Services Marketing Project

Retail Outlets
First Deliverable
21 August 2012

Prepared By
Dhananjay Karandikar

34409

Prakash Pawar

34420

Kedar Kulkarni

34413

Vikram Kadam

34441

Sachin Sharma

34448

Varun Khetan

34439

SIBM, Pune

TABLE OF CONTENTS
INTRODUCTION ............................................................................................. 3
THE RETAIL LANDSCAPE IN INDIA ................................................................................................................................ 3
BIG BAZAAR ........................................................................................................................................................... 3
KIRANA STORES ...................................................................................................................................................... 4

BUSINESS MODEL .......................................................................................... 4

SERVICE CHARACTERIZATION......................................................................... 7
SERVICE CHARACTERISTICS ........................................................................................................................................ 7
WHAT GETS PROCESSED............................................................................................................................................ 9
CUSTOMER-EMPLOYEE PRESENCE .............................................................................................................................. 9
CUSTOMIZATION AND EMPOWERMENT ..................................................................................................................... 10
SERVICE EVALUATION............................................................................................................................................. 10
PRODUCT SERVICE CONTINUUM............................................................................................................................. 10

MARKETING MIX.......................................................................................... 11
PRODUCT ............................................................................................................................................................ 11
Characterization of supplementary services ................................................................................................ 12
PRICING: ............................................................................................................................................................. 13
DISTRIBUTION....................................................................................................................................................... 14

Introduction
The objective of this project is to study the retail outlet business from a services marketing
perspective. This project will consider two organizations viz. (a) Big Bazaar, and (b) the Kirana Stores.
While the first is an entity owned by a business house and operates in the organized sector, the
second one, viz. The Kirana Stores is not owned by a single entity. These actually are small retail
outlets owned by small businessmen and exist throughout the country. The kirana store will none
the less be termed as an organization in this document. The presumption is that most of the kirana
stores have similar characteristics.
This document is organized as follows: First a brief about the retail landscape in India is given. Next a
business model for the organizations is developed. A molecular model giving a customer centric view
of the business as-is is further identified depicting various services offered by each of the
organizations. An analysis of the services is then done in various dimensions to characterize the
services. The next section depicts the strategic elements that the organization has at its disposal in
terms of the marketing mix.

The Retail Landscape in India

The Indian retail industry is the second largest employer after agriculture. Majority of the retailing
business viz. 95% happens in the un-organized sector, kirana stores, open markets, pan and bidi
shops, individual salesman being examples of this. Only about 5% happens in the organized sector.

According to the ICRIER 2008 report, the retail market was estimated to be USD 396 billion
Contribution of retail trade to GDP is around 11-12 percent
Food sector contributes to the largest part of the total retail market followed by clothing and
footwear
Organized retail in 2008 was expected to grow at a huge rate of 45 to 50 percent.

The selected organizations have inherent differences either in terms of the products they sell or the
method in which they operate. Following is a brief about these organizations

Big Bazaar
Big Bazaar is a chain of hypermarkets in India. As of June 2, 2012 there are 214 stores across 90
cities and towns in India covering around 16 million sq.ft. of retail space. Big Bazaar is designed as an
agglomeration of bazaars or Indian markets with clusters offering a wide range of merchandise
including fashion and apparels, food products, general merchandise, furniture, electronics, books,
fast food and leisure and entertainment sections.
Big Bazaar is part of Future Group, which also owns the Central Hypermarket, Brand Factory,
Pantaloons, eZONE, HomeTown, futurebazaar.com, KB's Fair Price to name a few and is owned
through a wholly owned subsidiary of Pantaloon Retail India Limited(BSE: 523574 523574), that is
listed on Indian stock exchanges.
History
Big Bazaar was launched in September, 2001 with the opening of its first four stores in Calcutta,
Indore, Bangalore and Hyderabad in 22 days. Within a span of ten years, there are now 161 Big
Bazaar stores in 90 cities and towns across India.

Big Bazaar was started by Kishore Biyani, the Group CEO and Managing Director of Pantaloon Retail
India. Though Big Bazaar was launched purely as a fashion format including apparel, cosmetics,
accessory and general merchandise, over the years Big Bazaar has included a wide range of products
and service offerings under their retail chain. The current formats includes Big Bazaar, Food Bazaar,
Electronic Bazaar and Furniture Bazaar. The inspiration behind this entire retail format was from
Saravana Stores, a local store in T. Nagar, Chennai
The stores are customized to provide the feel of mandis and melas while offering the modern retail
features like Quality, Choice and Convenience. As the modern Indian family's favorite retail store, Big
Bazaar is popularly known as the "Indian Walmart".
On successful completion of ten years in Indian retail industry, in 2011, Big Bazaar has come up a
new logo with a new tag line: Naye India Ka Bazaar, replacing the earlier one: 'Isse Sasta Aur Accha
Kahin Nahin'.
The competitors of Big Bazaar are:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Reliance Retail ltd

Odyssey
Bharti Wal Mart
Landmark group
Aditya Birla Group - MORE
Next Retail
Vishal Mega mart
D-Mart
Kirana stores

Kirana Stores
The kirana stores in India are owned by individuals, typically having about a few hundred square feet
of space. The reason they are included in this study is the large number of stores in India and their
intense competition with the large format stores. There were an estimated 13 million unorganized
retail outlets in 2006, of which an estimated 52 percent are kirana stores selling food and personal
care products. Kirana stores as of now, seem to be sustaining in the competition with the organized
large format organized retail stores. Their differential advantage comes from the fact that they have
a low cost structure, are conveniently located near to the customer, know the pulse of the
customers due to customer intimacy and also offer credit to them.

Business Model
A business model describes in simple terms how a business is creating its offerings for customers
and how it earns profits by doing that. Following sections describe the business model for each of
the organizations.

Big Bazaar
Big Bazaar is a large format store. It typically sources material directly from the vendors and make
available the products to customers at its own stores. Since there are no middlemen, it gets the

power to reduce costs by sourcing in bulk and better managing its demand and supply chain. Figure
1 gives a molecular model for Big Bazaar. Looking into above Molecular Model, Service quality in
retailing is different from any other product / service environment, because of the unique nature of
retail service. In retail service, it is necessary to look at from the perspective of services as well as
Food and Farm
products

Quality

Inside Decoration

Billing and
Packaging

Experienc

Air Quality
Advertising &
Promotions

Home and Personal

Care
Toys and Children
Section

Snacks

Final Goods on
the shelves

Atmosphere
Store

Layout

Music
Lighting

Store Size

Consumer
Electronics

Apparels

Color

Facility

Space for Rest

Sales Person
Service

Availability of New
Information

Securit
Knowledge
Kindness

Facility
Maintenance

Location
Forcefuln

After Sales
Service

Furniture

Explanation

Parking Space
Refund

Return
Ploicy
Repair
Policy

Delivery
Service

Figure 1 Molecular model for a Big Bazzar Store

goods and derive a set of items that accurately measure this construct. Retail service has a
hierarchical factor structure comprising five basic dimensions, namely physical aspects, reliability,
personal interaction, problem solving, and policy, with first three basic dimensions having two
sub-dimensions each and overall service quality as a second order factor. The sub-dimensions of the
basic dimension physical aspects are: appearance and convenience; the sub-dimensions of the
basic dimension reliability are: promises and doing it right; and the sub-dimensions of the basic
dimension personal interaction are: inspiring confidence and courteousness/helpful.

Kirana Stores
The kirana stores source material from vendors and sell it to customers. It makes a profit on the
difference between the sale price and the sourcing price. While this is the simplistic model, there are
a lot more services that a kirana stores offers. The store owner, in most cases, knows each of his
clients and their preferences personally. From a customer perspective, the molecular model shown
in Figure 2 below indicates the range of services it performs. These are described below:
1. The core service a kirana store performs is that of selling goods to consumers. This is considered
as a tangible service since the customer knows what he is going to get when he asks for this, in

most of the cases. Exceptions are perishable products like fruits and vegetables due to their
availability, quality and price.
2. Home delivery is another staple service of a kirana stores. They are ready to deliver goods, at the
customers convenience at their homes.
3. Credit: The kirana owners know most of their customers and are ready to give credit. This can be
due to the financial needs of persons or simply convenience of giving a single monthly bill and
reduce time wasted in billing during the time when actual delivery of goods is made. Since most
of the customers can count on this, there is little intangibility in this, unless the owner does not
know the customer.
4. Keeping past credit accounts: Giving credit also entails keeping an account of past transactions.
The kirana owner does this on behalf of the customer and normally keeps accounts of all past
transactions. The customer may, may not be or in most cases, will only partially remember the

Advice on
future
changes

Information
on new
products and
schemes

Home
Delivery

Goods
Credit
Sourcing
on
Request
Order on
phone

Returns
processing

Keeping
past
accounts

Figure 2 Molecular model for a Kirana Store

5.

6.
7.
8.

transactions made previously.

Returns processing: Customers often will return goods which they think are not up to the mark
or goods which they feel after the purchase are un-necessary. The owner may be ready for this,
but it also depends on the condition of the goods returned. There can be some intangibility even
for regular customers.
Order on phone: The store owner will take orders on phone and deliver goods later as these
may not be required immediately, or if required and possible, can be delivered immediately.
Sourcing on Request: An additional service that the owner offers is to source certain items on
request of the customer, that he normally does not stock.
Information in new products and services: The owner normally gives information on any new
products and schemes being launched. While the customer expects to get updates regularly,
normally it is not a pressing need of the customer. The intangible part in this is whether the
owner will really give updates to a particular customer, or will reserve it to only his high priority

customers, will he have time to give updates which will be important from the clients
perspective.
9. Advice on future changes: Normally a kirana owner will also give advice on any price fluctuations
or any stockouts that he foresees, and a consequent advice to stock up essential goods. The
intangibility in this part is that he should himself have the necessary stocks to provide to
customers. He will also not give an advice if it affects his profitability.

Service Characterization
Based on the model described above, the organizations are characterized in the following way:

Service Characteristics
Following table gives a birds eye view of the major service indicators. Table 1 gives the important
indicators for Big Bazaar while Table 2 give it for the kirana stores
Table 1 Service Characteristics for Big Bazaar
Service
Sales Person

Intangibility
Fairly tangible. Though
person dependent, the
company gives them
training and thus one
can expect to meet the
requirements

Atmosphere

Intangible since this

depends on a lot of
factors that are dynamic
in nature: (a) rush (b)
power supply affecting
air conditioning
Typically return policies
are transparent.

After Sales

Advertising
promotion

Space for rest

Snacks

and

Fairly tangible since

mostly
what
is
advertised is achieved by
customers, but at times
things may not turn out
to be as expected
Intangible
since
availability cannot be
guaranteed and depends
on rush hours
Fairly tangible since
restaurants
do
not
change taste often.
Availability is also not
an
issue.
Small
intangibility in terms of
time required.

Perishability
Sales persons time can
be
considered
perishable.
But
consequences are not in
terms of lost business
since customers will
approach him only in
case
of
difficulty,
considering the fact that
customers like to help
themselves
Yes

Homogeneity
Fairly homogeneous due
to similar training given
to all sales persons

Separability
Inseparable.

Factors that are within

organizations control are
taken care of. Factors
due to other customers
may not be in control

Inseperable

Not perishable

Homogeneous
since
policy is people and time
independent

This is a demand
management technique
in the hands of the
organization.
Not
perishable

Since more thro media,

less prone to people
hence
more
homogeneous

Depending on the exact

need. Example returns
are inseparable but
customer contact can be
over the telephone
Separable

Perishable but do not

affect business in a
major way

Homogeneous
since
people independent

Separable.

Yes

Yes

If preparation at stores
not
inseparable.
If
vending machine, yes.

Perishability

Homogeneity

Separability

Table 2: Service Characteristics for Kirana

Service

Intangibility

Goods

This is highly tangible

since the customer
knows what he is buying

Most of the goods are

non-perishable except
vegetables and fruits.

Credit

Fairly tangible since this

is
one
of
the
differentiators for a
kirana. But depends on
the credit history of the
customer as in the mind
of the owner

Not perishable

Returns Processing

Intangible
since
regulations may not be
enforced
strictly.
Depends on the business
interests of the owner.
Tangible, since this is
one
of
the
differentiators for the
kirana.

Not Perishable

Sourcing on request

Info on new products

Order on Phone

Advice
changes

on

Home Delivery

future

Retailer has no control

on this and is defined by
the manufacturer. Highly
homogeneous
since
customer is going to get
the
same
product
everytime
Multiple persons from
the owners family may
have
different
perceptions about the
customer. That along
with changing dynamics
affect a decision each
time.
Not homogeneous

For kirana, typically not

separable
since
customers do not have
access to goods directly

Not perishable

Mostly homogeneous,
since not much scope for
change

Intangible, since this

depends on the business
interest of the owner

Not perishable

Intangible since depends

on the rush in the store
at the time this service is
given, benefits to owner
by selling this as regards
existing business.
Intangible since depends
on the rush in the store
at the time this service is
given, benefits to owner
by selling this as regards
existing business.
Tangible since not much
change expected in this

Depends on the product

being sold. For example,
sales by manufacturers
last for a short time.

Not homogeneous since,

different
family
members may take a
different decision at the
same store
Different
family
members may give info
in different ways based
on their understanding
and drive

Not separable. Kirana as

yet do not seem to have
taken to technology in a
major way to use tools
like
websites
of
answering machines on
telephones etc.
Not separable

Since future changes are

dynamic
in
nature,
makes this perishable.

Again, different family

members may give
advice in different ways
based
on
their
understanding and drive

Not perishable since

mostly goods will be
delivered at owners
time availability. In case
the
customer
has
urgency, he may move
to a different store.

Homogeneous

Highly non-separable

Not separable

Mostly not separable

since kirana stores do
not resort to promotions
thro print media. Mostly
depend on one-on-one
contact.
Mostly not separable
since
kirana
stores
mostly depend on oneon-one contact.

Separable since order

can be taken over phone
and
delivered
independently of the
customer.

Comparisons based on the above factors:

As can be seen from the above tables, it is clear that a large organization is good at converting the
intangibles into tangibles due to the following:
1. Since Big Bazaar resorts to activities like advertising promotion and advertising are same for
all customers but kiranas depend more on mouth publicity. From an effectiveness
perspective, the message of Big Bazaar is carried to a large number of people but there is no
feedback in this mode. A kirana owner resorting to mouth based advertising and has the
discretion of person dependent advertising since he is immediately getting the feedback
from his customer

2. Training of persons is planned activity at Big bazaar and hence sales people respond in
similar ways. At the same time at a kirana, since it is a family business the owner takes the
responsibility of training his family members. Further members also learn on the job since
childhood. Thus effectiveness of both seem to be similar.
3. Since Big Bazaar works on a policy applicable at all stores, things like return policies are
common and defined. A kirana typically does not have such policies and is dynamically
changing based on the situation.

What gets processed

For Big Bazaar, each of the services mentioned in the molecular model in Figure 1 can be classified
into the four broad categories of services. These are given in Table 3 below:
Table 3: Big Bazaar Service Categorisation

Service type
Sales Person
Atmosphere

After Sales
Advertising and promotion
Space for rest
Snacks

Categorization
Information processing
Person Processing since the atmosphere has an
effect on the person. This is one of the selling
points for a large hypermarket like Big Bazaar
Information or product processing based on the
type of after sales service
Information or mental stimulus processing (on
boundary)
Person Processing
Product (snacks)

For a kirana, each of the services mentioned in the molecular model in Figure 2 can be classified into
the four broad categories of services. These are given in Table 4 below:
Table 4: Kirana Service categorisation

Service type
Goods
Returns processing
Credit
Keeping past accounts
Home Delivery
Advice on future changes
Information on new products and schemes
Sourcing on Request
Order on Phone

Categorization
Product processing
Product processing
Information processing
Information processing
Product processing
Information or mental stimulus processing (on
boundary)
Information processing
Product processing
Information processing

Customer-Employee Presence
For each of the services, Table 5 gives a list of the customer-employee presence for Big Bazaar.
Service type
Sales Person

Customer Employee presence

Interpersonal

Atmosphere
After Sales
Advertising and promotion
Space for rest
Snacks

Self service
Interpersonal or remote based on the service
Remote
Self Service
Depending on snacks type. If preparation, yes, if
vending machine, no.

For each of the services, Table 5 gives a list of the customer-employee presence for kirana stores.
Table 5 Customer Employee Presence

Service type
Goods
Returns processing
Credit
Keeping past accounts
Home Delivery
Advice on future changes
Information on new products and schemes
Sourcing on Request
Order on Phone

Customer Employee presence

Interpersonal
Interpersonal
Interpersonal
Remote
Remote
Interpersonal
Interpersonal
Interpersonal
Interpersonal

Customization and Empowerment

In case of Big Bazaar, most of decisions are planned. There is a hierarchy of empowerment from
sales person to manager to business. Customization may not be allowed much.
In the case of a kirana store, since the owner himself is taking all the decisions and providing services
himself, there is always a high amount of empowerment. Further, all the services can be highly
customized based on needs of the customer.

Service Evaluation
This involves evaluation of a service before the service encounter. The customer sets his expectation
about the service that he is going to receive. Broadly, this has three types viz. (a) Search (information
about the product), (b) Experience and (c) Credence. For a first time user, it is difficult to evaluate a
service from a kirana retail store before he actually experiences it. Thus this can be classified as a
Experience attribute of the service. Similar is the case for Big Bazaar

Product Service Continuum

Based on the above analysis, vis--vis other businesses, the retail industry is mapped on the product
service continuum as shown in Figure 3 below. While the core product that a customer gets is a good
that is manufactured by someone else, there are a lot of related, value adding, activities that a retail
business does. Most of these can be classified as intangibles. The total mix would place the business
somewhere in between the tangible dominant and intangible dominant extremes.

Salt

Soft
Drink
Detergent

Auto

Intangible
Dominant

Cosmetic
Retail

Tangible
Dominant

Advertising
Airline
Investment
Managemen
t

Consulting

Teaching

Figure 3: Retail in the Product Service Continuum

Marketing Mix
Product
The classification of the services offered by a kirana stores is made in Error! Reference source not
found..

Potential: Predictions
Based on history
Enhanced:
Info on new products and services
Advice on future changes
Expected:
Shopping experience
Sourcing on request
Atmosphere
Returns
Order on Phone

Figure 4 classification of Retail Service Products for Big Bazaar

The classification of the services offered by a kirana stores is made in Figure 5.

Core: Goods

Potential: Predictions
Based on history
Enhanced:
Info on new products and services
Advice on future changes
Expected:
Sourcing on request
Credit
Keeping accounts of credit
Home Delivery
Returns
Order on Phone

Core: Goods

Figure 5 Classification of retail Service product for Kirana

Characterization of supplementary services

Supplementary services can be classified as Facilitating services and Enhancing services.
These are shown in Table 6 below
Table 6 Supplementary services for Big Bazaar

Service type
Sales Person
Atmosphere
After Sales
Advertising and promotion
Space for rest
Snacks

Classification
Facilitating
Enhancing
Enhancing
Enhancing
Enhancing
Enhancing

Sub-Classification
Information
Hospitality
Information
Hospitality
Hospitality
Hospitality

These are shown in Table 7 below.

Table 7 Characterization of Supplementary services

Service type
Returns processing
Credit
Keeping past accounts
Home Delivery
Advice on future changes
Information on new products

Classification
Enhancing
Enhancing
Facilitating
Enhancing
Enhancing
Facilitating

Sub-Classification
Exception processing
Hospitality
Information
Hospitality
Consulting
Information

and schemes
Sourcing on Request
Order on Phone

Enhancing
Facilitating

Exceptions
Information

While most of the characterization is obvious, reasons for some that may not be obvious are given
below. As regards credit, in the context of the kirana this does not mean payment by a credit card.
He offers credit from his own working capital. Hence it is considered as an enhancing service and
classified as a hospitality service. Similarly, Home delivery is an enhancing service and hospitality is
the closest known category.

Pricing:
The pricing objective at Big Bazaar is to get Maximum Market Share. Pricing at Big Bazaar is based
on the following techniques:

Value Pricing (EDLP Every Day Low pricing): Big Bazaar promises consumers the lowest
available price without coupon clipping, waiting for discount promotions, or comparison
shopping.

Promotional Pricing: Big Bazaar offers financing at low interest rate. The concept of
psychological discounting (Rs. 99, Rs. 49, etc.) is also used to attract customers. Big Bazaar
also caters on Special Event Pricing (Close to Diwali, Gudi Padva, and Durga Pooja).

Differentiated Pricing: Differentiated pricing i.e. difference in rate based on peak and nonpeak hours or days of shopping is also a pricing technique used in Indian retail, which is
aggressively used by Big Bazaar. e.g. Wednesday Bazaar

Bundling: It refers to selling combo-packs and offering discount to customers. The combopacks add value to customer and lead to increased sales. Big Bazaar lays a lot of importance
on bundling. e.g. 3 Good Day family packs at Rs 60(Price of 1 pack = Rs 22)

5kg oil + 5kg rice + 5kg sugar for Rs 599

Big Bazaar is using pricing as a tool for demand management e.g. Wednesday Bazaar
Big Bazaar introduced the Wednesday Bazaar concept and promoted it as Hafte Ka Sabse Sasta
Din. It is mainly to draw customers to the stores on Wednesdays, when least number of customers
are observed. According to the chain, the aim of the concept is "to give homemakers the power to
save the most and even the stores in the city don a fresh look to make customers feel that it is their
day"
As regards Kirana is concerned, there is little choice the kirana retailer has at the moment.
Considering the amount of competition from the hypermarkets, the kirana is always on his toes as
regards pricing is concerned. He typically has no option but to charge a competitor based pricing.
Kiranas are not so knowledgeable on this front and have to accept what others are pricing.

Distribution
The Big Bazaar stores are operational across three formats hypermarkets spread over 40,000 45,000 sq ft, the Express format over 15,000 - 20,000 sq ft and the Super Centers set up over 1 lakh
sq ft. Big Bazaar stores are multi-level and are located in stand-alone buildings in city centers as well
as within shopping malls. These stores offer over 200,000 SKUs in a wide range of categories led
primarily by fashion and food products. Apart from the Metros these stores are also doing well in the
tier II cities. These stores are normally located in high traffic areas. Big Bazaar aims at starting stores
in developing areas to take an early advantage before the real estate value booms.
Food Bazaar, a supermarket format was incorporated within Big Bazaar in 2002 and is now present
within every Big Bazaar as well as in independent locations. A typical Big Bazaar is spread across
around 50,000 square feet (4,600 m2) of retail space. While the larger metropolises have Big Bazaar
Family centres measuring between 75,000 square feet (7,000 m2) and 160,000 square feet
(15,000 m2), Big Bazaar Express stores in smaller towns measure around 30,000 square feet
(2,800 m2).
In order to gain a competitive advantage Big Bazaar has also launched a website
www.futurebazaar.com, which helps customers to orders products online which will be delivered to
their doorstep. This helps in saving a lot of time of its customers.
There are no intermediaries or Franchises of Big Bazaar
As regards Kiranas, they typically have a store space of less than 500sq.feet. They are dependent on
distributors for receiving goods and stocking inventories. They typically do not use any sales and
promotion tools. Word of mouth is their main method.