Would Kiranas in Urban India Survive the Modern Trade Onslaught?

Insight from Efficiency Persective

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Paromita "os#ami
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%esignation&
Assistant Professor, Marketing
Marketing Area Coordinator
'ontact %etails&
Xavier Institute of Management Bhubaneswar
Xavier Square
Bhubaneswar
Orissa
India
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Email& aromita()imb*ac*in, aromitagos#ami(hotmail*com
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PhD (BITS, Pilani)
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Would Kiranas in Urban India Survive the Modern Trade Onslaught?
Insight from Efficiency Persective
E)tended ,bstract
Conceptualization
It is a matter of debate as to whether Indian ,irana stores wou-d be ab-e to survive in the fa.e of
.om/etition from organi0ed modern trade gro.er1 retai-ers2 A-though traditiona- retai- .urrent-1
.onstitutes over &! /er .ent of the tota- sa-es in the .ountr1, sma--er kiranas that are unab-e to
.om/ete with new age retai-ers in terms of variet1 and s.a-e have begun -osing vo-ume in severa-
/arts of the .ountr1 %3i4a1raghavan and 5amsur1a, +##'2 Internationa--1, whi-e some studies
suggest that -arge s.a-e retai-ers -ike 6a--Mart are res/onsib-e for wides/read .-osings of mom 7
/o/ stores %6a--Mart 6at.h, +##!8 Basker, +##!' and question whether .ost to .ommunities in
terms of -abor dis/-a.ements and higher /overt1 is offset against benefits of -ower /ri.es and
greater .onvenien.e %9oet0 and Swaminathan, +##(', other studies suggest that the /ro.ess of
.reative destru.tion un-eashed b1 6a--Mart has had no statisti.a--1 signifi.ant -ong-run im/a.t on
the overa-- si0e and /rofitabi-it1 of the sma-- business se.tor in the :nited States %Sobe- and
;ean, +##('2 In India modern trade or organi0ed retai-ing a-read1 a..ount for $# to )# /er .ent of
gro.er1 sa-es in the to/ (- .ities of the .ountr1 %,akkar, +##*'2 <he Prime Minister=s Offi.e
%PMO' of India has initiated a stud1 on the im/a.t of retai- giants on sma-- retai-ers and this move
has been we-.omed b1 the Confederation of A-- India <raders %CAI<'2
As /ointed out b1 Sanghavi %+##', so far retai-ers, who fo.used on deve-o/ing on-1 su//-1-side
effi.ien.ies in terms of rea.hing retai- /rodu.tivit1 targets, need to think about demand-side
effi.ien.ies in terms of satisfa.tion of .ustomers= needs in order to o/timi0e business
/erforman.e2 It is im/ortant to identif1 effi.ient -eve-s of the various dimensions of satisfa.tion of
.ustomers= needs that dire.t-1 -ink to measures of s/e.ifi. firm out/uts that firms intend to
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ma>imi0e in addition to su//-1 side effi.ien.ies %B-ose et a-, +##!'2 In this /a/er we sha-- use two
se/arate ;ata ?nve-o/ment Ana-1ses %;?A'@ one ;?A using CC5 method to e>amine the
demand-side effi.ien.1 in terms of dimensions of satisfa.tion of .ustomers= needs %hen.eforth
referred to as Customer ;?A'8 and another ;?A using both CC5 and BCC method %fo--owing
Barros, +##(' to e>amine su//-1 side effi.ien.1 in terms of retai- /rodu.tivit1 s.ores %hen.eforth
.a--ed 5etai-er ;?A'2 6e have attem/ted to dedu.e the .han.es of surviva- of ,iranas b1
e>amining the two ;?As2 <he -ogi. of using se/arate ;?A is that even if an out-et is effi.ient on
retai-er /rodu.tivit1 s.ores, if it is ineffi.ient on .onsumer variab-es, it is bound to be.ome
ineffi.ient on retai-er /rodu.tivit1 s.ores in the -ong-term2 <hus, ;?A on .onsumer variab-es ma1
a.t as a diagnosti. too- before it is too -ate and affe.ts the effi.ien.1 of the out-et on retai-er
/rodu.tivit1 s.ores as we--2
Method
In order to .a/ture the demand-side effi.ien.1, a .onsumer stud1 was designed and to 4udge the
su//-1-side effi.ien.1, a stud1 was done on the gro.er1 retai- out-et that the res/ondents of the
.onsumer stud1 /atroni0ed2 <he stud1 was .arried a.ross four Indian .ities- two ma4or metros
%,o-kata and Mumbai', and two sma--er .ities %Aamshed/ur and Bag/ur' with around "##
res/ondents from ea.h .it12 Cour gro.er1 formats re-evant for India are kirana and u/graded
kirana stores, su/ermarkets and h1/ermarkets2 Crom ea.h .it1 +! .ustomers of ea.h of the four
gro.er1 formats were interviewed2 Stratified s1stemati. sam/-ing design was fo--owed2 <he strata
were the four formats of gro.er1 stores2 <o maintain the s1stemati. design of the sam/-e, ever1
fifth .ustomer -eaving the store was inter.e/ted and interviewed with a stru.tured questionnaire2
<he questionnaire had a set of statements on .ustomer /er.e/tion of gro.er1 store attributes
whi.h had been used /revious-1 with tested va-idit1 and re-iabi-it1 %9oswami and Mishra, +##'2
<he retai-er questionnaire was administered to the out-et manager and after re4e.ting in.om/-ete
questionnaires and a..ounting for non-res/onses we were -eft with "" retai- out-ets %"
h1/ermarket, $ su/ermarkets, + u/graded kiranas and ! kiranas' and a .onsumer sam/-e si0e of
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+$2 <he Customer ;?A was run on .ustomer variab-es of .-ean-iness, offers, qua-it18 he-/fu- and
trustworth1 sa-es/eo/-e8 in-store .onvenien.e, -o.ation8 trave- .onvenien.e8 home sho//ing8
store brands, fami-1 gro.er1 sho//ing, /arking fa.i-ities as in/uts and .ustomer /atronage in
terms of /er.entage of gro.er1 sho//ing as out/ut8 and the 5etai-er ;?A was run on retai-er
variab-es of store hours /er week, number of fu---time em/-o1ees, se--ing area, average week-1
sa-e, average .ustomer transa.tion /er week as in/uts and gross /rofit, sa-es /er square foot as
out/uts2
Major Findings
<he Customer ;?A revea-ed that of the "" out-ets, " su/ermarket, " u/graded kirana and +
kiranas were effi.ient2 <he 5etai-er ;?A revea-ed that with the e>.e/tion of " su/ermarket and "
kirana %this kirana was effi.ient on .ustomer variab-es', the rest of the out-ets were effi.ient2 <he
resu-ts suggest that whi-e & stores %out of ""' had effi.ient retai- ;?A s.ores, the1 had ineffi.ient
.ustomer ;?A s.ores, thus im/-1ing that .orre.tive a.tion needs to be taken for these stores for
im/roving demand-side effi.ien.ies, or e-se the1 might u-timate-1 be.ome ineffi.ient in retai-er
s.ores in future2 <he store whi.h has ineffi.ient retai-er s.ore but effi.ient .ustomer s.ore needs
to s/e.ifi.a--1 -ook into reasons and take .orre.tive measures as suggested b1 the ;?A2 <he
stores whi.h have Customer ;?A S.ores of -ess than one, shou-d e>amine their o/erating
/ro.edures in identified areas of gro.er1 storeDsho//ing attributes to identif1 /ossib-e sour.es of
ineffi.ien.12 ?>.ess -eve-s of in/uts im/-1 some stores are getting more in terms of effi.ient use of
storeDsho//ing attributes2 Obvious-1 no store wou-d wish to /ur/ose-1 redu.e the /er.eived -eve-s
of .ustomer /er.e/tion in/uts, the ad4ustments /res.ribed b1 the ;?A mode- serve as ordina-
indi.ators of ineffi.ien.ies ri/e for .hange %B-ose et a-, +##!'2
6e found " out of $ su/ermarkets %#2$$', " out of + u/graded kiranas %#2!', and " out of ! kiranas
%#2+' to be effi.ient2 :/graded ,iranas, in terms of /robabi-it1 suggested b1 this stud1, has
ma>imum .han.es of surviva- %this ma1 be attributed to modern trade--ike ambien.e as we-- as
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greater .ustomer insight'8 fo--owed b1 su/ermarkets and -ast-1 ,iranas2 <he resu-ts suggest
kiranas wou-d do best to tr1 and u/grade in order to survive2 9iven that modern trade out-ets
have dee/er /o.kets and .an afford to make mistakes and get awa1 with it in the short term,
kiranas have to sta1 a-ert, tr1 to u/grade and .ontinue to serve .ustomers we--, whi-e
.on.entrating on innovating, evo-ving and remaining effi.ient on retai-er /rodu.tivit1 s.ores2
!ibliograhy
Barros C2P2 %+##(', E?ffi.ien.1 Measurement among F1/ermarkets and Su/ermarkets and the
Identifi.ation of ?ffi.ien.1 ;rivers=, International Journal of Retail and Distribution Management,
3o-2 $), Bo2 +, // "$!-"!)2
Basker ?2 %+##!', EAob Creation or ;estru.tionG Habor-Market ?ffe.ts if 6a--Mart ?>/ansion=,
The Review of conomics and !tatistics, 3o-2 *, // ")-"*$2
B-ose A2, <ankers-e1 62B2, C-1nn H252 %+##!', EManaging Servi.e Iua-it1 :sing ;ata
?nve-o/ment Ana-1sis=, "ualit# Management Journal, 3o-2 "+, Bo2 +, // -+)2
9oet0 S2A2, Swaminathan F2 %+##(', E6a--Mart and Countr1-wide Povert1=, !ocial !cience
"uarterl#, 3o-2 *, Bo2 +, Aune, // +""-++(2
9oswami P2, Mishra M2S2 %+##&' %to be /ub-ished', E6ou-d Indian Consumers move from ,irana
Stores to Organi0ed 5etai-ers when Sho//ing for 9ro.eriesG=, $sia%&acific Journal of Mar'eting
and (ogistics) abstra.t ma1 be viewed at htt/@DD/a/ers2ssrn2.omDabstra.tJ&*$$#$, -ast a..essed
on Ma1 "!, +##*
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,akkar S2 %+##*' , E<he Cuture of ,irana Stores and Im/-i.ations for Bationa- Brands=, *
th
Mar'eting and Retail Conclave, Organi0ed b1 <e.hno/ak, Cebruar1 "&-+", <he <a4 Pa-a.e, Bew
;e-hi, India
Sanghvi B2 %+##', EI have seen the future and it works=, The conomic Times, ,o-kata ?dition,
Ma1 ", // )2
Sobe- 52S2, ;ean A2M2 %+##(', EFas 6a--Mart Buried Mom and Po/G@ <he Im/a.t of 6a--Mart on
Se-f ?m/-o1ment and Sma-- ?stab-ishments in the :nited States=,
www+be+wvu+edu,divecon,econ,sobel,-alMart,-almart+pdf) -ast a..essed on +$2+2#2
3i4a1raghavan ,2, 5amsur1a M232 %+##', EMom 7 /o/ ha//1 -etting a ri.h tenant take over=, The
conomic Times, Cebruar1 !, // )2
6a--Mart 6at.h %+##!', E9rand O/ening@ 6ith a Bew Store O/ening Bear-1 ?ver1 ;a1, 6hat is
6a--Mart=s Im/a.t on Ameri.a=s Sma-- BusinessesG=, -al%Mart -atch. (ow &rices at -hat Cost/
-al%Mart -atch $nnual Report, Center for Communit1 and Cor/orate ?thi.s, // "#2
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