c

Ê

 
The food and grocery retail industry has been of interest to researchers for

many years from a wide array of perspectives. A literature review was carried

out to identify the previous research efforts and directions related to the

present focal area. To the extent possible, the researcher tried to reproduce

the original terminology used by the authors, to preserve the originality of

the views. The review of literature set off with an overview of Indian retailing

in general and growth and development of food & grocery retailing in

particular followed by consumer shopping behaviour in retailing, shopper

behavior versus choice of retail formats, previously proposed models of store

choice and patronage to introduce a conceptual frame work of this study.

Then the far-reaching literature relating to important constructs in the

proposed model of store choice and patronage behaviour is surveyed.

Finally, this chapter ends with identification of research gaps and

justification of proposed research.

3
 
 Ê 



 
The retailing sector is India·s largest industry after InfoTech, in terms of

contribution to gross domestic product (GDP) i.e. 12 percent and also being

the second largest employment generator (8 percent of total employment)

after agriculture sector. The retailing in India is largely unorganized and

predominantly consists of small, independent, owner -managed shops. Of the

estimated 15 million retail outlets in the country, only about 4 percent of

them are larger than 500 sq. ft. in size. India has been one of the highest

density of retail outlets percapita in the world with a widely spread retail

network but with the lowest per capita retail space @ 2 sq. ft per

c
c
c

person. Indian retailing continues to be one of the least evolved industries.

The Indian retailing buoyed by favorable political and economic outlook with

government legislation permitting foreign direct investment of 51% in single -

brand retail and 100 percent in cash and carry retail business. The Indian

retail market stood at Rs. 1,330,000 crore with annual growth of about 10.8

percent for 2007-08 1. Of this, the share of organised retail in 2007-08 was

estimated to be only 5.9 percent, which was Rs. 78,300 crore. But this

modern retail segment grew at the rate of 42.4 percent in 2007, and is

expected to maintain a faster growth rate over the next three years.

Moving forward, organized retailing is projected to touch Rs. 2, 30,000

crore (at constant prices) by 2010, constituting roughly 13 percent of the

total retail market (India retail report, 2009). This generic growth is likely to

be driven by changing lifestyles and wider brand choice, strong surge in

income levels, which in turn will be supported by favorable demographic and

psychographic patterns. This is substantiated by the growth a nd

development of Indian retailing including organised retailing from the year

1999-2007 and expected retail volume for 2008 -2010 also shown in Table 1

cccccccccccccccccccccccccccccccccccccccc cccccccccccccccc
1 The Images F & R Research estimates for India Retail report-2009.

c
c
 c



  
  



   Ê 
 


   









 




 3




  

 



 


 3






 


1999 7,00,000 5,000 0.7

2000 4,00,000 5,000 1.3

2001 7,20,000 13,000 1.6

2002 8,25,000 15,000 1.8

2003 8,85,000 23,000 2.6

2004 9,30,000 28,000 3.0

2005 10,30,000 37,500 3.6

2006 12,00,000 55,000 4.6

2007 13, 30, 000 78, 300 5.9

2008 e 14,80,000 1,12,000 7.7

2009e 16,40,000 1, 60,000 9.7


 !"" "#" $%

Source:KSA Technopak retail report- 2000, 2001, 2002, 2003, 2004, 2005,
2006 and India retail report-2007 & 2009, e=expected



&



 '

(


 

Food and Grocery is by far the most promising area for the corporate majors

to get into organised retail businesses. The Food and grocery is the second -

largest segment of the retail trade constitutes 53 percent of total private

consumption expenditure (USD 154 billion) and 70 percent of total retail

sales (KSA Technopak Report, 2007). Most of the food and grocery products

reach the consumers through traditional markets which are unorganized

(Bajaj et al, 2005). But the very fast changing trends in food and eating

habits of consumers have contributed immensely to the growth of ¶Western·

format typologies such as convenience stores, discount stores, super

c
c
c

markets, specialty stores and hyper markets for various conspicuous

reasons namely, demand, supply, socio -cultural, demographic,

psychographic, economic, technology and government policies.

In a developing country like India, a large chunk of consumer

expenditure is on basic necessities, especially food related items. Hence

food, beverages and tobacco account for 60 percent of the consumer

spending and sales constitute 70 percent of total retail sales is the 'way to

go' for retailers to attract consumers initially. According to KPMG study

entitled ¶Grocery Retailing in Asia pacific· The organized Indian food/g rocery-

retailing sector is forecast to grow at a compound annual rate of 33 percent

between 2004-2007 even as the Economic Times Intelligence Group (ETIG)

has predicted a CAGR of 13 percent from 2001-2007, for the entire Indian

retail sector. But the growth of organized retailing in India has changed the

business landscape and buyer behavior.

Out of the Rs.13,30, 000 crore total Indian retail market, food &

grocery retail is the single largest block estimated to be worth whopping

Rs.7,92,000 crore (59.5 percent), which has grown from Rs 3,81,000 crore

in 1999 to Rs 4,50,000 crore in 2004 to Rs. 7,43,900 crore in 2006, b ut

98.9 per cent of this market is dominated by the neighbourhood kirana

stores and organised food and grocery retailing accounted for a mea gre 1.1

percent (Rs. 9000 crore), which has increased significantly from 0.8 percent

(Rs. 5800 crore) in 2006 to 0.6 percent (Rs. 3,500 crore) in 2005 and 0.5

percent (Rs.2950 crore) in 2004. However, the modern Food & Grocery retail

accounts for a meagre 11.5 percent of total organised retail market in 2007 -

08.

c
c
c

India·s total retail market was worth US$ 328 billion and its grocery

and food retail market was calculated at US$ 236 billion and US$ 228

billion respectively 2. This has made India the sixth largest grocery market in

the world and expected to grow to US$ 482 billion in 2020 to occupy fourth

position after US, China and Japan. India is the second largest producer of

fruits & vegetables (15 percent and 14 percent respectively) after China (34

percent). The sector is defined by the low gross margins, but there is a

tremendous growth potential in the organised sector in the form of

hypermarkets, supermarkets and hard discount chains.

With significant consumer spending in India on grocery products,

grocery retailers dominated the retailing scene in India, accounting for 90

percent of store-based outlets and 66 percent of value sales in 2007 -08. But,

food and grocery retailing continues to be in the hands of unorganized

independent kirana shops (98.9), as organised retailing outlets such as

supermarkets, hypermarkets, convenience stores and discounters combined

accounted for a miniscule one percent of food and grocery retailing value

sales in 2007 -08. The highly fragmented nature of retailing in India was

evident in the fact that the top 50 retailers in India accounted for only 3.5

per cent of store-based retail value sales in 2007. The constant value

compound annual growth rate for store-based retailing is expected to be 7

percent over the forecast period 2007-2011. Growth among grocery retailers

is likely to be dampened by the mature formats such as independent grocers

and other grocery retailers. This would arise as result of the shift in

cccccccccccccccccccccccccccccccccccccccc cccccccccccccccc
2 International Grocery Development (IGD) estimates, 2006

c
c
c

consumer demand from traditional to modern trading formats and as o ne-

stop shopping has become order of the day.


 
 




(


'



For the last two decades, retailing industry has gone through a

metamorphosis and wide transformation so far as introduction and

induction of different for mats is concerned (Sinha and Kar, 2007). Many

researchers and retail analysts describe the growth of retailing in India as

evolution, especially when they discuss retail formats. But, there is a unique

scenario prevailed in India as it is more of revolutio n than evolution

(Vedamani, 2008). There is retail evolution happening with more and more

formats being defined by the day, not only by the market place but by the

method of retail mediation with customers, by physical store characteristics,

by merchandise characteristics, by convenience etc. At the same time these

newly defined formats co -exist with the primitive ones. In fact, it is the store

format that creates a unique identity for retailers, enabling recall in the

minds of customers. It is difficult to fit a successful international format

directly and expect a similar performance in India (Sinha and Kar, 2007,

p.5).

Therefore, it is important for retailer to look at local conditions and

insights into the local buying behaviour before shaping the forma t choice.

Considering the diversity in terms of taste and preferences existing in India,

the retailers may go for experimentation to identify the winning format

suited to different geographies and segments. Therefore, most of grocery

retailers are region-centric at this point of time. Now a number of retailers

are in a mode of experimentation and trying several formats which are

c
c
c

essentially representation of retailing concepts to fit into the consumer mind

space. There are retail formats that sell multiple products under one roof,

there are formats that sell a definite set of products, and there are formats

that specialises in just one niche product category; also, there are formats

that can attain optimum business from just 10-20 sq.ft of retail space and

there are formats that need a minimum of one lakh square feet to be able to

operate efficiently (India retail report, 2009). It is therefore difficult to

classify retailing merely on the basis of product category.

The Indian food and grocery retailing can be divided into fresh
groceries, branded packaged foods, personal hygiene products and toiletries
and dry unprocessed groceries. The food & grocery sector is characterised by
a large number of traditional formats like the independent grocers, the
pan/beedi shops, Haats, bazaars, government fair price shops and co -
operatives like Kendriya Bhandaar, Apna Bazaar, Sahakari Bhandaar, etc.
dominate this sector. In comparison, modern retail formats viz., convenience
stores, discount stores, supermarkets and hyperm arkets accounted for a
small proportion of sales. However, the growth rate of modern retail format
sales has been significant for the last seven years because new wave of
consumerism and higher standards of hygiene and attractive ambience. The
market is thus getting organised from being micro constituents to macro
players. Retailers are now developing formats in terms of location, layout,
size, design, merchandise, service experience offerings, etc in order to meet
the specific needs of their target custome rs.

c
c
c

The following sections provide insight on growth and development of existing

food and grocery retail formats in India.
´
 )



'



Accounting for over 66% of all forms of retail outlet, independent grocers, or

Kirana stores as they are popularly referred to mom-and-pop or brick and

mortar or traditional formats in the country, was the most common format

of retailing in India. Independent grocers· growth has been phenomenal

despite increasing growth and number modern re tail outlets during the

review period. The independent grocers registered an estimated sales value

of Rs 4,270,813 crore in 2007 from Rs 290,200 crore in 20001 with CAGR of

7.8 percent in 2001-2008 and 6.3 percent in 2006/2007 3. The total number

of independent grocer·s retail outlets also had seen a huge growth rate of 2.8

percent in 2006/2007 with CAGR of 3.2 percent in 2001 -2008. The total

number of independent retail outlets increased to 88, 71,500 in 2007 from

7, 56,700 in 2001. The Table 2 presented the total sales, retail outlets and

selling space of independent grocers from 2001 -2007.

cccccccccccccccccccccccccccccccccccccccc cccccccccccccccc
3 Euromonitor International Retail India research report-2007

c
c
 c



  Ê 



 
 *



" 




  


%





   # + , - %


 2,90,20 3,16,32 3,41,63 3,65,54 3,87,47 4,08,78 4,270,8


 0 0 0 0 0 0 13
 




 7.567 7.832 8.066 8.292 8.500 8.696 8.871




 



  285,94 294,51 301,88 308,82 315,00 320,67 328,570


 0 8 1 4 0 0
.
$/
Source: Euromonitor Report on Indian Retail, 2007.






'


As the name suggests, convenience stores are those stores that are open

24x7. They stock most essential and fast moving consumer goods like food

items (both grocery and packaged foods), beauty and personal care products

and an array of products of day-to-day use. These are relatively small stores

in the retail space range from 400 to 2,000 sq. feet located near residential

areas. In India these are mostly located at fue l retail stations or at locations

where there may not be any stores offering most basic items of daily use.

These kinds of stores offer a limited range of high -turnover convenience

products and are usually open for extended periods during the day; seven

days a week and shoppers use it for buying fill -in merchandise and

emergency purchases. Prices are slightly higher due to the convenience

premium. It is estimated that there are 987 convenience stores in a total

retail space of 32,000 sq.meter with a total s ales value of Rs 2,125.6 million

in 2007 from Rs 15 million with a meagre 5 outlets and 1,000 sq.meter in

c
c
c

2000 4. The same is presented in Table 3. A few notable players in the arena

include My Mart, In & Out, Red shop, DHL Servicepoint, UPS, AFL Touch

world and 24/7.



 # 


 

 *



" 




  

"
%





    # + , - %


 15 68 225 431 998 1,347.3 1,715.5 2,125.6


 

 


 5 28 99 249 370 510 710 987





  1 2 5 9 16 23 32 46



.







'


Unlike western countries where supermarkets are prominently visible, in

our country this is lacking (Sinha and Kar, 2007, p. 11). These are large, low

cost, low margin, high volume, self service operations designed to meet the

needs for food, groceries, & other non-food items. The supermarkets offer

relatively less assortments but focus on specific product categories. They do

not play the game on price rather use convenience and affordability as their

salient features. These were the formats at the forefron t of the grocery

revolution, and today, it controls more than 30 percent of the grocery

market in many countries. These are located in or near residential high

streets. These stores today contribute to 30 percent of all food & grocery

organized retail sales. Super Markets can further be classified in to mini

supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets

ranging from of 3,500 sq ft to 5,000 sq ft. with more than 30,000 SKU·s and

cccccccccccccccccccccccccccccccccccccccc cccccccccccccccc

cIbid.33 c

c
c
c

having a strong focus on food & grocery and persona l sales (Vedamani,

2008, p.35).

The entry of supermarkets in the retail arena brought about

tremendous changes in the psyche of the Indian consumers. The Indian

consumers now have the option to shop at the supermarkets instead of

shopping at the neighbourhood kirana stores. The supermarkets with

appealing surroundings, hygienic ambience, and better product display

along with the availability of a wide variety of brands helped a lot in drawing

consumers towards the format. In India Food World, Food Bazaar, Nilgiris,

and Adani are the leading supermarket operators. It is estimated that, there

are 36,000 supermarkets with total retail sales of Rs 69,330.1 million from

Rs. 10,100.0 million with 784 supermarket retail stores in 2001 5. The same

is depicted in Table 4



 + 



 


 

 



" 



 
 


 %





   # + , - %


 10,100 14,000 18,500 22,108 28,298 39,617.2 69,330.1


 

 


 784 980 1200 1368 1683 2380 3600





  106.0 150.0 200.0 249.0 332.0 448.2 657.5




$
Source: Euromonitor Report on Indian Retail, 2007

0(





'


Hypermarkets have emerged as the biggest crowd pullers due to the fact

that regular repeat purchases are a norm at such outlets. Hypermarkets not

only offer consumers the most extensive merchandise mix, product and
cccccccccccccccccccccccccccccccccccccccc cccccccccccccccc
5 Ibid.33

c
c
c

brand choice under one roof, but also cre ate superior value for money

advantages of hypermarket shopping (Sinha and Kar, 2007, p.10).

Hypermarket isacombination of supermarket and a department storewith

asales area of over 2,500 sq.m and with at least 35 percent of selling space

devoted to no n²grocery product. The stores occupy an area which ranges

from anywhere between 80,000 to 2,20,000 sq.ft, offering a variety of food,

and non-food products like clothes, jewellery, hardware, sports equipments,

cycles, books, electrical and computer equipme nts and etc. The growth and

development of hypermarket is phenomenal with total sales of Rs 40,123.5

million from 128 outlets with total selling space of 5,46,900 sq. mtr in 2007

from Rs 1150.0 million from a meagre 4 outlets with total selling space of

14000 sq.mtr in 2001 shown in table 5. The major leading players in

hypermarket format are Big Bazaar of Pantaloon Retail, Star India Bazaar of

Trent India, Hypercity of K. Raheja group, Adani, Giant, Reliance retail and

ITC·S Choupal Sagar being the India·s first rural hyper market.



 , 0(



 


 





" 



 
 


 %





   # + , - %
Sales 1,1500 1,875 2,793 5,418 10,541.1 21,925.4 40,123.5
value in
Rs
million
Total 4 8 14 22 36 70 128
outlets
Selling 14.0 20.0 36.0 81.2 128.1 237.0 546.9
space
(000
sq.m)

Source: Euromonitor Report on Indian Retail, 2007

Though the food and grocery retail industry has been showing a

continuous sales growth for different retail formats from 2001 -2007, few

c
c
c

studies have attempted to examine and analyse the store format choice and

patronage factors underlying Indian food and g rocery shopping. Previous

Store choice studies indicate the sequential effects of personal factors,

cognitive orientation toward shopping and perceptions about store attributes

on store choice behaviour in Indian retailing (Sinha and Banerjee, 2004;

Sinha and Uniyal, 2005; Sinha et al, 2005). Kaul (2006) developed an

untested conceptual model on store patronage with antecedents and

linkages in the context of Indian retailing. However, most of these past

conceptual store choice and patronage models lack the empirical tests to

prove the comprehensive relationships proposed to exist among the

variables.

Identification of key factors and clarification of linkages between the

variables is necessary in patronage research (Bellenger and Moschis, 1982).

By examining the empirically testable model with sequential effects of store

choice and patronage behaviour, a more precise understanding of

consumer·s store choice and patronage can be obtained. Therefore, the focus

of this study is to examine the links between the effects of various

antecedents of consumers· store choice and patronage behaviour in food and

grocery retailing. Six direct linked constructs besides the influential and

interactional impacts are involved in the underlying model: Shoppers·

characteristics, determinant store attributes, information sources,

situational factors, and store format choice & repatronage intentions.

c
c