. Recreational shopping often involves window shopping (just
looking, not buying) and browsing and does not always result in a purchase.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 5

Organized retailing in India is alluring all the big players (corporate houses). India

has approximately 300 million middle class people and this group is growing

rapidly. One of the important reasons for rapid growing of organized retail in India

is malls. There are malls manias in Indian market. Each & every real estate

developers are constructing world class malls in India. Malls in India are a

relatively new format for retailing. While this format may have existed in the

Western economies for several decades, in India this phenomenon could be

estimated to be only about fifteen odd years old.

One of the earliest large floor-area retailers in India was "Shopper's Stop".

However, the first of the current format of the malls was the Crossroads mall in

Mumbai, which was established by the Primal in period around 2000-01.

Crossroads then had the highest rent per sq. meter of establishment that the

vendors had to bear. Due to the exorbitant rent, Crossroads initially had a rough

ride. Also, the mall format was new, and was a novelty for most Indian

consumers. This led several visitors to the mall, but never converted to actual

purchases, since most were visiting the place out of curiosity.

However, the situation had changed drastically now. Malls seem to be springing

up across several cities in India. Notable among these is Gurgaon, an upcoming

city near Delhi.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 6

The Global Retail Industry

An Overview

R etail has played a major role world over in increasing productivity across a
wide range of consumer goods and services .The impact can be best
seen in countries like U.S.A., U.K., Mexico, Thailand and more recently China.
Economies of countries like Singapore, Malaysia, Hong Kong, Sri Lanka and
Dubai are also heavily assisted by the retail sector.

Retail is the second-largest industry in the United States both in number of

establishments and number of employees. It is also one of the largest worlds
wide. The retail industry employs more than 22 million Americans and generates
more than $3 trillion in retail sale annually. Retailing is a U.S. $7 trillion sector.

Wal-Mart is the world’s largest retailer. Already the world’s largest employer with
over 1million associates, Wal-Mart displaced oil giant Exxon Mobil as the world’s
largest company when it posted $219 billion in sales for fiscal 2001. Wal-Mart
has become the most successful retail brand in the world due its ability to
leverage size, market clout, and efficiency to create market dominance. Wal-Mart
heads Fortune magazine list of top 500 companies in the world. Forbes Annual
List of Billionaires has the largest number (45/497) from the retail business.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 7

Global Retail

1999 2002 2005

Total Retail (US$ 150 180 225

Organized Retail 1.1 3.3 7

(US$ Billion)

% Share of 0.7 1.8 3.2

Organized retail

Table no. -1 Source: CSO, MGI Study

Top Retailers Worldwide

Rank Retailer Home Country

1 Wal-Mart Stores, Inc. U.S.A.

2 Carrefour Group France

3 The Kroger Co. U.S.A.

4 The Home Depot, Inc. U.S.A.

5 Metro Germany

Table no. -2 (Source: STORES / Deloitte Touche


Retail Scenario in India:

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 8

A s the corporate – 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 hypermarts.
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
Euromonitor International, a leading provider of global consumer-market
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

basic necessities, especially food-related items. Hence, it is not surprising that
food, beverages and tobacco accounted for as much as 71% of retail sales in
2002. The 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,

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 9

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
The factors responsible for the development of the retail sector in India can be
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% by 2006-07.

• Liberalization of the Indian economy which has led to the opening up of the
market for consumer goods has helped the MNC brands like Kellogg, 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,


• 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 10

waves of globalization, the retail sector is bound to take big leaps in the years to
• Retailers direct procure the products & services in bulk through manufacturers,
so they eliminate the middleman and save the cost. They offer the product &
services on the discount prices or on a wholesaler rate to the consumer.

Country Malaysia Thailan Philippine Indonesia South China Indi

d s Korea a

Organize 55% 50% 35% 30% 15% 20% 3%


Tradition 45% 50% 65% 70% 85% 80% 97%


Table no. -3

The Indian retail sector is estimated to have a market size of about $ 180 billion;
but the organized sector represents only 3% share of this market. Most of the
organized 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. Organized retailing in India has a
huge scope because of the whole urban and rural 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

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 11

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. According to the estimates available with Fitch, close to 25mn sq. ft. of
retail space is being developed and will be available for occupation over the next
36-48 months. Fitch expects organized retail to capture 15%-20% market share
by 2010. A McKinsey report on India says organized retailing would increase the
efficiency and productivity of entire gamut of economic activities, and would help
in achieving higher GDP growth. At 6%, the share of employment of retail in India
is low, even when compared to Brazil (14%), and Poland (12%).

The Organized Retail Pie of Daily need items:

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 12

The Organised Retail Pie
Beauty Products

Books, Music &
3% Gifts

7% Home Decore

Jewellery &
40% watches

Food & Grocery

Cloathing, Textiles
& Fashion

(Business Today December 31.2006)Category wise share in organized retail Source CII
Kearney Report

Figure no.-1

Fact and Figures:

• Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles), the country sorely lacks anything that can resemble a
retailing industry in the modern sense of the term. This presents international
retailing specialists with a great opportunity.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 13

• It was only in the year 2000 that the global management consultancy put
a figure that: Rs. 400,000 crore (1 crore = 10 million) which will increase more
than Rs. 800,000 crore by the year 2007 – an annual increase of 20 per cent. .

• As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area. This means that India per capita retailing space is about 2
square feet (compared to 16 square feet in the United States). India's per capita
retailing space is thus the lowest in the world (source: KSA Technopak (I) Pvt
Ltd, the India operation of the US-based Kurt Salmon Associates).

• Just over 8 per cent of India's population is engaged in retailing

(compared to 20 per cent in the United States). There is no data on this sector's
contribution to the GDP.

• From a size of only Rs.20, 000 crore, the organized retail industry will
grow more than Rs. 160,000 crore by 2007. The TOTAL retail market, however,
as indicated above will grow 20 per cent annually from Rs. 400,000 crore in
2000 to Rs. 800,000 crore by 2005.

• Given the size, and the geographical, cultural and socio-economic

diversity of India, there is no role model for Indian suppliers and retailers to
adapt or expand in the Indian context.

• The first challenge facing the organized retail industry in India is:
competition from the unorganized sector. Traditional retailing has established in
India for some centuries. It is a low cost structure, mostly owner-operated, has
negligible real estate and labor costs and little or no taxes to pay. Consumer
familiarity that runs from generation to generation is one big advantage for the
traditional retailing sector.

• In contrast, players in the organized sector have big expenses to meet,

and yet have to keep prices low enough to be able to compete with the
traditional sector. High costs for the organized sector arises from: higher labor

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 14

costs, social security to employees, high quality real estate, much bigger
premises, comfort facilities such as air-conditioning, back-up power supply,
taxes etc. Organized retailing also has to cope with the middle class psychology
that the bigger and brighter sales outlet is, the more expensive it will be.

• The above should not be seen as a gloomy foreboding from global retail
operators. International retail majors such as Benetton, Dairy Farm and Levis
have already entered the market. Lifestyles in India are changing and the
concept of "value for money" is picking up.

• India's first true shopping mall – complete with food courts, recreation
facilities and large car parking space – was inaugurated as early as in 1999 in
Mumbai. (This mall is called "Crossroads").

• Local companies and local-foreign joint ventures are expected to more

advantageously position than the purely foreign ones in the fledgling organized
India's retailing industry. The foreign Retail players has knowledge &
experience about Retail ,at the same, local players has knowledge about Indian
culture &society setup.

• These drawbacks present opportunity to international and/or

professionally managed Indian corporations to pioneer a modern retailing
industry in India and benefit from it.

• The prospects are very encouraging. The first steps towards

sophisticated retailing are being taken, and "Crossroads" is the best example of
this awakening. More such malls have been planned in the according to that
retail industry is one of other big cities of India.

• An FDI Confidence Index survey done the most attractive sectors for FDI
(foreign direct investment) in India and foreign retail chains would make an
impact circa 2003.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 15

•Indian organized retail is new and in the experimental stage so the
players should be deeper pocket to absorb the sock of loss in retail

Different Forms of Retailing:

1. Store Retailing

2. Non store Retailing

3. Other popular format

Store Retailing

1. Popular Formats in store retailing

• Hypermarts
• Large supermarkets, typically (3,500 - 5,000 sq. ft)
• Mini supermarkets, typically (1,000 - 2,000 sq. ft)
• Convenience store, typically (7,50 - 1,000 sq. ft)
• Discount/shopping list grocer
• Traditional retailers trying to reinvent by introducing self-service formats as
well as value-added services such as credit, free home delivery etc.

Format Description The Value Proposition

Exclusive showrooms either Complete range available
Branded Stores owned or franchised out by for a given brand, Certified
a manufacturer. product quality.
Focus on a specific Greater choice to the

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 16

Specialty Stores consumer need; carry most consumer, comparison
of the brands available. between brands possible
Large stores having a wide One stop shop catering to
variety of products, varied consumer needs.
Department Stores organized into different
departments, such as
clothing, house wares,
furniture, appliances, toys,
Extremely large self- One stop shop
Supermarkets services retail outlets. catering to varied consumer
Stores offering discounts on Low prices.
the retail price through
Discount Stores selling high volumes and
reaping the economies of
Larger than a Supermarket, Low prices, vast choice
sometimes with a available including services
warehouse appearance, as cafeterias
generally located in quieter
parts of the city
Small self-service formats Convenient location and
Convenience Stores located in crowded urban extended operating hours.
An enclosure having Variety of shops available
Shopping Malls different formats of in-store close to each other.
retailers, all under one roof.
Source: India info line Table no.-4

2. Non-store Retailing:

It is another type of retail Business. Different types of non-store retailing are

given below:

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 17

• Direct Selling

Direct selling which started centuries ago with itinerant peddlers has burgeoned
into a $9 billion industry, with over 600 companies selling door to door, office to
office, or at home sales parties. A variant of direct selling is called multilevel
Business, whereby companies such as Amway recruit independent
businesspeople who act as distributors for their products, who in turn recruit and
sell to sub distributors, who eventually recruit others to sell their products, usually
in customer homes.

• Direct Business

Direct Business has its roots in mail-order Business but today includes reaching
people in other ways than visiting their homes or offices, including tale Business,
television direct response Business, and electronic shopping.

• Automatic Vending

Automatic vending has been applied to a considerable variety of merchandise,

including impulse goods with high convenience value (cigarettes, soft drinks,
candy, newspaper, hot beverages) and other products (hosiery, cosmetics, food
snacks, hot soups and food, paperbacks, record albums, film, T-shirts, insurance
policies, and even fishing worms).

3. Some other popular formats:

Region specific formats: With organized retail penetrating in to class II towns,

retailers have started differentiating and experimenting with store sizes and
formats. For example, in departmental store format, while most class cities and

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 18

metros have large stores of 50,000+ square foot in size, stores in Class II towns
have stabilized in the 25,000-35,000 square foot range.

Development of discount formats: Large discounts formats, or hypermarkets,

aiming at retail consolidation by providing a single point of contact between
brand-owners and customers, are now emerging as major competitors to both
unorganized and organized retailers. Penetration of organized retailing in to the
lower income brackets and consumers demand for increased value-for-money
has improved the prospects of these formats. Big Bazaar, Promoted by
Pantaloon, and Giant, promoted by RPG group, provide two examples of this

Convenience stores at gas Station: India is now showing signs of aligning with
global trend in petro-retailing with increasing sales coming from non-fuel related
products. With deregulation, private players entering this sector force existing
petro-retailers to review their business models. Dealer and company owned
convenience stores at service station are on the rise. State run oil giants have
entered into joint venture with FMCG companies and food retailers to sell food
and groceries select markets.

Retail Revolution

Name N0.Of stores Formats Details

Pantaloon 100 Multiple Has aggressive growth plans

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 19

Format in the retail sector, plans to
reach a monthly run rate of
Rs 2500 crore by June 2010

Reliance 70 Multiple Reliance retail has an

Format ambitious roll out of 1575

stores by 2007. It plans to
have ware house-style store
spread over 150,000 sq ft
storesbin a super market

Shoppers’ 20 Deptt./ One of the earliest in the

stop Hypermarket / retail market, Shopper’s Stop

Books plans to expand retail space

to 2.5 mn sq ft by FY08,
From the Current 950,700 sq

Raymond 321 Specialty A manufacturer-retailer.

Stores Raymond also has an

overseas network of around
25 shops

RPG Retail 250 Hypermarkets The group is planning an

expansion of its Spencer
supermarket and
hypermarket stores and
Music World stores. Retail
space of 4 mn sq ft &550
stores by 2008

Bharti Group NA Multiple With joint venture with global

Format major Wal-Mart, the group is

expected to have an

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 20

estimated 6 million retail
surface by 2008

Gloubes 28 Deptt / Will add 6 west side Stores,

Hypermarket / 5 Landmark book stores and
Books 1 hypermarket. Space under
retail will expend to 1.25mn
sq feet in FY 07 from the
current 900,000 sq ft. income
from operations in 06 was
RS365 crore and growth rate
during HY 07 was 40%

Trent 100 Multiple Has aggressive growth plans

Format in the retail sector, plans to

reacha monthly run rate of
RS 2500 crore by June 2010.

Aditya Birla NA NA The largest corporate group

Group to jump into the fray. Has

some experience in retail
business of Madura
Garments. The format is not
known but their hiring plans
indicate a presence in all
categories from apparel, food
to furniture. The group wild
pump in Rs 5,000 cr to 6,000
cr in the initial phase.
Table no.-5 The Economic Times, 29 Nov. 2006

Classification of Indian retail sector:

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 21

• Food Retailers

There are large number and variety of retailers in the food-retailing sector.
Traditional types of retailers, who operate small single-outlet businesses mainly
using family labor, dominate this sector .In comparison, super markets account
for a small proportion of food sales in India. However the growth rate of super
market sales has being significant in recent years because greater numbers of
higher income Indians prefer to shop at super markets due to higher standards of
hygiene and attractive ambience.

• Health & Beauty Products

With growth in income levels, Indians have started spending more on health and
beauty products .Here also small, single-outlet retailers dominate the market
.However in recent years, a few retail chains specializing in these products have
come into the market. Although these retail chains account for only a small share
of the total market , their business is expected to grow significantly in the future
due to the growing quality consciousness of buyers for these products.

• Clothing & Footwear

Numerous clothing and footwear shops in shopping centers and markets operate
all over India. Traditional outlets stock a limited range of cheap and popular
items; in contrast, modern clothing and footwear stores have modern products
and attractive displays to lure customers. However, with rapid urbanization, and
changing patterns of consumer tastes and preferences, it is unlikely that the
traditional outlets will survive the test of time.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 22

• Home Furniture & Household Goods

Small retailers again dominate this sector. Despite the large size of this market,
very few large and modern retailers have established specialized stores for these
products. However there is considerable potential for the entry or expansion of
specialized retail chains in the country.

• Durable Goods

The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period. A greater variety of consumer
electronic items and household appliances became available to the Indian
customer. Intense competition among companies to sell their brands provided a
strong impetus to the growth for retailers doing business in this sector.

• Leisure & Personal Goods

Increasing household incomes due to better economic opportunities have

encouraged consumer expenditure on leisure and personal goods in the country.
There are specialized retailers for each category of products (books, music
products, etc.) in this sector. Another prominent feature of this sector is popularity
of franchising agreements between established manufacturers and retailers.

FDI in retail

G overnment has relaxed regulatory controls on foreign direct investment

(FDI) considerably in recent years, while retailing currently remains

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 23

closed to FDI. However, the Indian government has indicated in 2005 that
liberalization of direct investment in retailing is under active consideration. It has
allowed 51% FDI in "single brand" retail.
The next cycle of change in Indian consumer markets will be the arrival of foreign
players in consumer retailing. Indian companies know Indian markets better, but
foreign players will come in and challenge the locals by sheer cash power, the
power to drive down prices. That will be the coming struggle.

India can become a giant in a short time span in food processing and textiles, for
which we have the potential because Indian agricultural production is the lowest
cost in the world, and textile labor is the cheapest internationally.

Allowing FDI in retail trade, especially in groceries and garments marketing, is

one sure way of doing it. Food processing and textiles will grow very substantially
from the linkage effects of a modernized; globalize retail trade that only FDI can
ensure. The employment generation for Indian youth would also be enormous.

Indian retail trade is of enormous size ($180 billion), nearly 10 per cent of GDP,
employing 21 million persons, which is about 7 per cent of the labor force. It is six
times bigger than Thailand and five times larger than South Korea and Taiwan.
China's retail trade is 8 per cent of GDP and 6 per cent of employment.

But the trade in India is fragmented, unorganized, networked, and individually

small. The 12 million kirana shops are mostly family or 'ma-pa' owned, with little
capital for expansion or credit to receive or to extend to consumers.

About 96 per cent of these shops have 500 sq. ft or less of space with limited
stock or choice to offer. During all these years, instead of shedding tears for
indigenous trade and resisting FDI, had the government declared it an industry, it
would done the trade a world of good. Now it is being said that allowing FDI in
retail trade would destroy this commerce! Will it?

A study by the Associated Chambers of Commerce of Industry of India,

New Delhi, concluded that at least for the next ten years that will not

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 24

happen. Thereafter, the present fragmented system may get phased out or
evolved into more integrated networked units.

Modern retailing is designed not only to provide consumers with a wide variety of
products under one roof, but also of assured home delivery and information
feedback between consumers and producers. A modern retail outlet will also
make it easy to buy on credit and provide for servicing and repair of products

With IT application, the modern retail store can cut transaction costs such as due
to inventory, delivery and handling. That is precisely how the US based Wal-Mart
grew to be a giant because it reduced its distribution costs to 3 per cent of sales
compared to 4.5 per cent of others.

With MIT Professor Sanjay Sharma's epochal innovation of RFID (radio

frequency identification), which will do away with cash registers and clerks who
are required to operate it, Wal-Mart will further reduce its costs.

India is today the only major economy that still does not permit FDI in retail trade.
In China, 35 of the world's top 70 retailers have already entered and set up
business. They have helped boost exports. Wal-Mart alone exported in 2002
about $12 billion worth of goods. These retailers source their goods from inside

India is targeting for its GDP to grow by 8 to 10 per cent per year. This requires
raising the rate of investment as well as generating demand for the increased
goods and services produced. Exports are one way of generating that demand.
Encouraging private consumption expenditure is another way.

These retail giant houses can bring their better managerial practices and IT-
friendly techniques to cut wastage and set up integrated supply chains to
gradually replace the presented disorganized and fragmented retail market.
According to McKinsey, India wastes nearly Rs. 50,000 crore in the food
chain itself. These international retail outlets can help develop the food

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 25

processing industry, which requires $28 billion of modern technology and

FDI in retail trade has forced the wholesalers and food processors to improve,
raised exports, and triggered growth by outsourcing supplies domestically. The
availability of standardized products has also boosted tourism in these countries.

Indian Middle Class People:

I n India, the middle class is difficult to define by income levels - not least
because of the massive concealment of earnings. It is vaguely described as
the 200-250 million who are engaged in the market, almost as large as the entire
US population. According to the National Council of Applied Economic Research
(NCAER), between 1985 and 1999, a quarter of this class earned between Rs
35,000 and Rs 75,000 a year. In the next income category, Rs 70,000 and Rs
105,000, the proportion dropped from 36% in 1985 to one-fifth in 1999.
Revealingly, in the next category, Rs 105,000 to Rs 140,000, the percentage
increased during this period, from 15% to a quarter of the middle class. And
above Rs 140,000, it similarly went up from 22% to 27%. So it seems clear that
this consuming class is better off than ever before.

• India has registered a very impressive growth of its middle class -- a

class which was virtually non-existent in 1947 when India became a politically
sovereign nation.

• At the start of 1999, the size of the middle class was unofficially
estimated at 300 million people.

• The middle class comprises three sub-classes: the upper middle,

middle and lower middle.

• The upper middle class comprises an estimated 40 million people. They

have annual incomes of US$600,000 each in terms of Purchasing Power Parity
(PPP).Here calculation of PPP is complicated, but suffice it to say that it is

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 26

based on what a unit of currency can purchase in one country compared to
what the same currency can purchase in another country. It is also known as
the "law of one price" that governs the price level of general goods and
services between the two countries).

• The middle class comprises an estimated 150 million people, each with
PPP incomes of US$20,000 per year each.

• The lower middle class comprises an estimated 110 million people. An

estimate of their annual income is not available, but they are mostly the
relatively affluent people in the rural areas of India.

• The middle classes on the whole (i.e. upper middle + middle middle
lower middle classes) are expected to grow by 5 to 10 percent annually.

Opportunity Challenges and emerging trends for

Organized retail in Indian


Population: India’s population estimated at 1,055 million is expected to grow by

1.7 % year by year. Growing urbanization is key trend in the country, with rural
population growth average 17.9 % and urban growth at 30.7% for the period
1991 to 2001. Today (12 Mar 2007 at 10.03) the population of India is

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 27

Right now the population of Key static with regard to population growth ant the
urban and rural split is set out bellow

Source: Technical Group on Population Projections, Registrar General of India (RGI) 1996
Figure no.-2
• In the period between 1996-2016, population in the:
1. Age group 15-59 will increase from 519 to 800 million
2. Age group < 15 yrs will decline from 353-350 million
3. Age group > 60 yrs will increase from 62.3 to 112.9 million

Challenges of Retailing in India

Retailing as an industry in India has still a long way to go. To become a truly
flourishing industry, retailing needs to cross the following hurdles:
• Automatic approval is not allowed for foreign investment in retail.
• Regulations restricting real estate purchases, and cumbersome local laws.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 28

• Taxation, which favors small retail businesses.
• Absence of developed supply chain and integrated IT management.
• Lack of trained work force.
• Low skill level for retailing management.
• Intrinsic complexity of retailing – rapid price changes, constant threat of product
Obsolescence and low margins.
• The credit facility given by the unorganized retail which is not available to
Organized store
• Traditional pattern of buying of consumer
• Credit facility given by kirana store
• Family relationship with kirana store/Lalagi
• Psychological behavior to enter big size
• Check impulsive buyer
• Absence of model
• Limited floor space, Park space, Display space
• Time factor
• Home delivery

The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing, managing, and
coping up with new challenges in an ever-changing marketplace. Indian retailers
must use innovative retail formats to enhance shopping experience, and try to
understand the regional variations in consumer attitudes to retailing. Retail
marketing efforts have to improve in the country - advertising, promotions, and
campaigns to attract customers; building loyalty by identifying regular shoppers
and offering benefits to them; efficiently managing high-value customers; and
monitoring customer needs constantly, are some of the aspects which Indian
retailers need to focus upon on a more pro-active basis.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 29

Despite the presence of the basic ingredients required for growth of the retail
industry in India, it still faces substantial hurdles that will retard and inhibit its
growth in the future. One of the key impediments is the lack of FDI status. This
has largely limited capital investments in supply chain infrastructure, which is a
key for development and growth of food retailing and has also constrained
access to world-class retail practices. Multiplicity and complexity of taxes, lack of
proper infrastructure and relatively high cost of real estate are the other
impediments to the growth of retailing. While the industry and the government
are trying to remove many of these hurdles, some of the roadblocks will remain
and will continue to affect the smooth growth of this industry. Fitch believes that
while the market share of organized retail will grow and become significant in the
next decade, this growth would, however, not be at the same rapid pace as in
other emerging markets. Organized retailing in India is gaining wider acceptance.
The development of the organized retail sector, during the last decade, has
begun to change the face of retailing, especially, in the major metros of the
country. Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole. This is mainly on account of the reach and penetration of
this business and its scientific approach in dealing with customers and their
needs. In spite of the positive prospects of this industry, Indian retailing faces
some major hurdles (see Table 1), which have stymied its growth. Early signs of
organized retail were visible even in the 1970s when Nilgiris (food), Viveks
(consumer durables) and Nallis (sarees) started their operations. However, as a
result of the roadblocks, the industry remained in a rudimentary stage. While
these retailers gave the necessary ambience to customers, little effort was made
to introduce world-class customer care practices and improve operating
efficiencies. Moreover, most of these modern developments were restricted to
south India, which is still regarded as a ‘Mecca of Indian Retail’.

Factors Description Implications

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 30

� FDI not permitted in � Absence of global
Barriers to FDI pure retailing players
� Franchisee
arrangement allowed � Limited exposure to
best practices Status
� Government does not � Restricted availability
Lack of Industry recognize the of finance
industry � Restricts growth and
scaling up

� Lack of urbanization � Lack of awareness of

Indian consumers
� Poor transportation � Restricted retail
Structural Impediments infrastructure growth
� Consumer habit of
buying fresh foods � Growth of small, one-
Administered pricing store formats, with
unmatchable cost
� Wastage of almost
20%-25% of farm
produce High Cost of
Real Estate
� Pro-tenant rent laws � Difficult to find good
real estate in terms of
location and size
� High land cost owing
High Cost of Real � Non-availability of to constrained supply
Estate government land, zoning
� Lack of clear � Disorganized nature of
ownership titles, high transactions

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 31

stamp Duty (10%)

� Several segments like � Limited product range

food and apparel
reserved for SSIs � Makes scaling up
� Distribution, logistics difficult
Supply Chain constraints–restrictions of
Bottlenecks purchase and movement
of food grains, absence
of cold chain
� Long intermediation � High cost and
chain complexity of sourcing &
� Lack of value addition
and increase in costs by
almost 15%

� Differential sales tax � Added cost and

rates across states complexity of distribution
Complex Taxation � Multi-point octroi � Cost advantage for
System smaller stores through
� Sales tax avoidance tax evasion
by smaller stores

� Stringent labor laws � Limits flexibility in

governing hours of work, operations
minimum wage payments
� Multiple
Multiple Legislations licenses/clearances � Irritant value in
required establishing chain
operations; adds to

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 32

overall costs
� Local consumption � Leads to product
habits proliferation
� Need to stock larger
� Need for variety number of SKUs at store
Customer Preferences level
� Cultural issues � Increases complexity
in sourcing & planning
� Increases the cost of
store management

� Highly educated class � Lack of trained

does not consider personnel
Availability of Talent retailing a profession of
� Lack of proper training � Higher trial and error
in managing retail
� Increase in personnel

� No increase in � Manufacturers refuse

margins to dis-intermediate and
Manufacturers pass on intermediary
Backlash margins to retailers

Table no.-6 Source: Market Participants,


Emerging Trends in Retailing

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 33

Retailing in India is at a nascent stage of is evolution, but within a small period of
time certain trends are clearly emerging which are in line with the global
experiences. Organized retailing is witnessing a wave of players entering the
industry. And, these players are experimenting with various retail formats. Yet,
Indian retailing has still not been able to come up with many successful formats
that can be scaled up and applied across India. Some of the notable exceptions
have been garment retailers like Madura Garments & Raymond who was scaled
their exclusive showroom format across the country. The Indian economy is
highly regulated and the most significant regulation is the restriction of foreign

Trends in Retailing

New retail forms and combinations continually emerge. Bank branches and ATM
counters have opened in supermarkets. Gas stations include food stores that
make more profit than the gas operation. Bookstores feature coffee shops.

Even old retail forms are reappearing: In 1992 Shawna and Randy Heniger
introduced peddler’s carts in the Mall of America. Today three-fourths of the
nation’s major malls have carts selling everything from casual wear to condoms.

Successful carts average $30,000 to $40,000 a month in sales and can easily top
$70,000 in December. With an average start-up cost of only $3,000, pushcarts
help budding entrepreneurs test their retailing dreams without a major cash

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 34

investment. They provide a way for malls to bring in more mom-and-pop retailers,
showcase seasonal merchandise, and prospect for permanent tenants.

1. New retail forms are facing a shorter life span. They are rapidly copied
and quickly lose their novelty.

2. The electronic age has significantly increased the growth of non store
retailing consumers receive sales offers in the mail and over television,
computers, and telephones, to which they can immediately respond by
calling a toll-free number or via computer.

3. Competition today is increasingly intertype, or between different types of

store outlets. Discount stores, catalog showrooms, and department stores
all compete for the same consumers. The competition between chain
superstores and smaller independently owned stores has become
particularly heated. Because of their bulk buying power, chains get more
favorable terms than independents, and the chains’ large square footage
allows them to put in cafes and bathrooms.

4. In many locations, the arrival of a superstore has forced nearby

independents out of business. In the book selling business, the arrival of a
Barnes & Noble superstore or

5. Borders Books and Music usually puts smaller bookstores out of business.
Yet the news is not all bad for smaller companies. Many small
independent retailers thrive by knowing their customers better and
providing them with more personal service.

6. Today’s retailers are moving toward one of two poles, operating either as
mass merchandisers or as specialty retailers. Superpower retailers are
emerging. Through their superior information systems and buying power,
these giant retailers are able to offer strong price savings. These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 35

7. In the process, they are crowding out smaller manufacturers, who become
dependent on one large retailer and are therefore extremely vulnerable,
and smaller retailers, who simply do not have the budget of the buying
power to compete.

8. Many retailers are even telling the most powerful manufacturers what to
make; how to price and promote; when and how to ship; and even how to
reorganize and improve production and management. Manufacturers have
little choice: They stand to lose 10 to 30 percent of the market if they

9. Marketing channels are increasingly becoming professionally managed

and programmed. Retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups. They are
not sticking to one format, such as department stores, but are moving into
a mix of retail formats.

10. Technology is becoming critical as a competitive tool. Retailers are using

computers to produce better forecasts, control inventory costs, order
electronically from suppliers, send e-mail between stores, and even sell to
customers within stores. They are adopting checkout scanning systems,
electronic funds transfer, and improved merchandise-handling systems.

11. Retailers with unique formats and strong brand positioning are
increasingly moving into other countries. McDonald’s, The Limited, Gap,
and Toys “R” U.S. have become globally prominent as a result of their
great marketing prowess. Many more Indian retailers are actively pursuing
overseas markets to boost profits.

12. There has been a marked rise in establishments that provide a place for
people to congregate, such as coffeehouses, tea shops, juice bars,
bookshops, and brew pubs.


MUKESH KUMAR, I.T.S, PGDM (2006-2008) 36

1. Forward integration / alternate channels: In bid to close the distance
between the company and the end consumer by cutting down the
distribution channel, some manufacturers of consumer goods are
establishing company owned stores and service formats and exploring the
store in store concept to enhance margins and increase customer value.

2. Sourcing: The CPG industry is following the It outsourcing trend. Indian

subsidiaries of global CPG players have proved them self in term of
quality and production capabilities. This had led several international
companies to source from India. For example Hindustan lever the
subsidiary of Unilever exports a wide range of products like soap,
detergents, oral care and skin care products to other Unilever subsidiaries.
A new export Oriented unit is being set up by Hindustan lever in Pune, to
cater to the need of this business. Unilever is also setting up a global
sourcing office in India to buy products and raw material from low cost
location for its subsidiaries across the world. India is moving towards
embracing global patent and trademark standard that will facilitate
outsourcing by CPG companies.
With quotas in textiles sector also being relaxed, global retailers are
increasingly focusing their sourcing efforts (both apparel and non apparel)
from India. Wal-Mart has announced it will increase it an annual sourcing
from India from USD5 billion. This trend is likely to be followed by most big

3. Rapid expansion and format migration: After making years of

investment in customer acquisition, setting up of systems / process and
consequent operational loose, many leading retailers have passed their
“learning” phase and are getting in to the consolidation/aggressive rollout
phase. Today few of them are making modest money out of the business.
This provides confidence to the investors to infuse much needed capital in

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 37

the businesses and will lead the further expansion and format migration.
For example the department store chain, Shoppers Stop, will soon have
its Initial Public Offer (IPO) and use all the fund raised, for rapid expansion
in existing format and roll out of grocery stores. Other leading retailers
such as Tent (West side) and Landmark Group (life style) are also
considering new formats in home improvement and hypermarkets.

Retail as an Employment Generator

T he retail sector can generate huge employment opportunities, and can

lead to job-led economic growth. In most major economies, ‘services’ form
the largest sector for creating employment. US alone have over 12% of its
employable workforce engaged in the retail sector. The retail sector in India
employs nearly 21 million people, accounting for roughly 6.7% of the total
employment. However, employment in organized retailing is still very low,
because of the small share of organized retail business in the total Indian retail
trade. The share of organized retailing in India, at around 3%, is abysmally low,

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 38

compared to 80% in the USA, 40% in Thailand, or 20% in China, thus leaving the
huge market potential largely
Untapped. A modern retail/retail services sector has the potential of creating over
2 million new (direct) jobs within the next 6 years in the country (assuming only 8-
10% share of organized retailing), according to Arvind Singhal, CMD, KSA
Technopak. Retail can create as many new jobs as the BPO/ITeS sector in India.
A strong retail front-end can also provide the necessary fillip to agriculture & food
processing, handicrafts, and small & medium manufacturing enterprises, creating
millions of new jobs indirectly. Through its strong linkages with sectors like
tourism and hospitality, retail has the potential of creating jobs in these sectors
also. Though the Planning Commission has identified retail as a prospective
employment generator, in order to strengthen the multiplier effect of the growth in
organized retailing upon the overall employment situation, a pro-active
governmental support mechanism needs to evolve for nurturing the sector.
Issues like FDI in retail, allocation of government-controlled land on more
favorable terms, strong political and bureaucratic leadership, etc., need to be
addressed adequately. Big corporate houses are coming in retail with huge
investment plan, in coming future due to the reason of competition Retail has
required more talented & skilled business people.


T he following survey was mainly done with an objective to know the state of
mind of an individual and their preference of organized retail. And their
satisfaction level towards these outlets.

And other reasons are:

1. To get an insight in to the retail industry

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 39

2. To understand the factors that influence shoppers to visit organized retail
3. To understand consumer behavior about organized retail shop
4. To identify change in consumer behavior, i.e., preference of the small
retail store over the supermarket or vice versa.
5. Buying Experience of middle class people for daily need items with from
Organize retail shop & Kirana store.


T o discover the answer to the research or to achieve the objective of the

project certain scientific procedure was followed. These procedures are
explained as follows.

Research technique

In my research I followed the descriptive method of research, which includes

surveys and fact-findings enquires of different kinds. The major purpose of
descriptive research is description of the state of affairs, as it exists at present. In

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 40

business research we quite often use the term Ex Post Facto research for
descriptive research studies. The main characteristic of this method is that the
research has no control over the variables; he can only report what happened or
what is happening.
Structured questionnaires were prepared having both open and close-ended
questions. The questionnaire was prepared for middle class Indians for
understanding their purchase behavior with organized retail for daily need items.

Universe of the study

Universe of the study was the people of middle clsss(Upper middle class, Middle
middle class, Lower middle class) of NCR (North Central Regon).

Sample size for study

100 people were surveyed by the questionnaire method. Both convenience and
judgmental sampling was used.

Data collection techniques

To achieve the objectives of the study both primary and secondary data was

Primary data

100 people were surveyed to know their purchase behavior with organized retail
for daily need items. And factors, which motivated them to go for organize retail.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 41

Secondary data

Secondary data was collected by visiting libraries and associations the major
• Internet
• Different News Paper & Magazines
• Journals

Data tabulation, analysis and interpretations

The data was tabulated using tally marks and analyzed by using percentages.
The interpretations are based on the overall survey done on the respondents.


1) What the factor that influences your decision while going for
purchase of daily need items?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 42



35 S eries2
No. of respondants


20 18
15 12
10 8

5 3

Service Price Dealing of Variety of theBrand nam e Proper
the s ales products product
pers on dis play
Fa ctors tha t influe nce de cision m a king

Figure no.-3
The data which is collected by questionnaire is very well showing that the
people of middle class are very price conscious. And the price factor influence
their decision while going for purchase of daily need items. After that Variety
of the product and brand name effect a lot in decision making .Other factor
like service proper product display has not much importance while purchase
of daily need items. But apart of daily need items in the sample size of 100
people 45% people is influenced for daily purchase by price. That is a reason
that lots of organize retailer are focusing their store on the basis of price. The
best examples are Subhiksha, Reliance Fresh, Big Baazar and also Bharti
Wal-Mart is also going to penetrate Indian

2) What type of stores do you prefer for shopping for daily need items?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 43

Malls/Depar Store
preference Co-operative Stores

Kirana Stores/
Convenience store

No particular

e store

Figure no.-4
For daily need items generally people prefers Kirana stores/Convenience store
because they gives the reason that the positioning of kirana stores for daily need
items is much more convenient. According to chart 45% of people prefer kirana
stores/Convenience. 20% People prefer to go Malls/ Departmental stores for
daily need items, generally these people are those who purchase product in bulk
for a full month Behind this they give reason that they don’t have much time to
visit shop daily. Shopping from these stores saves their time and their service,
variety and offers satisfied their need.
These people are generally Upper middle class service people or middle
executives from reputeted organization. Rest of 20% people have not any
preference towards stores for daily need items.15 people out of 100 believe that
Co-operative stores are giving good discount and quality oriented product.

3) What comes when you think about organized retail shop?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 44

100 12
25 30 20 In the
80 50 45 40 40
40 80 88
75 70
50 55 60 60
20 40


Lo ice

Di ce

Hi rice

om ng



Do Bra
Pr ppi








process of filling questionnaire done by respondents when I interacted with

people then I found that when I asked about organized retail shop then more
than 60% respondents given their view in favor of organized retail stores. About
organized retail shop they feel that shopping with these stores give them fun
because all the items with wide variety is available under one roof with discounts.
Mean to say products are available can be found in less efforts. And they are
generally discounted, Branded with wide variety. Here is a pitch for organized
retail store where they can pitch the product because already people has positive
attitude towards organized retail stores. That is a positive point for organized
retailers. But in some point of view for daily need items people say after discount
goods are cheep in purchase but after discount session product of daily need
items are costly in comparison to Local kirana wala shop. Generally lower middle
class believe on that. So here is a lead for organized retailers where they have to

4) How often you go for shopping for daily need items?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 45

Once a

Thrice a Once a day

month 40%

Once in a

Once a day Once in a week

Thrice a month Once a month

Figure no.-6

Basically the reason of asking this question from respondents is to understanding

their frequency of visiting of the shop which helps us to understand how often
they visit the shop for daily need items. Generally people purchase items like
milk, bred, cigarette and vegetables daily, 40% of total respondents say that they
daily go for shopping. 25 out of 100 say that they go purchase of daily need items
for once week. 25% people visit for these items for thrice a month and rest of
10% people go for these items for once a month because they don’t have time to
go daily for these. Again these people are people from upper middle class. So
those people generally purchase in a bulk for a month. More than 55% people
from those prefer organized retail because from purchase in bulk they get big
discount. Reliance fresh, Big Bazaar, Spancers and Subhiksha are generally
preferred retailers. So for these kinds of people organized retailers are much
profitable that is again a type of strength for organized retailer.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 46

5) How much portion of your fix income you dispose in shopping /
month for daily need items (In Thousands)?

more than 7
5-7 thousands
thousand 20%


0-2 thousands 2-5 thousand

5-7 thousand more than 7 thousand

Figure no.-7

The reason of asking this question from the respondents is to understand their
purchasing behavior towards daily need items. In the sample size of 100, 55% of
people invest between 2 to 5 thousands, so this is again an opportunity for shop
keepers to earn. After analysis of data it has found that on those 60% of people
who invest more than average they mostly prefers organized retail stores
because of variety, quality and discount . That is also positive point for organize

6) On the scale of 0 to5 Rate your Buying Experience of daily need items

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 47

Buying Experience of daily need items with
organised retail on the scale of 5

Very Good


Buying Experience of daily need items

with unorganised retail on the scale of

11% 11%

17% Average
Very Good


Figure no.-8
Above graph shows that more than 60% people have excellent experience with
organize retail but in traditional retail 60% also have excellent experience but
satisfaction level is much higher in organized retail 25% people found excellent
experience in organized retail but only 11% people enjoyed excellent experience
in unorganized retail. The respondent had to rate the both organized as well as
unorganized retail store buying experience.
7) Are you satisfied with the shopping of daily need items from organized
retail store?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 48


Yes No

Figure no.-8
From the sample size of 100, 55% people are satisfied with organized retail.
More than 50% respondents had given their view in favor of organized retail
stores. About organized retail shop they feel that shopping with these stores
shopping becomes fun because all the items with wide variety are available
under one roof with discounts. Mean to say products are available can be found
in less efforts. And they are generally Discounted, Branded with wide variety.
Here is a pitch for organized retail store where they can pitch the product
because already people has positive attitude towards organized retail stores.
That is a positive point for organized retailers. But in some point of view for daily
need items people say after discount goods are cheep in purchase but after
discount session product of daily need items are costly in comparison to Local
kirana wala shop. So here is a lead for organized retailers where they have to

8) It is expensive to purchase in organized retail stores in comparison to

local kirana shop?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 49

Can't say


Yes No Can't say

Figure no.-9

Generally in organized retail wide variety of products is available can be found in

less effort. And they are generally Discounted, Branded with wide variety. But in
some point of view for daily need items 40% people say after discount goods are
cheep in purchase but after discount session product of daily need items are
costly in comparison to Local kirana wala shop. But 40 out of 100 feel that goods
are not expensive in organized retail shop. And 20% are not having any idea
about the price.

9) To what extent do you agree with following statements; rate them on the
scale of 0 to 5.

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 50

Question Strongly Disagree Moderat Agree Strongly
disagree e agree
Shopping in organize 20% 18% 38% 12% 12%
retail stores is more
expensive compare
to local kirana shop
It is more time 20% 18% 15% 22% 25%
consuming to
purchase in
organized retail
Prefer shopping from 9% 22% 10% 20% 39%
local kirana shop
because they give
Prefer shopping from 32% 28% 17% 8% 15%
local kirana shop
because they give
fresh products
Kirana shops provide 10% 10% 30% 21% 29%
home delivery of
even less products
Table no.-6

From the above table it can be understand that the people of middle class very
well know that Shopping in organize retail stores is not expensive compare to
local kirana shop because people say that in organized retail shop products are
available under one roof so it save their time as well as traveling cost . But in
other hand people had given negative response in question “It is more time
consuming to purchase in organized retail stores”, they say that in organized
retail shop in the flood of product many times it take more time to select right
product but in this question 38% people gives the reason that these stores gives
lot’s of choice in selection so it save theirs traveling time. Lover middle class

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 51

prefer kirana shop because they give credit without having credit card which is
again much more convenient for lower middle class people. But in point of
freshness 60% people prefer organized retail store because thy know that fresh
product generally only can be found in stores like Reliance Fresh & Subhiksha. In
the point of home delivery people say that their kirana shop owner give home
delivery of less product even low price like 20-50. But in organized retail shop
there is a fix slap for that they give home delivery.

10) Where you feel better to go for purchase of daily need items?

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 52

Kirana Organized
Stores/ Retail shop
Convenienc 43%
e store

Organized Retail shop Kirana Stores/ Convenience store

Figure no.-10
The aim of asking this question from respondents is to conclude the research of
“The Preference of middle class for Organized Retail For daily need items” This
question sumup all the research which is showing that for daily need items
generally use local Kirana stores in comparison to organized retail But for other
items generally people prefer variety and quality oriented store that is organize
retail store. But if we understand the consumer behavior of middle class then we
will find that rapidly they are shifting kirana stores to organized retail shop. If we
would have asked this question to respondent then we would have find decision
in favor of kirana stores. Currently Indian middle class is showing a big change
in their buying behavior and becoming Variety & quality conscious. That is again
a type of victory for organized retailers.


MUKESH KUMAR, I.T.S, PGDM (2006-2008) 53

L iberalization of the economy in the nineties and the entry of large players in
the retail business have brought the retail industry into spotlight. Big
players and national retail chains are changing the rules of the game, in spite of
their meager share in the overall retail trade. Organized retailing though still in an
embryonic stage has huge growth potential.

To meet the challenges of organized retailing that is luring customers away from
the unorganized sector, the unorganized sector is getting organized. Because of
preference of middle class for these stores is going to increase day by day. The
organized retail chains, display all the products and the most attractive product
catches the customer attention. Gone are the days of - customer loyalty with
increasing number of products of similar quality hitting the market? The
customers of the 21st century would expect to pick his/her own products form an
array of choices rather than asking the local kirana wallas to deliver a list of
monthly groceries. Thus, the way of distribution of products has gained
importance in the past decade.

The first challenge facing the organized retail industry in India is: competition
from the unorganized sector. Traditional retailing has established in India for
some centuries. It is a low cost structure, mostly owner-operated, has negligible
real estate and labor costs and little or no taxes to pay. Consumer familiarity
that runs from generation to generation is one big advantage for the traditional
retailing sector. That is the basic reason now organized sector facing more
challenges from unorganized sector but this research report is also concluding
that preference of middle class for organized retail is going to increase rapidly
but it is little bit slow in daily use items but the day is not so for when middle
class people frequently purchase daily need items maximum from organized
retail shop.

In contrast, players in the organized sector have big expenses to meet, and yet
have to keep prices low enough to be able to compete with the traditional sector.
High costs for the organized sector arises from: higher labor costs, social security
to employees, high quality real estate, much bigger premises, comfort facilities

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 54

such as air-conditioning, back-up power supply, taxes etc. Organized retailing
also has to cope with the middle class psychology that the bigger and brighter
sales outlet is, the more expensive.


• The time factor was a great limitation while the time of 2 month research
• Due to less knowledge of site of NCR, I visited few areas of NCR so
research is based on according to the customer of that area.
• Sample size of 100 is not sufficient to finish this project in moredescriptive
• During our meeting part with customer we consider only our potential
customer who was middle class people.


MUKESH KUMAR, I.T.S, PGDM (2006-2008) 55


Retail Marketing by J.A. Lamba

Statistic Methods by S.P. Gupta
Research Methodology by C. R. Kothari

Web sites

Magazines & News papers

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 56

Sudhir Vinita (Apral31, 2006)”In The Growth Trajectory”, Pitch pp 26-29

Guest Column (November15, 2006)” The Changing Marketplaces”, Pitch pp 100-


Sridharan R. and Gopalan Krishna (December31, 2006),”Retail’s Coming Face-

Off”, Business Today pp82-94

‘The Behemoth from Bentonville’ The Times Of India (Times Ascent), New Delhi,
27December2006, pp 10.

“Retail Revolution” (29November2006) The Economic Times, New Delhi, pp 20.

Barbaro Michael & Greenhouse Steven (August19, 2006),”Wal-Mart image-

maker quits”, Times Business

Kaushik, Neha (21December2006), “Youth and beyond” Business Line (Brand

Line), pp 01.



MUKESH KUMAR, I.T.S, PGDM (2006-2008) 57

1) What the factor that influences your decision while going for purchase of
daily need items?

Service Variety of the products

Price Brand Name

Dealing of the sales person Proper product display

2) What type of stores do you prefer for shopping for daily need items?

Malls/Departmental Store Co-operative Stores

Kirana Stores/ Convenience store No particular preference

3) What comes when you think about organized retail shop?

Yes No
Fun in shopping
Low price
High price
Door delivery

4) How often you go for shopping for daily need items?

Once a day Once a week

Thrice a month Once a month

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 58

5) How much portion of your fix income you dispose in shopping / month
for daily need items (In Thousands)?

0-2 2-5

5-7 more than 7

6) On the scale of 0 to5 Rate your Buying Experience of daily need items

Organized retail shop 0...........1.............2...............3.................4...........5

Kirana Stores 0...........1.............2...............3.................4...........5

0 for Very poor, 1 -poor, 2 - average, 3 - good, 4 - very good, 5- excellent

7) Are you satisfied with the shopping of daily need items from organized
retail store?

Yes No

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 59

8) It is expensive to purchase in organized retail stores in comparison to
local kirana shop?

Yes No can’t say

9) To what extent do you agree with following statements; rate them on the
scale of 0 to 5.

Shopping in organize retail stores is more expensive compare to local

kirana shop
It is more time consuming to purchase in organized retail stores
Prefer shopping from local kirana shop because they give credit
Prefer shopping from local kirana shop because they give fresh products
Kirana shops provide home delivery of even less products
1 for strongly disagree, 2 - disagree, 3 - moderate, 4 - agree, 5- strongly agree

10) Where you feel better to go for purchase of daily need items?

Organized retail shop Kirana Stores


Respondent Details

Sex Male Female

Age Qualification


MUKESH KUMAR, I.T.S, PGDM (2006-2008) 60

Income/ annum

0-.5 Lac .5-1.5 Lac 1.5-3 Lac 3-6 Lac More than 6 Lac

MUKESH KUMAR, I.T.S, PGDM (2006-2008) 61