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ISSN 0975 – 5942
Survival Strategy for Traditional Retailers in the Era of
Modern Retailing
H. C. Purohit and Kavita
Department of Business Economics, VBS Purvanchal University, Jaunpur, UP
Corresponding author: hcpurohit_mbe@yahoo.co.in
Abstract
India is the fastest growing market in Asia Pacific for
international tourist spending, according to the latest Visa Asia
Pacific release. The economy is growing by over 8% a year and
India’s growth rate can actually exceed that of China by 2015.
Favorable demographic and psychographic changes relating to
India’s consumer class international exposure, availability of quality
retail space, wider availability of products and brand communication
are some of the factors that are driving the retail in India.
Development of India as a sourcing hub shall further make India as
an attractive retail opportunity for the global retailers. Retailers like
Wal-Mart, GAP, Tesco, JC Penny, H&M, Karstadt-Quelle, Sears
(Kmart) etc stepping up their sourcing requirements from India and
moving from third-party buying offices to establishing their own
wholly owned/wholly managed sourcing & buying offices shall
further make India an attractive retail opportunity for the global
players.
Increasing growth of modern retailing in across product
categories, food and grocery, wet groceries, apparel and jewelry etc
are the areas where lucrative opportunities for modern retailing
exist. The traditional retailers have the challenges in the era of
modern retailing. The proposed study covers the issues related to the
growth of modern retailing and the perception of the traditional
retailers about the modern retailing.
Keywords: Traditional, Modern, Retailers, Survival, Strategy
199
Introduction
Retailing is one of the world’s largest industries. It is in a
permanent state of change, and the pace of this change has been
accelerating over the last decade. Retail outlets are the main source
of purchase for consumers. Retailing is the final stage in the
distribution process (from manufactures to consumer), in which the
retailer, as an intermediary, collects an assortment of goods and
services from various sources and offers them to the customer.
Retailing goes back to centuries it started as a very primitive
business but today has grown tremendously. First people were doing
business with their neighbors. Goods were exchanged between them.
Gradually people began to collect themselves to a given
neighborhood, which provides a geographical place to do the
exchange. This not only increases the exposure of a given good but
also helps a lot towards the development of a more formalized
system, gradually, a few more start to get together to a place which in
turn creates a need for a common place. Later this common place
time was called a fair. With the passing of time, the number of
people doing businesses in a given fair increased, issues like security,
transportation, become a matter of concern. This semi formalized
system then gave birth to small scale groceries, where people start to
provide more combinations in their own neighborhoods. Then came
the issue of choice in given grocery, the choices the customer had
was limited, this was the beginning of the concept of everything
under one roof. Rapid evolution of these small scale groceries gave
birth to the modern retail grocery system where, super markets were
considered as the major form of retailing. Delivering a superior
quality of service has long been considered the basic retailing
strategy (Berry, 1986, Cronin and Taylor, 1992, Parasuraman,
Zeithamal and Berry, 1988).
Organized retailing, which aims at providing an ideal
shopping experience for the consumer based on the advantages of
large- scale purchases, consumer preference analysis, excellent
ambience and choice of merchandise, has been in a large number of
cities in India with many business houses investing in this segment.
Retailing environment has evolved tremendously over the last 10
years. Indian retail network has grown through what are called
“mom- and- pop” small grocery stores that are run by individuals or
families and cater to their immediate neighborhood or locality. Like
200
in most other countries, India’s retail industry is slowing getting
organized and giant networks of stores are spreading themselves
across the Indian landscape, starting with the larger and more
populated cities and towns.
The entire retail industry can be segmented based on the kind
of goods they carry, these can be:
Food and grocery
Consumer durables
Clothing, Textiles and fashion accessories,
Jewelry
Watches
Footwear
Health and beauty care products (including
pharmaceuticals)
Mobile handsets and accessories
I). Furniture and furnishings.
Organized Verses Unorganized Retailing:
Retailers include street vendors, supermarkets, department
stores, restaurants, hotels and even two-wheeler and car showrooms.
While Counter stores, kiosks, street markets and vendors, where the
ownership and management rest with one person, are classified as
traditional or unorganized retail outlets.
The Indian retail story of transformation began a few years
ago and is rapidly spreading across the more densely populated cities
and towns but it is still a small fraction of the total retail potential
that exists.
An overview of the retail industry:
The organized retail business in India is booming and various
expert studies has pointed out that it is set to grow exponentially in
the coming years . The unstated fact of organized retailing is that the
first phase of organized retailing came into existence way back, when
few textile mills showrooms, Khadi Bhavan outlets were opened
across the nation. Jewelry showrooms were among the first to offer
air conditioned facility to make customer feel comfortable. Probably
Raymonds was the first one to open chain store with décor and
ambience resulting in a chain reaction amongst established brands
201
and retailers in the country. Until 90’s, there were just 3 international
style shopping malls in India-Ansal in Dehli, Spencer in Chennai,
Crossroad in Mumbai (Bhatnagar 2004). Opening up of the Indian
economy, market liberalization, growing purchasing power of middle
class, increasing number of rich and increasingly self-confident
consumers are sowing the seeds for a retail transformation that will
bring more Indian and multinational players on the scene. The Indian
retail sector continues to be one of the largest sectors attracting fresh
investments from private sector. Currently Indian retail distribution is
completely fragmented with about 13 million players. The majority
of these are very small players operating from small shops (below 50
square feet in size) and with handcarts. These retail outlets are spread
across the country in over 5,000 cities and 6, 00,000 villages. The
Indian retail industry is estimated to provide employment to over 18
million people, the largest employment after agriculture. FICCI
Retail Report, 2007 indicates that organized retail will grow at
significant CAGR of around 50 percent till 2011 mainly due to the
investments of more than $ 30 billion budgeted by big and small
players in the organized retail sector over coming five to seven years.
Organized retail sector has witnessed a CAGR of around 35 percent
over the past five years and contributing around 10 percent to the
country’s GDP and eight percent of the employment. The retail
sector is seeing investments of up to Rs.6000 crore by the 20
prominent retail players. Organized corporate retailing is poised to
become the business of the decade in India. The value of organized
retail is expected to grow 2.8 times in the coming four years to a
Rs.1, 000 billion industry, attracting many global retail chains like
Wal- Mart, Tesco, and Carrefore (Outlook, October 16, 2006),
Foreign Direct Investment (FDI) up to 51 percent in single brand
retail was permitted and multi-brand retail is expected to open up to
51 percent of FDI soon. Meanwhile Indian retail chains like Reliance
Retail, Croma, Aditya Birla group, S. Kumars, Shopper’s stop
,Wetside, Subhiksha and Trinetra have all been consolidating their
reality, brands, market shares and locations. Retail giants, the largest
being Wal-Mart- Bharati, Reliance, AV.Birla group and Future
group, Pantaloon, plan to expand the share of organized retail from
the current 3 percent to approximately 15-20 percent in four years by
investing more than $25 billion (excluding real estate investment). Of
the proposed investment, 60-65 percent will go towards setting up
the supply chain for food and groceries, (CII-Kearney2006).
According to the India Retail report 2007, the organized retail sector
202
accounted for Rs.55,000 crore ($12.4 billion)business at current
prices in the calendar year 2006, increasing its share to 4.6 percent of
the total Indian Retail value that stood at Rs.12,00,000 crore ( $270
billion). Moving forward, organized retailing is projected to grow at
the rate of about 37 percent in 2007 and 42 percent in 2008 It is also
said that the organized retail sector is expected to generate 10 to 15
million jobs over the next five years, and that the value of the
organized retail sector in India by 2010 would be around Rs.2,
00,000 crore or US $45 billion. According to the report organized
retail in India has the potential to generate some 2.5 million
additional jobs in retain support activities including contract
production and processing, supply chain and logistics, retail real
estate development and management etc. On the other hand, a report
published in 2004 by the centre for policy alternatives entitled FDI in
India’s Retail sector: More Bad than Good stated that retailing is
probably the primary form of disguised unemployment,
underemployment in the country”. As per the report, due to
overcrowding in the agricultural sector and stagnation in the
manufacturing sector, millions of Indians are forced into the service
sector. Given the lack of opportunities it is almost a natural decision
for an individual to set up a small shop or store depending on his or
her means or capital and thus a retailer is born seemingly out of
circumstances rather than choice (Trivedi et. al.2007).
Review of Literature:
Review of existing literature and different reports which are
published from time to time are flashing that, to- date there is very
little understanding of what the impact of corporate retail will be on
the so called unorganized retail sector and the agricultural sector (the
country’s two largest sources of employment). Retailing
encompasses the business activities involved in sending goods and
services to their consumers for their personal family or household
use. It includes sale to the final consumers ranging from cars to
apparel, to meals at restaurant to theater tickets. Retail is the largest
private industry in the world and is playing a significant role in the
world economy because of the contribution that it makes to the
economy of the country. The major impact which the retailing has
made in India is that it has changed the whole concept of shopping in
terms of setup and consumer buying behaviour. The trend shows that
it is not only the consumers of the metro and other big cities of India
but also those of the small cities who are experiencing this retail
203
revolution. They show that many more consumers in various cities
are eagerly waiting for the opening up of the shopping malls (Gupta
et al 2008).
Objectives
to study the growth of modern organized retailing in
India.
to find out the perception of traditional retailers about
modern retailing.
Methodology
To gather the required information for this study, both
secondary and primary source of data was used. Secondary data has
been collected from journals, magazines, news articles, books,
internet and other documented materials. Information obtained from
retailers was analyzed using the SPSS computer package.
Questionnaire construction: To measure the perception of the
Kirana store keepers towards the organized retailing, a questionnaire
was developed on 5-point Likert type scale, ranging from “Strongly
Agree --- --- --- --- --- Strongly Disagree”, in all seventeen items
were constructed to measure the perception of traditional retailers
toward the modern retailing. And some more questions related to the
demography were also included in the questionnaire.
Data Collection
The primary data was gathered by administrating a structured
questionnaire with more than 100 retailers of grocery, cosmetics,
jewelry, and apparel items in Jaunpur city.
Sampling
The Selection of the retail outlets was based on convenient
sampling, according to the availability of the shop keeper in a
particular time period of the survey.
Sample Size: In all more than 100 questionnaires were distributed
but only 89 questionnaires were included in the study rest were
rejected due to incomplete information or did not return from the
shop keepers.
204
Sample Profile: The sample profile of the respondents is presented
below:
Age: A great majority (65%) of the respondents was from young age
group i.e. 20 to 40 years, with 35% respondents 20 to 30 years of
age. One third (33%) of the respondents were from mature age group
i.e. more than 40 years, with 12% old age group (more than 50 years
of age) (Table-1).
Gender: Almost all (93%) of the respondents were male (Table-1).
Income: Less than half (40%) of the respondents were from middle
income group i.e. 10,000 to 30,000 per month, and more than one
third (35%) of the respondents were from lower income group i.e
upto Rs. 10,000 per month (Table-1).
Capital Invested: An overwhelming majority (88%) of the
respondents was having an investment of upto Rs. 5, 00,000 in their
business concern (Table-1).
Education: (42%) of the respondents were highly educated with 5%
professionally educated, and 44% of the respondents were having
upto intermediate education (Table-1).
Family Size: A great majority (68%) of the respondents were having
large family size with more than 5 members in their family, and one
fourth (25%) of the respondents were having middle family size
(Table-1).
Table-1: Sample Profile
Age Gender Income (000) Investment (000) Education Family Size
Years % Category % Levels % Capacity % Levels % No. %
< 20 2 Male 93 < 10 35 < 500 88 Inter 44 < 3 7
20-30
35
Female 7 10-20
17
500-
1000
5
Graduate
37
3-5
25
30-40 30 Total 100 20-30 23 > 1000 7 Professional 5 > 5 68
40-50 21 > 30 25 Total 100 Uneducated 14 Total 100
>50 12 Total 100 Total 100
Total 100
205
Validity of the Tool
In order to test the validity of the tool developed for the
purpose to measure the perception of the traditional retailers and
before going to apply the tool, a chi square test was done and it was
found that almost all the items except the item that ‘modern retailing
will have negative impact on traditional retail outlets’ and ‘the
traditional retailer will improve their customer services in the era of
modern retailing’ were significant of .000 level. As the sample size
of the study is less so these two items were also included for final
survey (Table-2).
Table-2 : Validity of the Tool
Sl.
No.
Name of the Item
Chi
Square
Significance
1 Healthy Competition 39.75 .000
2 Cut The Profit Margin 32.38 .000
3 Reduce the Sales Volume 19.84 .000
4 Negative Impact 6.84 .084
5 Unhealthy Competition 14.49 .006
6 Positive Impact 25,01 .000
7 Way of Cooperative Marketing 26.77 .000
8 Change of Strategy 34.66 .000
9 Violation of Socio-Cultural Values 21.15 .000
10 Association of Traditional Retailers 23.08 .000
11 Change of Distribution Strategy 13.26 .010
12 Violation of Business Ethics 20.80 .000
13 Improvement of Customer Service 6.78 .079
14 Replacement of Traditional Retail
Stores
31.68 .000
15 Employment Opportunity 14.84 .005
16 Economic Development 23.61 .000
17 Impact on Entrepreneurship 56.24 .000
Results
The perceptions of the traditional retailers were analyzed with
the help of SPSS and presented as below:
Healthy Competition: More than half (55%) of the respondents
were agree with the statement that modern retailing will lead a
healthy competition in the market, while 19% of the respondents
were disagree and more than one fourth (26%) of the respondents
were undecided. The mean value of the item is 3.34 with .937 S.D.
and .124 S.E.
206
Cut The Profit Margin: A great majority (63%) of the respondents
were agree that modern retailing will cut the profit margin of the
traditional retailers, while 21% of the respondents were undecided
and 16% of the respondents were disagree with the statement. The
mean score of the item is 3.61 with .977 S.D. and .129 S.E.
Reduce the Sales Volume: Around half (51%) of the respondents
were agree with the statement that modern retailing will reduce the
sales volume of their business, while 30% of the respondents were
undecided and 19% of the respondents were disagree with the
statement. The mean value of the item is 3.36 with .858 S.D. and
.113 S.E.
Negative Impact: Less than half (47%) of the respondents were
agree with the statement that the modern retailing will have negative
impact on traditional retail outlets, while 30% of the respondents
were undecided and more than one fifth (23%) of the respondents
were disagree with the statement. The mean score of the item is 3.36,
with .975 S.D. and .129 S.E.
Unhealthy Competition: More than (39%) of the respondents were
disagree with the statement that modern retail will lead an unhealthy
competition in the market, while less than one third (31%) of the
respondents were agree and 30% of the respondents were undecided
with the statement. The mean score of the item is 2.91, with .1.09
S.D. and .144 S.E.
Positive Impact: More than one third (38%) of the respondents
were agree with the statement that modern retail will have a positive
impact on traditional retail outlets, while 32% were undecided and
30% of the respondents were disagree with the statement. The mean
score of the item is 3.01, with 1.00 S.D. and .133 S.E.
Way of Cooperative Marketing: Less than half (41%) of the
respondents were agree that the modern retail will pave way for co-
operative marketing, while around equal number of the respondents
(40%) were disagree and rest (19%) of the respondents were
undecided. The mean value of the item is 2.92, with 1.06 S.D. and
.141 S.E.
207
Change of Strategy: Around half (46%) of the respondents were
agree with the statement that the traditional retailers will have to
change their supply chain and store strategy for their survival, while
one third (33%) of the respondents were undecided about their
strategy. The mean value of the item is 3.24 with .911 S.D. and .120
S.E.
Violation of Socio-Cultural Values: More than one third (35%) of
the respondents were disagree that the modern retailers are violating
the socio-cultural norms of the society, while 40% of the respondents
were agree and one fourth (25%) of the respondents were undecided
with the statement. The mean value of the item is 3.00 with 1.06 S.D.
and .141 S.E.
Association of Traditional Retailers: Less than one fourth (24%) of
the respondents were agree with the statement that modern retailing
will lead an association of the traditional retailers, while 39% of the
respondents were undecided and 37% of the respondents were
disagree. The mean value of the item is 2.82 with .984 S.D. and .130
S.E.
Change of Distribution Strategy: 38% of the respondents were
agree that the traditional retailers will have to change their
distribution strategy and around equal number (39%) of the
respondents were disagree with this statement, with 3.03 mean, 1.14
S.D. and .152 S.E.
Violation of Business Ethics: more than one third (37%) of the
respondents were agree with the statement that modern retailers are
violating the ethics and values of the business, while 35% of the
respondents were disagree with the statement. The mean value of the
item is 3.01 with 1.02 S.D. and .135 S.E.
Improvement of Customer Service: Around half (51%) of the
respondents were agree with the statement that the traditional
retailers will improve their customer services in the era of modern
retailing, while more than one third (35%) of the respondents were
neutral with the statement. The mean value of the item is 3.56 with
.964 S.D. and .128 S.E.
208
Replacement of Traditional Retail Stores: On fourth (25%) of the
respondents were disagree with the statement the modern retailing
will replace the traditional retailers, while 29% of the respondents
were agree with the statement and around half (46%) of the
respondents were neutral with the statement. The mean value of the
item is 3.00 with .963S.D. and .127 S.E.
Employment Opportunity: More than one third (36%) of the
respondents were agree that the modern retailing will close
employment opportunity in the country, while an equal number of
the respondents (32%) were neutral and disagree with this statement.
The mean value of the item is 3.10 with 1.08 S.D. and .143 S.E.
Economic Development: 40% of the respondents were agree that
modern retailing is good for economic development of the country,
while more than one third (35%) of the respondents were neutral and
one fourth (25%) of the respondents were disagree with the
statement. The mean value of the item is 3.23 with .963 S.D. and
.138 S.E.
Impact on Entrepreneurship: More than half (56%) of the
respondents were neutral with the statement that modern retailing
will have negative impact on entrepreneurship development in the
country, while 23% of the respondents were disagree and rest 21% of
the respondents were agree with the statement. The mean value of the
item is 2.98 with .743S.D. and .098 S.E.
Table-3
Perception of Traditional Retailers towards Modern Retailing
Sl.
No.
Name of the Item
Agree
(%)
Neutral
(%)
Disagree
(%)
Mean S.D. S.E.
1 Healthy Competition 55 26 19 3.36 .937 .124
2 Cut The Profit Margin 63 21 16 3.61 .977 .129
3 Reduce the Sales
Volume
51 30 19 3.36 .858 .113
4 Negative Impact 47 30 23 3.36 .975 .129
5 Unhealthy
Competition
31 30 39 2.91 1.09 .144
6 Positive Impact 38 32 30 3.01 .133 1.00
7 Way of Cooperative
Marketing
41 19 40 2.92 1.06 .141
8 Change of Strategy 46 33 21 3.24 .911 .120
9 Violation of Socio-
Cultural Values
40 25 35 3.00 1.06 .141
209
10 Association of
Traditional Retailers
24 39 37 2.82 .984 .130
11 Change of Distribution
Strategy
38 23 39 3.03 1.14 .152
12 Violation of Business
Ethics
37 28 35 3.01 1,02 .135
13 Improvement of
Customer Service
51 35 14 3.56 .964 .128
14 Replacement of
Traditional Retail
Stores
29 46 25 3.00 .963 .127
15 Employment
Opportunity
36 32 32 3.10 1.08 .143
16 Economic
Development
40 35 25 3.23 .963 .138
17 Impact on
Entrepreneurship
21 56 23 2.98 .743 .098
Relationship of Demography and Perception
The relationship between the perception items and
demography of the respondents a Bivariate correlation was done and
it is found that the Family size and capital investment of a traditional
retailer was having significant relationship with the perception
variables. Rest of the demography variables was not having any
correlation with the perception variables. The family size was having
significant negative correlation with healthy competition (r= -.273),
and capital invested is having relationship with cut of profit margin
(r= .308), negative impact of modern retailing (r=.332), cooperative
marketing (-.373), improved customer service (r= .298) close
employment opportunity (r= .266).
The variables which are having significant relationship with
capital investment are negative or against the modern retailing. It is
clear that as majority of the respondents are from lower investment
group i.e. <Rs.5, 00,000 so they have more challenges with the entry
of modern retailing. The formation of cooperation of traditional
retailers is having significant negative relationship this relationship
shows that the chance of formation of cooperation is not very much
clear, as the cooperative movement has been failed in India.
210
Table-4
Correlation between Family Size and Capital Invested with Perception Variables
Items
Family
Size
Capital
Invested
Healthy Competition -.273* .102
Cut Profit Margin -.132 .308*
Reduced Sales Volume -.030 .225
Negative Impact .003 .332*
Unhealthy Competition .002 -.061
Positive Impact .068 .220
Cooperative Marketing -.123 -.373**
Change Store & Supply Chain
Strategy
-.082 -.096
Violating Socio-Cultural Norms .162 -.030
Lead Association Of Traditional
Retailers
.121 -.101
Change Distribution Strategy .044 .131
Violating Ethical Values .151 .152
Improved Customer Service -.019 .298*
Modern Retailing Will Replace
Traditional Retailing
-.060 -.135
Close Employment Opportunity .062 .266*
Economic Development -.029 -.186
Negative Impact On
Entrepreneurship
.101 .358**
* Correlation is significant at the 0.05 level (2-tailed).
** Correlation is significant at the 0.01 level (2-tailed).
Conclusion
It is clear from the study that the traditional retailers are not
very much clear about the consequences of the modern retailing as
most of the responses about the impact of the modern retailing given
by the traditional retailers are neutral or undecided, except the item
like; the modern retailing will cut the profit margin of the traditional
retailers, as a great majority of the respondents were agree with the
statement and, the around half of the respondents were also agree
with three more items like; the modern retailing will lead healthy
competition in the market, modern retailing will reduce the sales
volume of the traditional retailers, and traditional retailers should
improve customer care services in the era of modern retailing, Rest
of the items were almost equal rating within agree, disagree and
211
undecided. This may be because of low penetration of the modern
retail stores in the each and every town/city of the country, and most
of the modern retail stores are located in the metro cities so the
traditional retailers may not have the knowledge of its consequences.
In metro cities the shopping from modern retail store is the symbol
of high status in the society and it is an entertainment source also as
all facilities are available under one roof.
The initiatives should be taken to protect the interest of the
unorganized retailers as this sector is having the employment
opportunity to the majority of society and this is one of the areas of
entrepreneurship development in the country as the most of the
respondents are having less than Rs.5,00,000 lakh initial investment
and belonging to the large families.
The traditional retailers should make strategy to retain their
customers by providing quality goods and services and they should
also go for collaboration within the regional level then only they can
survive and win in this globally competitive environment.
212
References
Agarwal Vaishali & Sanjay Mishra, (2008), “Role of Retailers in
Reducing Inventory and Improving Customer Satisfaction:
An Empirical Study of Consumer Durables.”- Indian Journal
of Marketing, September, pp-36-43.
Baseer Amatul & G. Laxmi Prabha, (2007), “Prospects and
Problems of Indian Retailing”.-Indian Journal of Marketing,
October, pp-26-28.
Bhatnagar Gitanjali, (2004), “Retail Revolution.”-Indian Journal of
Marketing, November, pp-13-17.
Dave Sumita, Shikha Sondhi & Saket Ranjan Praveer, (2008),
“Effectiveness of E- Tailing in the era of Techno Revolution
in Retailing”.A study with respect to Vending Machines.-
Journal of Marketing & Communication (May- August) Vol-
4 Issue-1, pp-71-79.
Gupta C. P., Rajeev Agarwal & Madhulika Sinha, (2008),
“Organized Retailing and its effect on the consumer buying
behaviour with special reference to Agra city.”- Journal of
Marketing & Communication (May- August) Vol- 4 Issue-1,
pp-80-88.
Krishnan, N.V. H. & S. Prasanna Venkatesh (2008),“Challenges of
Merchandising Strategies in Fashion Retailing-A Study on
Private Labels Vs Manufactured Brands.”- Indian Journal of
Marketing, March, pp-14-21.
Lather, Anu Singh & Tripat Kaur (2006) - “It’s All at the Mall:
Exploring Present Shopping Experiences” –Indian Journal of
Marketing, August, pp-3-8.
Perera, H. S. C., S. A. Buddhika & C.V. Rathnayake, (2008),
“Application of Retail Services Quality Scale to SriLankan
Supermarkets: An Empirical Study.”- Indian Journal of
Marketing, October, pp-13-18.
213
Ramanathan. V. & K. Hari, (2008), “Structural changes in Indian
Retail market: From Unorganized to Organized”-Indian
Journal of Marketing, December, pp-34- 40.
Singh, Reetesh Kumar& Aditya Tripathi, (2008), “Diagnosing
impact of malls on small shops” a study of Delhi and NCR”, -
Delhi Business Review, Volume-9, No-1 (January-June), pp-
77-84.
Swar Biranchi Narayan (2007), “Challenges and opportunities of
Organized Retailing in India”- Journal of Marketing &
Communication, Sep-Dec, Vol-3, Issue-2, pp-41- 49.
Sahoo Debajani & Hari Govind Mishra, (2008), “Organized Retail
in India: A Case Study of Bal-Wart .”- Indian Journal of
Marketing, January, pp-35-43.
Venkateshwarlu, H. & C. V. Ranjani, (2007), “Small Vs Mall.”-
Indian Journal of Marketing, October, pp-29-33.
Online Sources
Outlook (2006), October, 16
http://retailindustry.about.com/od/technology/
http://www.retailtech.com/
http://www.retailtechnology.co
www.india retailing.Com
www.commerce.nic.in
FICCI Retail Report 2007

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Survival strategy for unorganised retailers

  • 1. ISSN 0975 – 5942 Survival Strategy for Traditional Retailers in the Era of Modern Retailing H. C. Purohit and Kavita Department of Business Economics, VBS Purvanchal University, Jaunpur, UP Corresponding author: hcpurohit_mbe@yahoo.co.in Abstract India is the fastest growing market in Asia Pacific for international tourist spending, according to the latest Visa Asia Pacific release. The economy is growing by over 8% a year and India’s growth rate can actually exceed that of China by 2015. Favorable demographic and psychographic changes relating to India’s consumer class international exposure, availability of quality retail space, wider availability of products and brand communication are some of the factors that are driving the retail in India. Development of India as a sourcing hub shall further make India as an attractive retail opportunity for the global retailers. Retailers like Wal-Mart, GAP, Tesco, JC Penny, H&M, Karstadt-Quelle, Sears (Kmart) etc stepping up their sourcing requirements from India and moving from third-party buying offices to establishing their own wholly owned/wholly managed sourcing & buying offices shall further make India an attractive retail opportunity for the global players. Increasing growth of modern retailing in across product categories, food and grocery, wet groceries, apparel and jewelry etc are the areas where lucrative opportunities for modern retailing exist. The traditional retailers have the challenges in the era of modern retailing. The proposed study covers the issues related to the growth of modern retailing and the perception of the traditional retailers about the modern retailing. Keywords: Traditional, Modern, Retailers, Survival, Strategy
  • 2. 199 Introduction Retailing is one of the world’s largest industries. It is in a permanent state of change, and the pace of this change has been accelerating over the last decade. Retail outlets are the main source of purchase for consumers. Retailing is the final stage in the distribution process (from manufactures to consumer), in which the retailer, as an intermediary, collects an assortment of goods and services from various sources and offers them to the customer. Retailing goes back to centuries it started as a very primitive business but today has grown tremendously. First people were doing business with their neighbors. Goods were exchanged between them. Gradually people began to collect themselves to a given neighborhood, which provides a geographical place to do the exchange. This not only increases the exposure of a given good but also helps a lot towards the development of a more formalized system, gradually, a few more start to get together to a place which in turn creates a need for a common place. Later this common place time was called a fair. With the passing of time, the number of people doing businesses in a given fair increased, issues like security, transportation, become a matter of concern. This semi formalized system then gave birth to small scale groceries, where people start to provide more combinations in their own neighborhoods. Then came the issue of choice in given grocery, the choices the customer had was limited, this was the beginning of the concept of everything under one roof. Rapid evolution of these small scale groceries gave birth to the modern retail grocery system where, super markets were considered as the major form of retailing. Delivering a superior quality of service has long been considered the basic retailing strategy (Berry, 1986, Cronin and Taylor, 1992, Parasuraman, Zeithamal and Berry, 1988). Organized retailing, which aims at providing an ideal shopping experience for the consumer based on the advantages of large- scale purchases, consumer preference analysis, excellent ambience and choice of merchandise, has been in a large number of cities in India with many business houses investing in this segment. Retailing environment has evolved tremendously over the last 10 years. Indian retail network has grown through what are called “mom- and- pop” small grocery stores that are run by individuals or families and cater to their immediate neighborhood or locality. Like
  • 3. 200 in most other countries, India’s retail industry is slowing getting organized and giant networks of stores are spreading themselves across the Indian landscape, starting with the larger and more populated cities and towns. The entire retail industry can be segmented based on the kind of goods they carry, these can be: Food and grocery Consumer durables Clothing, Textiles and fashion accessories, Jewelry Watches Footwear Health and beauty care products (including pharmaceuticals) Mobile handsets and accessories I). Furniture and furnishings. Organized Verses Unorganized Retailing: Retailers include street vendors, supermarkets, department stores, restaurants, hotels and even two-wheeler and car showrooms. While Counter stores, kiosks, street markets and vendors, where the ownership and management rest with one person, are classified as traditional or unorganized retail outlets. The Indian retail story of transformation began a few years ago and is rapidly spreading across the more densely populated cities and towns but it is still a small fraction of the total retail potential that exists. An overview of the retail industry: The organized retail business in India is booming and various expert studies has pointed out that it is set to grow exponentially in the coming years . The unstated fact of organized retailing is that the first phase of organized retailing came into existence way back, when few textile mills showrooms, Khadi Bhavan outlets were opened across the nation. Jewelry showrooms were among the first to offer air conditioned facility to make customer feel comfortable. Probably Raymonds was the first one to open chain store with décor and ambience resulting in a chain reaction amongst established brands
  • 4. 201 and retailers in the country. Until 90’s, there were just 3 international style shopping malls in India-Ansal in Dehli, Spencer in Chennai, Crossroad in Mumbai (Bhatnagar 2004). Opening up of the Indian economy, market liberalization, growing purchasing power of middle class, increasing number of rich and increasingly self-confident consumers are sowing the seeds for a retail transformation that will bring more Indian and multinational players on the scene. The Indian retail sector continues to be one of the largest sectors attracting fresh investments from private sector. Currently Indian retail distribution is completely fragmented with about 13 million players. The majority of these are very small players operating from small shops (below 50 square feet in size) and with handcarts. These retail outlets are spread across the country in over 5,000 cities and 6, 00,000 villages. The Indian retail industry is estimated to provide employment to over 18 million people, the largest employment after agriculture. FICCI Retail Report, 2007 indicates that organized retail will grow at significant CAGR of around 50 percent till 2011 mainly due to the investments of more than $ 30 billion budgeted by big and small players in the organized retail sector over coming five to seven years. Organized retail sector has witnessed a CAGR of around 35 percent over the past five years and contributing around 10 percent to the country’s GDP and eight percent of the employment. The retail sector is seeing investments of up to Rs.6000 crore by the 20 prominent retail players. Organized corporate retailing is poised to become the business of the decade in India. The value of organized retail is expected to grow 2.8 times in the coming four years to a Rs.1, 000 billion industry, attracting many global retail chains like Wal- Mart, Tesco, and Carrefore (Outlook, October 16, 2006), Foreign Direct Investment (FDI) up to 51 percent in single brand retail was permitted and multi-brand retail is expected to open up to 51 percent of FDI soon. Meanwhile Indian retail chains like Reliance Retail, Croma, Aditya Birla group, S. Kumars, Shopper’s stop ,Wetside, Subhiksha and Trinetra have all been consolidating their reality, brands, market shares and locations. Retail giants, the largest being Wal-Mart- Bharati, Reliance, AV.Birla group and Future group, Pantaloon, plan to expand the share of organized retail from the current 3 percent to approximately 15-20 percent in four years by investing more than $25 billion (excluding real estate investment). Of the proposed investment, 60-65 percent will go towards setting up the supply chain for food and groceries, (CII-Kearney2006). According to the India Retail report 2007, the organized retail sector
  • 5. 202 accounted for Rs.55,000 crore ($12.4 billion)business at current prices in the calendar year 2006, increasing its share to 4.6 percent of the total Indian Retail value that stood at Rs.12,00,000 crore ( $270 billion). Moving forward, organized retailing is projected to grow at the rate of about 37 percent in 2007 and 42 percent in 2008 It is also said that the organized retail sector is expected to generate 10 to 15 million jobs over the next five years, and that the value of the organized retail sector in India by 2010 would be around Rs.2, 00,000 crore or US $45 billion. According to the report organized retail in India has the potential to generate some 2.5 million additional jobs in retain support activities including contract production and processing, supply chain and logistics, retail real estate development and management etc. On the other hand, a report published in 2004 by the centre for policy alternatives entitled FDI in India’s Retail sector: More Bad than Good stated that retailing is probably the primary form of disguised unemployment, underemployment in the country”. As per the report, due to overcrowding in the agricultural sector and stagnation in the manufacturing sector, millions of Indians are forced into the service sector. Given the lack of opportunities it is almost a natural decision for an individual to set up a small shop or store depending on his or her means or capital and thus a retailer is born seemingly out of circumstances rather than choice (Trivedi et. al.2007). Review of Literature: Review of existing literature and different reports which are published from time to time are flashing that, to- date there is very little understanding of what the impact of corporate retail will be on the so called unorganized retail sector and the agricultural sector (the country’s two largest sources of employment). Retailing encompasses the business activities involved in sending goods and services to their consumers for their personal family or household use. It includes sale to the final consumers ranging from cars to apparel, to meals at restaurant to theater tickets. Retail is the largest private industry in the world and is playing a significant role in the world economy because of the contribution that it makes to the economy of the country. The major impact which the retailing has made in India is that it has changed the whole concept of shopping in terms of setup and consumer buying behaviour. The trend shows that it is not only the consumers of the metro and other big cities of India but also those of the small cities who are experiencing this retail
  • 6. 203 revolution. They show that many more consumers in various cities are eagerly waiting for the opening up of the shopping malls (Gupta et al 2008). Objectives to study the growth of modern organized retailing in India. to find out the perception of traditional retailers about modern retailing. Methodology To gather the required information for this study, both secondary and primary source of data was used. Secondary data has been collected from journals, magazines, news articles, books, internet and other documented materials. Information obtained from retailers was analyzed using the SPSS computer package. Questionnaire construction: To measure the perception of the Kirana store keepers towards the organized retailing, a questionnaire was developed on 5-point Likert type scale, ranging from “Strongly Agree --- --- --- --- --- Strongly Disagree”, in all seventeen items were constructed to measure the perception of traditional retailers toward the modern retailing. And some more questions related to the demography were also included in the questionnaire. Data Collection The primary data was gathered by administrating a structured questionnaire with more than 100 retailers of grocery, cosmetics, jewelry, and apparel items in Jaunpur city. Sampling The Selection of the retail outlets was based on convenient sampling, according to the availability of the shop keeper in a particular time period of the survey. Sample Size: In all more than 100 questionnaires were distributed but only 89 questionnaires were included in the study rest were rejected due to incomplete information or did not return from the shop keepers.
  • 7. 204 Sample Profile: The sample profile of the respondents is presented below: Age: A great majority (65%) of the respondents was from young age group i.e. 20 to 40 years, with 35% respondents 20 to 30 years of age. One third (33%) of the respondents were from mature age group i.e. more than 40 years, with 12% old age group (more than 50 years of age) (Table-1). Gender: Almost all (93%) of the respondents were male (Table-1). Income: Less than half (40%) of the respondents were from middle income group i.e. 10,000 to 30,000 per month, and more than one third (35%) of the respondents were from lower income group i.e upto Rs. 10,000 per month (Table-1). Capital Invested: An overwhelming majority (88%) of the respondents was having an investment of upto Rs. 5, 00,000 in their business concern (Table-1). Education: (42%) of the respondents were highly educated with 5% professionally educated, and 44% of the respondents were having upto intermediate education (Table-1). Family Size: A great majority (68%) of the respondents were having large family size with more than 5 members in their family, and one fourth (25%) of the respondents were having middle family size (Table-1). Table-1: Sample Profile Age Gender Income (000) Investment (000) Education Family Size Years % Category % Levels % Capacity % Levels % No. % < 20 2 Male 93 < 10 35 < 500 88 Inter 44 < 3 7 20-30 35 Female 7 10-20 17 500- 1000 5 Graduate 37 3-5 25 30-40 30 Total 100 20-30 23 > 1000 7 Professional 5 > 5 68 40-50 21 > 30 25 Total 100 Uneducated 14 Total 100 >50 12 Total 100 Total 100 Total 100
  • 8. 205 Validity of the Tool In order to test the validity of the tool developed for the purpose to measure the perception of the traditional retailers and before going to apply the tool, a chi square test was done and it was found that almost all the items except the item that ‘modern retailing will have negative impact on traditional retail outlets’ and ‘the traditional retailer will improve their customer services in the era of modern retailing’ were significant of .000 level. As the sample size of the study is less so these two items were also included for final survey (Table-2). Table-2 : Validity of the Tool Sl. No. Name of the Item Chi Square Significance 1 Healthy Competition 39.75 .000 2 Cut The Profit Margin 32.38 .000 3 Reduce the Sales Volume 19.84 .000 4 Negative Impact 6.84 .084 5 Unhealthy Competition 14.49 .006 6 Positive Impact 25,01 .000 7 Way of Cooperative Marketing 26.77 .000 8 Change of Strategy 34.66 .000 9 Violation of Socio-Cultural Values 21.15 .000 10 Association of Traditional Retailers 23.08 .000 11 Change of Distribution Strategy 13.26 .010 12 Violation of Business Ethics 20.80 .000 13 Improvement of Customer Service 6.78 .079 14 Replacement of Traditional Retail Stores 31.68 .000 15 Employment Opportunity 14.84 .005 16 Economic Development 23.61 .000 17 Impact on Entrepreneurship 56.24 .000 Results The perceptions of the traditional retailers were analyzed with the help of SPSS and presented as below: Healthy Competition: More than half (55%) of the respondents were agree with the statement that modern retailing will lead a healthy competition in the market, while 19% of the respondents were disagree and more than one fourth (26%) of the respondents were undecided. The mean value of the item is 3.34 with .937 S.D. and .124 S.E.
  • 9. 206 Cut The Profit Margin: A great majority (63%) of the respondents were agree that modern retailing will cut the profit margin of the traditional retailers, while 21% of the respondents were undecided and 16% of the respondents were disagree with the statement. The mean score of the item is 3.61 with .977 S.D. and .129 S.E. Reduce the Sales Volume: Around half (51%) of the respondents were agree with the statement that modern retailing will reduce the sales volume of their business, while 30% of the respondents were undecided and 19% of the respondents were disagree with the statement. The mean value of the item is 3.36 with .858 S.D. and .113 S.E. Negative Impact: Less than half (47%) of the respondents were agree with the statement that the modern retailing will have negative impact on traditional retail outlets, while 30% of the respondents were undecided and more than one fifth (23%) of the respondents were disagree with the statement. The mean score of the item is 3.36, with .975 S.D. and .129 S.E. Unhealthy Competition: More than (39%) of the respondents were disagree with the statement that modern retail will lead an unhealthy competition in the market, while less than one third (31%) of the respondents were agree and 30% of the respondents were undecided with the statement. The mean score of the item is 2.91, with .1.09 S.D. and .144 S.E. Positive Impact: More than one third (38%) of the respondents were agree with the statement that modern retail will have a positive impact on traditional retail outlets, while 32% were undecided and 30% of the respondents were disagree with the statement. The mean score of the item is 3.01, with 1.00 S.D. and .133 S.E. Way of Cooperative Marketing: Less than half (41%) of the respondents were agree that the modern retail will pave way for co- operative marketing, while around equal number of the respondents (40%) were disagree and rest (19%) of the respondents were undecided. The mean value of the item is 2.92, with 1.06 S.D. and .141 S.E.
  • 10. 207 Change of Strategy: Around half (46%) of the respondents were agree with the statement that the traditional retailers will have to change their supply chain and store strategy for their survival, while one third (33%) of the respondents were undecided about their strategy. The mean value of the item is 3.24 with .911 S.D. and .120 S.E. Violation of Socio-Cultural Values: More than one third (35%) of the respondents were disagree that the modern retailers are violating the socio-cultural norms of the society, while 40% of the respondents were agree and one fourth (25%) of the respondents were undecided with the statement. The mean value of the item is 3.00 with 1.06 S.D. and .141 S.E. Association of Traditional Retailers: Less than one fourth (24%) of the respondents were agree with the statement that modern retailing will lead an association of the traditional retailers, while 39% of the respondents were undecided and 37% of the respondents were disagree. The mean value of the item is 2.82 with .984 S.D. and .130 S.E. Change of Distribution Strategy: 38% of the respondents were agree that the traditional retailers will have to change their distribution strategy and around equal number (39%) of the respondents were disagree with this statement, with 3.03 mean, 1.14 S.D. and .152 S.E. Violation of Business Ethics: more than one third (37%) of the respondents were agree with the statement that modern retailers are violating the ethics and values of the business, while 35% of the respondents were disagree with the statement. The mean value of the item is 3.01 with 1.02 S.D. and .135 S.E. Improvement of Customer Service: Around half (51%) of the respondents were agree with the statement that the traditional retailers will improve their customer services in the era of modern retailing, while more than one third (35%) of the respondents were neutral with the statement. The mean value of the item is 3.56 with .964 S.D. and .128 S.E.
  • 11. 208 Replacement of Traditional Retail Stores: On fourth (25%) of the respondents were disagree with the statement the modern retailing will replace the traditional retailers, while 29% of the respondents were agree with the statement and around half (46%) of the respondents were neutral with the statement. The mean value of the item is 3.00 with .963S.D. and .127 S.E. Employment Opportunity: More than one third (36%) of the respondents were agree that the modern retailing will close employment opportunity in the country, while an equal number of the respondents (32%) were neutral and disagree with this statement. The mean value of the item is 3.10 with 1.08 S.D. and .143 S.E. Economic Development: 40% of the respondents were agree that modern retailing is good for economic development of the country, while more than one third (35%) of the respondents were neutral and one fourth (25%) of the respondents were disagree with the statement. The mean value of the item is 3.23 with .963 S.D. and .138 S.E. Impact on Entrepreneurship: More than half (56%) of the respondents were neutral with the statement that modern retailing will have negative impact on entrepreneurship development in the country, while 23% of the respondents were disagree and rest 21% of the respondents were agree with the statement. The mean value of the item is 2.98 with .743S.D. and .098 S.E. Table-3 Perception of Traditional Retailers towards Modern Retailing Sl. No. Name of the Item Agree (%) Neutral (%) Disagree (%) Mean S.D. S.E. 1 Healthy Competition 55 26 19 3.36 .937 .124 2 Cut The Profit Margin 63 21 16 3.61 .977 .129 3 Reduce the Sales Volume 51 30 19 3.36 .858 .113 4 Negative Impact 47 30 23 3.36 .975 .129 5 Unhealthy Competition 31 30 39 2.91 1.09 .144 6 Positive Impact 38 32 30 3.01 .133 1.00 7 Way of Cooperative Marketing 41 19 40 2.92 1.06 .141 8 Change of Strategy 46 33 21 3.24 .911 .120 9 Violation of Socio- Cultural Values 40 25 35 3.00 1.06 .141
  • 12. 209 10 Association of Traditional Retailers 24 39 37 2.82 .984 .130 11 Change of Distribution Strategy 38 23 39 3.03 1.14 .152 12 Violation of Business Ethics 37 28 35 3.01 1,02 .135 13 Improvement of Customer Service 51 35 14 3.56 .964 .128 14 Replacement of Traditional Retail Stores 29 46 25 3.00 .963 .127 15 Employment Opportunity 36 32 32 3.10 1.08 .143 16 Economic Development 40 35 25 3.23 .963 .138 17 Impact on Entrepreneurship 21 56 23 2.98 .743 .098 Relationship of Demography and Perception The relationship between the perception items and demography of the respondents a Bivariate correlation was done and it is found that the Family size and capital investment of a traditional retailer was having significant relationship with the perception variables. Rest of the demography variables was not having any correlation with the perception variables. The family size was having significant negative correlation with healthy competition (r= -.273), and capital invested is having relationship with cut of profit margin (r= .308), negative impact of modern retailing (r=.332), cooperative marketing (-.373), improved customer service (r= .298) close employment opportunity (r= .266). The variables which are having significant relationship with capital investment are negative or against the modern retailing. It is clear that as majority of the respondents are from lower investment group i.e. <Rs.5, 00,000 so they have more challenges with the entry of modern retailing. The formation of cooperation of traditional retailers is having significant negative relationship this relationship shows that the chance of formation of cooperation is not very much clear, as the cooperative movement has been failed in India.
  • 13. 210 Table-4 Correlation between Family Size and Capital Invested with Perception Variables Items Family Size Capital Invested Healthy Competition -.273* .102 Cut Profit Margin -.132 .308* Reduced Sales Volume -.030 .225 Negative Impact .003 .332* Unhealthy Competition .002 -.061 Positive Impact .068 .220 Cooperative Marketing -.123 -.373** Change Store & Supply Chain Strategy -.082 -.096 Violating Socio-Cultural Norms .162 -.030 Lead Association Of Traditional Retailers .121 -.101 Change Distribution Strategy .044 .131 Violating Ethical Values .151 .152 Improved Customer Service -.019 .298* Modern Retailing Will Replace Traditional Retailing -.060 -.135 Close Employment Opportunity .062 .266* Economic Development -.029 -.186 Negative Impact On Entrepreneurship .101 .358** * Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed). Conclusion It is clear from the study that the traditional retailers are not very much clear about the consequences of the modern retailing as most of the responses about the impact of the modern retailing given by the traditional retailers are neutral or undecided, except the item like; the modern retailing will cut the profit margin of the traditional retailers, as a great majority of the respondents were agree with the statement and, the around half of the respondents were also agree with three more items like; the modern retailing will lead healthy competition in the market, modern retailing will reduce the sales volume of the traditional retailers, and traditional retailers should improve customer care services in the era of modern retailing, Rest of the items were almost equal rating within agree, disagree and
  • 14. 211 undecided. This may be because of low penetration of the modern retail stores in the each and every town/city of the country, and most of the modern retail stores are located in the metro cities so the traditional retailers may not have the knowledge of its consequences. In metro cities the shopping from modern retail store is the symbol of high status in the society and it is an entertainment source also as all facilities are available under one roof. The initiatives should be taken to protect the interest of the unorganized retailers as this sector is having the employment opportunity to the majority of society and this is one of the areas of entrepreneurship development in the country as the most of the respondents are having less than Rs.5,00,000 lakh initial investment and belonging to the large families. The traditional retailers should make strategy to retain their customers by providing quality goods and services and they should also go for collaboration within the regional level then only they can survive and win in this globally competitive environment.
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