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Buying Behavior Of Shoppers In Traditional Vs Modern

Paper Type: Free Essay Subject: Marketing
Wordcount: 3381 words Published: 27th Apr 2017

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Food and grocery constitute a major portion of private consumption. This offers a large potential market for organised retail companies to tap into. However, due to high proliferation of local kirana stores with their unbeatable advantage of proximity and customer familiarity questions the success of organised retail in this category. This study tries to find out the responses and the patronage behaviour of customers towards traditional and modern food and grocery retailers.


India is referred to be a nation of shopkeepers with about 15 million retail outlets of all kinds.

Of these, the majority are small neighbourhood 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 behaviour of urban customers towards traditional and modern food and grocery retailers.

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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. Size of Retail Industry in India is $435 billion as per Technopak report 2010. The Indian retail sector is divided into organized and unorganized retail. Share of Organized retail is 5% to 7 % in the total retail industry. Unlike most other countries, Indian retail sector is highly fragmented and bulk of the business is in the unorganized sector

India has the highest retail density in the world having over 15 million retail outlets. Liberalization of the economy, rise in per capita income and growing consumerism has encouraged large business houses and manufacturers to set up retail formats.

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

Food & Grocery is the main category that constitutes 70% of Total Retail Industry (As per Technopak report 2010)

Grocery has three components (CII-McKinsey &. Company, 2005) (1) Branded grocery products (including packaged foods, soaps and detergents, toiletries and household items); (2) Dry unprocessed grocery (including grains and cereals); and (3) Fresh grocery (including fruits and vegetables, meat and dairy products).

Unbranded category accounts for nearly 60% of all food sales. Fresh groceries in India account for 40% of the food business, including 18% in milk, 13% in fruits and vegetables, and 9% in meat and fish.

Food &Grocery in India is sold through both traditional formats and modern formats like supermarkets, hypermarkets, discount stores and convenience stores.

Nielsen’s Shoppers’ Trend Study, 2008 has revealed some changes in consumer shopping behaviour and purchase pattern in the advent of modem trade. Some of the key insights are as follows (Images F&R Research, 2009)

Shoppers are shopping at supermarkets more frequently than a year back and the average basket size per trip is also increasing.

The local grocer/general store, although still supreme, is, seeing a steady erosion of customer base and spends.

The attributes that a customer looks for while selecting a store also are almost unchanged, with location convenience still supreme followed by perceived value for money, range and quality of stocking

Indian consumers are rapidly evolving and accepting modern retail formats. By 2011, India will have an additional 280 hypermarkets,3,200 supermarkets, 400 department stores and approximately 1,200 mega specialty stores (the category killers) and 20,000 exclusive brand outlets

Purpose of the Study

There is a growing need to evaluate the true drivers of shopping behaviour in the Indian context. The Indian retailing scenario seems to be driven more by euphoria. To a large section of customers the new formats are perceived to add insufficient additional value, except for novelty. However many people in prefer to shop in modern retail outlets

The problem that has been identified for this study is that why even after almost 10 years of the growth of organized retailing in the country, food and grocery sector is not growing at the desired pace, though such a humongous opportunity in food and grocery retail is so visible.

Share of Modern Retail in Food & Grocery is 20% as per Technopak report 2010

On the face of it, food and grocery segment shows the most attractive potential for a modern retailer to enter into. While most observers have accepted the role of large format organized retail in clothing and lifestyle markets, there are still lingering doubts on how organized retail will perform in the food and grocery segment in India.

The following table shows the different formats of food retail formats in India as stated in the paper by Zameer, Asif;Mukherjee, Deepankar ,”Food and Grocery Retail: Patronage Behaviour of Indian Urban Consumers”, South Asian Journal of Management , 2011 .

Model Type



In Mall


Rationale for offering Food retail

Food retail (grocery) as core business.

Food retail (grocery) as core business.

Complete experience and offer.

Draw in customers and experience the offer.

Food Division

Large part of shop

Large part of supermarket

Part of mall management, normally outsourced.

Separate division or department.

Range of SKU’s



Not large


Pricing strategy

Matches market rates

Matches supermarket positioning, may discount.

Matches mall positioning

Discount below market rates.

Type of products

Dry, chilled, packaged, non-foods. Wet products normally not stocked.

Dry, chilled, packaged, limited wet stock.

Dry, chilled, packaged.

Dry, chilled, packaged, wet, and fresh.

Supply Chain Model observed

Self managed

Self managed or outsourced or DC driven

Outsourced logistics, royalty based or franchised.

Outsourced logistics, direct supply from main sources.

Private Labels

Local labels , may not be high

High and increasing

Depends on retailer in mall.

High and increasing.

(Source: The Economic Times Retail 2003)

Literature Review

Store choice and patronage have been widely studied across the world. However, there have been few studies done in India on these issues, since organized retailing has been a very recent phenomenon.

Zeithaml (1988) discussed the consumer perceptions of price, quality and value. He has argued that from the consumer’s perspective, price is what is given or sacrificed to obtain a product.

Howard (1989) identified the three key dimensions of a retail store image: convenience of the store’s location, the price of its products and the information it provides about its products.

Studies by America’s Research Group indicate that 83% of women and 91% of men have ceased shopping at a particular store because of long checkout lines

Supermarket shoppers have cited fast checkout as more important than low prices in selecting grocery stores (Food Marketing Institute, 1985 and 1986).

Woodside A ,Trappey III(1992) indicates that an individual’s positive or negative evaluation of relevant behaviour, is characterized by the person’s beliefs regarding the perceived outcomes of performing the behaviour. For example it can explain why consumers do or do not buy products of a particular brand name or shop at certain type of store.

Lindquist (1974-75) reviewed the published results of some 19 studies on retail store image and synthesized their frameworks into a set of six store image attributes. They are Merchandise, clientele, Promotions, service, Convenience, Store Atmosphere, Post Transaction Satisfaction

BB Goyal and Meghna Agarwal,” Organized Retailing In India- An Empirical Study Of Appropriate Formats And Expected Trends,(2009) it reviews the understanding of customers’ perceptions, attitudes, desires, aspirations and expectations has become very important for marketers. Customers can provide large numbers of new ideas, which companies may not identify on their own.

Ritesh Kumar Dalwadi,” Key Retail Store Attributes Determining Consumers Perceptions”(2010) this study emphasizes that product range, store layout, shopping convenience; promotional schemes, product pricing, customer service, employee behaviour, and store ambience significantly influence the customers.

Mohua Banerjee And Rajib Dasgupta,” Changing Pattern of Consumer Behaviour in Kolkata with Advent of Large Format Retail Outlets”(2010) this study says about the Retailers and mall managers should be aware of the benefits perceived by consumers at malls, whether consumers are shifting their preference from traditional zone-based buying to shopping in malls and the factors responsible for such change, in order to optimally position themselves.

P. Narayana Reddy,” Impact Of Emerging Organized Retailing On Unorganized Retailing” (2009),This paper suggest that the unorganized stores’ turnover falls by 22.8 per cent in the first year of the opening of an organized outlet near the store In other words, as the organized and unorganized retail co-exist, there is an increase in competitive response from the unorganized retailers and turnovers begin to show a positive trend.

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Ch. J. S. Prasad and A. R. Aryasri,” Study Of Customer Relationship Marketing Practices In Organised Retailing In Food And Grocery Sector In India” (2008)The fast changing trends in lifestyles, food and eating habits of consumers have contributed largely to the growth and development of organised food and grocery retail formats in India. But, this sector is predominantly dominated by the traditional kirana stores, which have strong relationships with the customers for various technical and functional quality benefits extended to them.

Decision Variables Used

Common to both Kirana and Modern Retail Stores

Convenience of Location

Parking Facility

Product Variety

Product Quantity


Phone Order

Home Delivery


Bargaining Facility

Credit Facility

Product Quality


Work Convenience


In order to determine the relevant decision variables influencing the selection of a neighbourhood kirana store or a modern trade store for the purchase of food and grocery, the study proposes a set of hypothesis upon certain projected decision variables as research done in the paper by Zameer, Asif;Mukherjee, Deepankar ,”Food and Grocery Retail: Patronage Behavior of Indian Urban Consumers”, South Asian Journal of Management ,2011. For each variable, the null hypothesis is as below:

H ( 0 ): There is no significant perceptual difference in the importance attached to each variable influencing the customer’s decision on choosing between the two retail formats to buy food and grocery.

This means that if the hypothesis is not accepted, there is a significant perceptual difference on account of particular variables between the two retail formats.

H (1): There is a significant perceptual difference in the importance attached to each variable influencing the customer’s decision on choosing between the two retail formats to buy food and grocery.

Key Findings

Convenience of Location: Anywhere in India, generally a customer can expect to find a Kirana store within half a kilometre of his residence, while the presence of supermarkets and convenience stores is mostly in urban areas and that too not very wide-spread. Hypermarkets are generally located in out-of-town locations.

Parking Facility: With, more people using own means of transportation (two-wheelers and four-wheelers) to go to the preferred stores, a preference for adequate and free parking very close to the store has gained importance. For modern retailers, who position themselves as one-stop shops, such a facility is a must near their stores. The consumers are not likely to value travelling frequently for longer distances required to reach such stores.

Product Variety: Total number of products (variety in terms of brands and their Stock Keeping Units (SKUs). Their availability at modern retail stores is more than the neighbourhood Kirana shop.

Product Quantity: Larger volumes are purchased at modern retail stores compared to small traditional shops per shopping trip.

Prices: Price of a particular item can be explained as economic value advantage that a customer perceives to have acquired by purchasing that item from any store. Prices at modern retailers’ are generally lower than that available at kirana shops due to bulk-purchases and disintermediation.

Phone Order: This is the facility extended by the retailers where the customer can place his or her order over phone and can later pick up the ordered items from the store at his/her convenience. This facility is mainly provided by traditional retailers.

Home Delivery: This is defined as the service provided by the retailer to get the customer’s ordered items delivered to his residence (generally extended by most of the retailers in combination with the phone ordering facility). The kirana shops are trying to fight the competition by extending these facilities to their customers.


These are the sales incentives extended by the retailers to customers for an increase in off

take of that particular brand common at modern retail outlets.

Credit Facility: Generally a close personal knowledge of the customer is a prerequisite for extending the credit facility and this aspect is available only at neighbourhood kirana shops.

Bargaining Facility: The scope for negotiating the price of an item at a retail setup is available more in unbranded grocery and fresh grocery, where there are no printed Maximum Retail Price (MRP) or the MRP seems to have no significance. This facility is extended only by kirana shops.

Product Quality: In India, traditionally, freshness is of prime importance in buying food and grocery products. Modem retailers with their long supply chain and storing capacity are perceived to be selling food items (especially wet groceries) which are comparatively less fresh than kirana stores or fruit and vegetable vendors.

Working Hours Convenience: It is defined as the timings in the day when a particular store remains open for customers to make purchases. Generally kirana shops have a longer working duration as they open early in the morning and close late in the evening.

Most of the people have experience of shopping at Modern Retail at least once

Most people prefer to shop food & Grocery from Modern retail outlets

This indicates that the overall benefits and the total shopping experience at the modern retail outlets can influence a high degree of store patronage behaviour.

Most of the people do not use vehicle to reach to the most preferred Kirana store

However majority of people use Vehicle to shop at modern retail outlets

Customers favoured Kirana shops on account of convenience of location, home delivery facility, bargaining facility; goods return facility and goods exchange facility.

On the other hands, decision variables like parking facility, product variety, quantity of goods to be purchased, advantage of sales promotion schemes, self-service facility and advantage of loyalty programs drive the customers to organized retail stores.

Clearly location advantage is very critical for Kirana shops plus more personalized services like home-delivery. The psychological benefits of being able to bargain and at the same time also compel the retailer to exchange or return goods are perceived to be more easily available at Kirana shops. The product quality is perceived to be better at Kirana shops for food and grocery products

Organized retailers are perceived to be having better parking facilities, more variety and assortment of merchandize (hence giving much better product choice), self-service (hence the power of holding and evaluating the merchandize), advantage of better discounts/schemes and loyalty programs to incentivize repeat purchases.

Even in Modern Retail there is difference between shopping patterns depending on psychographic and demographic factors

Majority of people who shop at modern retail outlets are in the age group of 25-35 years

More female in comparison to Males shop from Modern retail outlets

In terms of occupation most of the employees and housewife shop from modern retail outlets. Students shop least from Modern retail

In terms of Income, most of the people whose Income is between 10,000 to 20,000 per month shop from Modern retail outlets

Why People are Adapting Modern Retail Formats

Most of the category available under one roof is the major factor to shift towards modern retail outlets

Air conditioning at modern retail outlets is another factor, because AC removes the exhaustion and fatigue involved in shopping.

People also shop at super and hyper markets because they are confident that owner is not cheating on them and consumers are willing to pay premium for it

However few people who prefer to shop at Kirana store is because of Inability of consumer to bargain at modern retail outlets


There is significant perceptual difference in the importance attached to each variable influencing the customer’s decision on choosing between the two retail formats to buy food and grocery.

The major advantages which kirana stores are enjoying over modern retailers are location convenience, customized convenience and easy goods return/exchange facilities. With the highest retail density in the world, the customers are sure to find a local food and grocery retailer, very close to their homes.

Without the trouble of incurring any additional cost in product acquisition on account of fuel/transportation charges, the attractiveness and ease of reaching to the local store are immense. Apart from location advantage, another factor creating patronage for kirana shops is more personalized services like home-delivery.

Kirana stores are also perceived to be better on account of phone order facility and credit facility than organized retailers.

The first major value which the customers perceive very important for the modern food and grocery retailers to provide is the product choice

With large merchandize assortment available under one-roof, the urban customer can fulfill most of his/her monthly requirement in one shopping trip and avoid making frequent trips to various kirana stores.

Proper ambience, neat visual merchandizing, regular product availability, complimentary product layout and efficient check-out process will enhance the shopping experience for the customers. Another value-enhancer for the modem retailers can be extending value-added services (like phone-order and home-delivery), goods exchange/return policy, packaging services, carry-bags, etc. Finally, an important factor which can lead to increased patronage at the modern retailers is customer relationship management activities like loyalty bonus/discounts, special customer cards, and free-parking facility and so on.


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