Academic journal article South Asian Journal of Management

Food and Grocery Retail: Patronage Behavior of Indian Urban Consumers

Academic journal article South Asian Journal of Management

Food and Grocery Retail: Patronage Behavior of Indian Urban Consumers

Article excerpt

India is referred to be a nation of shopkeepers with about 15 million retail outlets of all kinds. Of these, the majority are small neighborhood grocery stores called "kirana stores". Food and grocery constitute a major portion of the private consumption. This offers a large potential market for the organized retail companies to tap into. However, the high proliferation of local kirana stores with their unbeatable advantage of proximity and customer familiarity questions the success of organized retail in this category. This study tried to find the responses and patronage behavior of urban customers towards traditional and modern food and grocery retailers. This paper reviewed various literatures to understand the factors which affect the patronage of various retail formats, especially in food and grocery purchase. Differences perceived by customers between the kirana stores and modern retailers are covered in the study to understand the influence of specific decision variables in the selection of a particular retail format. The inference is that "location convenience", "customized services" and "easy goods return/exchange facilities" drive a customer towards kirana stores while "product choice", "efficient store-management" and "value-enhancing services" attract customers towards modern retailers. This understanding of the patronage behavior helps the modern retailers to strengthen the elements of their retail offerings, which the customers value more.

INTRODUCTION

Retailing is the largest private industry in India and second largest employment sector after agriculture. It contributes about 10% to the GDP of India and generates 6-7% of employment. According to Images F&R Research (2007), India has the highest retail density in the world having over 15 million retail outlets. This sector witnessed significant developments in the past 10 years - from small, unorganized family-owned retail formats (commonly known as 'kirana stores') to organized retailing. Liberalization of the economy, rise in per capita income and growing consumerism have encouraged large business houses and manufacturers to set up retail formats; real estate companies (like Raheja Builders, DLF) and venture capitalists (like ICICI ventures) are investing in retail infrastructure. Many foreign retailers like Metro and Wal-Mart have also entered into the market through different routes such as wholesale cash-and-carry, local manufacturing, franchising, etc. In spite of the recent developments in retailing and its immense contribution to the economy, retailing continues to be one of the least evolved industries in India. Over a period of 10 years, the share of organized retailing in total retailing has grown from 10% to 40% in Brazil and 20% in China, while in India it is only about six percent (Images F&R Research, 2009). Within the organized retailing industry in India, the growth of food and grocery category has been particularly slow. The problem that has been taken up for this study was that why, even after almost 15 years of the growth of organized retailing in the country, food and grocery sector has not grown at a pace seen in other emerging economies. A study was undertaken which explores the factors that lead customers to choose modern retailers in food and grocery sector over other formats - based on their perceptions.

In India, retail trade is primarily divided into two segments - organized retailing and unorganized/traditional retailing. These two segments of retailing can be understood as follows (ICRIER, 2005).

Organized Retailing

Any retail outlet chain (and not a one shop outlet) that is professionally managed (even if it is family run), can be termed as organized retailing in India if it has the following features - accounting transparency (with proper usage of MIS and accounting standards), organized supply chain management with centralized quality control and sourcing.

Unorganized Retailing

Any retail outlet that is run locally by the owner or the caretaker of the shop. …

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