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    Coexistence of Tradition and Modernity

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    The government’s decision to open up in multibrand retail (in cities with 1 million plus population) has brought into focus the debate regarding the fate of the small traditional stores (STS), popularly called the ‘kiranas’, which forms the bedrock of retail in India.These STS are conveniently located in neighborhoods or clustered in traditional markets where dry and wet goods stores facilitate the practice of daily food shopping, even by the most affluent segments of Indian consumers. The question is, what will be the possible impact, on consumers and kirana stores of the policy change allowing the world’s largest retailer to enter India with majority ownership?

    India is an exception in many respects. Until 2006, according to CII-ATK, food and beverage dominated retail consumer purchases in India – accounting for 74 percent of the total retail market. One of the key reasons for the limited relevance of Western retail theories to countries like India is that Western theories, in various ways, focus on competitive dynamics among modern retail formats (intratype competition), while in India the unfolding process is of modern retail format making inroads into a massive and established base of traditional and unorganized retailing. Conceptualising about retail evolution in India, therefore, requires examination of the impact of the modern sector on the traditional retail sector – in other words, intertype competition 1.

    Today, India has the largest number of ‘unorganised’ retail outlets in the world. A point to remember here is that an ‘unorganised store’ does not necessarily mean an unprofitable or badly managed store. The traditional retail outlets differ significantly from modern retail outlets. The primary distinction is in the nature of direct in-store access to products and brands. In modern outlets, self service is the norm and the store layout and product display are all designed to facilitate shopper navigation and maximise shopper-product interactions. In the STS, on the other hand, in-store access is negligible at best. It is important, therefore, to understand how – despite these limitations – some STS outlets can retain shopper patronage and continue to create value for their shoppers, in other words survive in the context of multinational modern retailers entering India. Of course, other kirana stores that lack advantages of location, adaptability and innovative services may face danger from Walmart, and Tesco type megastores.

    Based on a 4-city (Mumbai, Kolkata, Vizag and Aligarh) study of the STS as well as ongoing research on the retail sector of India, we are able to draw some research-informed themes which can act as indicators of emerging retail systems in India.

    The biggest competitive advantage against modern retail stores is the ability of general stores to cater to a wide spectrum of shoppers across socio-economic classes. The majority of these stores have regular customers who typically know what they will get from that store, where the product is located and how much it costs.

    The shoppers visited these stores frequently; and location convenience was the most important reason for patronising the store. About 20 percent of the shoppers reported visiting the store at least once daily and 45 percent frequented the store once a week.

    Even though brand specification by the shopper is high, we observed considerable scanning of POP material and visible display items during the “waiting time windows”. Our research indicates that 33 percent of all shoppers scan POP of which 47 percent made purchases. Of all purchases in these stores 34 percent were unplanned – and 39 percent of these unplanned buys were POP triggered.

    The relationships between shopkeepers and shoppers appear to be of the identification-based trust type. The general stores have close and long relationships with their shoppers with average length of store patronage being 9 years. The owners of the stores appear to know more than 100 of their regular shoppers by name. Credit is often extended based on personal relationships. Theses store also charged less than MRP prices to their regular shoppers – subtle price preference that modern stores cannot replicate.

    In this type of relationship, both parties come to identify closely with each other’s wants and needs, display empathy, and engage in personal and family-related conversations.

    For nearly 65 percent of observed shopping in India the brand and brand-plus-SKU was specified by the shopper in the first action itself. In around 6 percent cases the brand asked for by the shopper was out-of-stock. However, in 2 out of 3 such cases the shopper accepted the alternative brand suggested by the shopkeeper. In some cases, the shopkeepers cemented the credibility further by offering a personal guarantee or additional services.

    In around 17 percent of cases the shopper mentions only the category and accepts the brand is selected and handed over by the shopkeeper in 80 percent of such instances.

    We identified four distinct shopping missions undertaken in these stores:

    Around 44 percent of shoppers bought for the entire family and 40 percent of shoppers made their monthly comprehensive purchase from these stores. About 34 percent of the shoppers came with a list of items to be purchased; they called out the products they wanted to buy.

    The shopping trips were successful in the sense over 90 percent of the shoppers interviewed purchased everything they wanted. The transaction value was small – an average of Rs 270 – but it was larger among those who came with a list (Rs 452) than those who did not (Rs 174).

    Our research also identified split shoppers who would use both Modern Trade (MT) and STS. These are of two types: Who normally do their monthly household shopping (comprehensive shopping) from a general trade store – The order will usually be home delivered by the store. They either order over phone or drop the list at the shop. These shoppers will also do their top-up/filler and emergency purchases from the local STS. These shoppers usually like to avoid the queues in the billing counter of MT and also don’t want to spend time in picking up items from the shelf which they can get home delivered.

    A mixed retail system comprising of large modern stores and STS outlets can be expected to continue in India for the foreseeable future. One thing, however, is self-evident: “You snooze, you lose” principle will apply to both MT and STS retail in India.

    About the Authors:

    Dr. Atish Chattopadhyay, SP Jain Institute of Management & Research, Mumbai, and Dr. Nikhilesh Dholakia and Dr. Ruby Roy Dholakia, , USA