A Study of the Organized Retail Scenario in India and Customer Impulsiveness in Organized Retail Outlets

Abstract

The organized retail sector is growing at a rapid pace across states in India and is the prime driver of impulse buying by youngsters and individuals with substantial salaries. Most buying takes place during weekends at these stores; this was not seen in the previous periods. The research study was conducted to find the impact of effective Visual Merchandising (VM) on the impulse buying behaviour of customers at various retail stores in Andhra Pradesh. The objective of this study is to provide some insight into various segments of the Indian organized retail sector – employment opportunities, education profile of employees across states, skill gaps, work force distribution – and to find the satisfaction attributes of customers at organized retail outlets, and most importantly, how VISUAL MERCHANDISING is affecting impulse decisions of the customer. In this study, we used various questions on lifestyle attributes and satisfaction with life scale variables for collecting information, and tried to study their effect on customer impulse behaviour. A survey of 600 retail customers was done and results interpreted in this paper.

Introduction

According to a KPMG report which focuses on various segments of the Indian retail sector, the food & grocery segment has a 31 percent share of retail employment, lifestyle has 7 percent, entertainment & leisure has 1 percent and home improvement has 7 percent; health & personal care has 3 percent, auto and auto components has 26 percent, and gems and Jewellery has 25 percent.

According to Pankaj Gupta, Practice Head – Consumer and Retail, Tata Strategic Management Group, the overall retail market in India has grown at a Compound Annual Growth Rate of 5.5 percent (at constant prices) to Rs 1,677,000 crore in 2015. He projected that the organized retail sector will grow at a much faster CAGR of 21.8 percent (at constant prices) to Rs. 246,000 crore and will constitute ~ 15 percent of total sales in the retail sector. He projected that the top retail categories in the organized retail sector would be grocery, food & general merchandise, clothing &
textiles, mobiles & electronic durables, food servicing, home improving decors and the like.

According to his estimate, the share of the 35 towns with population greater than one million in the overall population of India would grow much faster from around 10 percent to reach around 14 percent by 2025. Simultaneously, the share of these towns in the overall retail market would grow from 21 percent today to 40 percent by 2025. According to him, retailers should focus on the top 37 towns in this decade; the opportunity in smaller towns and rural India would be smaller and fragmented as compared to the larger towns.

According to Pankaj Gupta, Practice Head – Consumer and Retail, Tata Strategic Management Group, there are some likely trends seen internationally that could have a bearing on our country.

The first trend is top retailers consolidating their share of the organized retail market – the big retailers may get bigger at the early stages itself. He cited the example of China where in 2003, the top hundred players accounted for only 8 percent of the total retail market while the top 10 accounted for a little more than 3 percent share of the market.

According to a report of M+M Planet Retail, 30 retailers accounted for 20 percent share of the total US retail market in the 1990’s whereas only 8 retailers account for the same 20 percent share of the market in 2005. Similarly, 37 retailers accounted for 20 percent share of the European retail market in the nineties while only 10 retailers accounted for the same share of the market in 2005.

The second trend is convenience stores and hypermarket formats gaining more prominence driven by the consumer’s need for convenience and low price with high value in the mass category. Even though supermarkets are successful in emerging as successful pioneers in the first stage of retail space expansion, they are not able to match value propositions of hypermarkets and convenience stores.

The third trend pertains to the rising importance of private label products. Presently, private labels account for 17 percent of global retail sales with the highest share of 23 percent in Europe and around 4 percent in Asia. As per M+M Planet Retail data, private label penetration varies in the range of 25-95 percent among some of the largest retailers in the world. This is due to rising acceptability of private store labels
among store customers and growing competition in the pricing space. operations, setting up a proper display and selecting the right promotional mix and marketing strategy, taking stock of sales – product wise and amount wise – and also maintaining an effective after-sales service.

Generally retailers procure their selection of goods from distribution agents or manufacturing companies, and sometimes even resort to backward integration to manufacture their own store branded products. To maintain their inventory, retailers generally have national warehouses where they stock goods and transfer them to regional warehouses based on the demand for those goods. When it comes to marketing, store managers try to identify the various segments that they can and should target for improving the store sales through effective visual merchandising and
proper designing of the store with suitable product advertisements and through successful brand promotions. The store managers try to convert people
visiting the store to customers by providing good facilities inside the store, and training the store employees to guide and help customers in choosing their goods when needed. For retaining old customers and developing new customers through positive word-of-mouth, retailers now provide a separate and effective customer sales service help desk which offers attractive return options for rejected goods or exchange options as well as guarantees or warranties for almost all goods at the store, except consumables. In India, some states allow multi-brand retail while others don’t allow this due to regional considerations.

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