New Insights into Modern India Shopper Behavior and Implications for Global Retailers and Local Policymakers

Arpita Mukherjee Professor, Indian Council for Research on International Economic Relations (ICRIER) New Delhi, India Murali K. Mantrala Sam Walton Professor of Marketing University of Missouri, Columbia Shaoming Zou Robert J. Trulaske, Sr. Professor of Marketing University of Missouri, Columbia External Professor of Marketing, Peking University
Presentation at 2010 China India Consumer Insights Conference, Yale Univ.Tsinghua Univ., Beijing, July 3, 2010
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Motivation

Along with China, India has emerged as one of the most attractive countries for both domestic and international retailers.
The Indian organized retail market is expected to exceed $50 billion by 2013. reflecting a fast-growing middle class demanding higher quality shopping environment and stronger brands
(A. T. Kearney Global Retail Development Index Report).

Modern retail outlets growing at 30% - major foreign brands are entering India. Policy changes are taking place

Partial opening up of single brand retailers in 2006 (multi-brand retailers are still restricted). Government is evaluating the scope for further liberalization.

Indian consumers are changing.

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Indian Consumers are Changing

Classification Deprived Aspirers Seekers Strivers Near Rich Clear Rich Sheer Rich Super Rich Annual household income (000) <90 90-200 200-500 500-1,000 1,000-2,000 2,000-5,000 5,000-10,000 >10,000 Total 1995-96 1,31,176 28,901 3,881 651 189 63 11 5 164,876 2005-06 1,32,249 53,276 13,183 3,212 1,122 454 103 52 204,651 2009-10 (P) 1,14,394 75,304 22,268 6,173 2,373 1,037 255 141 221,945

Source: NCAER (2005) and http://www.fadaweb.com/indian_mkt_05.htm Note: These figures are given at 2001-02 prices., P - Projected
45 40 35 30 25 20 15 10 5 0

Percentage of Urban Population

42 35 31 20 17.5 18 23 25 27

1950-51

1960-61

1970-71

1980-81

1990-91

2000-01

2010- 11

2020-21

2030-31

Percentage of Population

Our Research Objectives & Questions

To gain insights into Indian consumers shopping behaviors What is their level of brand awareness and brand consciousness? What type of products do they purchase? From what kinds of retail outlets? What are the factors determining the choice of retail outlets & frequency of shopping for particular products? To draw useful implications for retailers and policymakers

Our Intended Contribution

Despite growing size and importance of the Indian Retail sector, existing primary research data on Indian shoppers are very limited. Our research is based on a primary survey of 300 high and middle-income, educated consumers shopping behavior across eight product categories conducted in 2009.

Presentation Organization
Description of the primary survey Sample profile Summary results of Indian shopper behavior Lessons for retailers and policymakers Next Steps

Survey Procedures

A three-tier survey was conducted through door-to-door interviews and through interviews with consumers in shopping malls Focused on the consumers level of brand consciousness, where they purchase such brands from, and what factors determine their purchase decisions.

Cities covered during the Survey Tier I Tier II & Tier III Mumbai, Chennai, Delhi, Kolkata, Hyderabad, Ahmedabad Allahabad, Bhubaneswar, Kanpur, Surat, Visakhapatnam
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Product Categories
Clothing and Fashion Accessories Footwear and Leather Goods Gems and Jewellery Food and Grocery
Home Furnishing and Home Appliances

Sports Goods

Health and Wellness Products

Gifts and Stationery Items

Sample Profile
Gender Distribution
160 38.33% 140 120 132

Age Distribution
151

Females Male s

61.67%

100 80 60 40 20 0 19-22 23-30 31-60 >60 13 4

Education Distribution
180 160 140 123 160

Income-wise Distribution
3 2 11 9 72 109

In per cent

120 100 80 60 40 20 0

94

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1 Lakh = $2,220
Graduate Post Graduate
50 Lakhs - 1 Crore 5 Lakhs - 10 Lakhs Up to 1 Lakh 20 Lakhs - 50 Lakhs 2 Lakhs - 5 Lakhs 10 Lakhs - 20 Lakhs 1 Lakh - 2 Lakhs

Schooling

Some college but not graduate

Sample Distribution across City-tiers

Location Tier 1 cities Delhi Mumbai Kolkata Chennai Hyderabad Total Tier II Cities Surat Ahemdabad Vishakhapatnam Kanpur Allahabad Total Tier III Cities Bhubaneswar Total Grand Total Total 51 47 40 38 25 201 13 10 12 16 18 69 30 30 300
Percentage Distribution

Tier III

10% 23%
Tier II

67%
Tier I

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Ownership of Autos

Luxury car

15
12

34

176

Small car

2- Wheeler

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Media and Brand Awareness

Level of Awareness Use of Media
30%

70%

65% of the respondents who travel abroad purchase foreign brands during their international trips 79% of those who purchase during international trips say that products are different from India

Do not follow updates

Follow updates

Percentage of Respondents Travelled Internationally

12.33%

87.67%

Yes

No

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Summary Findings of Indian Shopper Behavior

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Regional and City-wise Distribution of Branded Product Purchases

Products Sample Distribution (No.) North Region 85 In per cent South Region 75 East Region 70 West Region 70 Products Sample Distribution (No.) Delhi Kolkata

51

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In per cent 2.7 21.3 56.0 28.0 93.3 57.3 89.3 4.0 30.7 65.3 2.9 51.4 48.6 61.4 92.9 68.6 90.0 18.6 32.9 50.0 12.9 20.0 35.7 37.1 91.4 47.1 90.0 27.1 27.1 28.6 Fresh Fruits & Vegetables Preserved Food & Agro Products Apparel Handbags Footwear Watches 5.9 5.0

Fresh Fruits & Vegetables

Preserved Food & Agro Products Apparel Handbags Footwear Jewellery Consumer Durables Costume Jewellery Furniture Ceramic Tiles/Sanitary ware

10.6 64.7 24.7 65.9 78.8 68.2 100.0 32.9 51.8 83.5

56.9 29.4 51.0 94.1 100.0 52.9 25.5 49.0 72.5 100.0

60.0 32.5 62.5 87.5 97.5 62.5 15.0 35.0 40.0 95.0 14

Jewellery Costume Jewellery Furniture Ceramic Tiles/Sanitary ware Consumer Durables

Knowledge about Foreign Brands

(in percent) Brand
Bata Rayban United Colors of Benetton Nike Ermenegildo Zegna Louis Vuitton Versace Da Milano Gucci Salvatore Ferragamo Mango NEXT Dolce & Gabbana Giorgio Armani Bottega Veneta

Year of Entry
1931 1990 1991 1995 2000 2003 2006 2006 2006 2006 2006 2006 2007 2008 2008

Mode of Operation
Wholly owned subsidiary Wholly owned subsidiary Wholly owned subsidiary Exclusive licensing agreement Franchise agreement Distribution Agreement Franchise agreement Privately held company Exclusive licensing agreement Joint Venture Exclusive licensing agreement Franchise agreement Joint Venture Joint Venture Exclusive licensing agreement

Know/Not Use
22 33.67 64 44.67 13 18 35.33 57.67 55.67 12.67 33.33 52.33 35.67 52.67 12.67

Do Not Know
2.67 3 11.67 4.33 86.67 78 61.33 34.67 14.33 87 63 41 55.67 35.33 87

Know/Use
75.33 63.33 24.33 51 0.33 4 3.33 7.67 30 0.33 3.67 6.67 8.67 12 0.33
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Why do Consumers Choose Branded Products?

Leather Goods
160 140 120 100 80 60 40 20 0 Better Quality Better Design More Variety 10 5 0 Better Quality More Variety 4 69 20 15 149 128 30

Fresh Fruits and Vegetables

25
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Preserved Food and Agro Products

120 100 80 60 40 20 114 140 120 100 80 60 40 116

Apparel
109 92

14

11 More Variety

20

0
Better Packaging Affordibility

0
Better Design Better Quality More Variety

Where do Consumers Purchase?

Sectors Fresh Fruits and Vegetables FMCG products Preserved Food and Agro products Jewellery Small Retailers 274 258 191 92 Corporate Retailers 22 40 41 182 Both 4 2 1 11

Handbags
Apparel Footwear

82
3 3

148
202 269

3
95 28
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Effects of Emergence of Corporate Retail Outlets/ Malls on Purchasing Pattern

350

300

297

250 224 Population 200

232

240

150

100 74 50 2 0 Spending 3 3 0 5 Quality Copnciousness 65 55

Frequency of Purchase Brand Conciousness Purchasing Pattern Increased Decreased Unchanged

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Periods of Purchase for different Product Categories

Apparel
300 253 250 200 150 100 50 0 New Product Released in market Seasonal Sales & Discounts Festivals Family Occasions Regular Purchases Seaonal Pruchase 37 225

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22 3

Leather Goods
200 180 160 140 120 100 80 60 40 20 0 179 350 300 108 250 200

Fresh fruits
299

51
5 New Seasonal Product Sales & Released in Discounts market Festivals 6 2

150 100 50 0 Festivals Regular Purchases 1 Family Regular Seaonal Occasions Purchases Pruchase

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Importance of Various Factors in Consumers Choice of Modern Retail Stores

Availability of Foreign Brands 62 60 40 70 78 41

Blend of Shopping and Entertainment

Customer Loyalty Card Easy in Product Exchange After Sales Service Home Delivery Brand Image/Goodwill Closer to House Convenient Timings Better Ambience Better Customer Service Use of Credit/Debit Card Credit Facility Availability Promotional Offers Fixed Rate Quality Assurance Better Product Quality Better Packaging 20 52 31

87

76 85 86 63

60 94 95 76 90 92 55 0 10 20 30 40 50 60 70 80 90 100

Preffered Brand/Variety
Fresh New Stock/Exclusive Design Price

Per cent Note: Scale of 1 to 5, higher is better. Percentage calculated on the basis of high (4) and very high (5) on factor 20 importance ratings. This is a multiple choice question

Additional Analysis Results

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Indian consumer perception of modern retail stores: Top 5 and bottom 5

* 1=very bad, 5=very good

Factor
Infrastructure
Store Operators Availability of products Shop Operating Time Availability of public transport and toilets

Mean Evaluation*
4.49
4.47 4.36 4.30 4.26

Ability to Bargain
Parking facility Ease getting things exchanged/returned Prices of products Distance and required travel time

1.59
3.54 3.56 3.64 3.73
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Perception about Modern Retail Outlets

Ability to Bargain Public Utilities (Toilets) Availablity of Public Transport Connecting Roads Reach Distance and Time Overall Performance versus Small Retailers Prices of Products Store Operators Location Parking Facility Shop Opening Time Ease in Getting Things Exchange/Returned Technical Problems (Bar Codes, Cash Counter Machines, etc.) Availability of Products Time Taken in Clearing Bill Infrastructure 0 10 20 30 40 50 60 Per cent 70 80 90 68 93 100 55 64 90 54 84 90 52 94 61 87 4 85 87 89

Note: Scale of 1 to 5, higher is better. Percentage calculated on the basis of high (4) and very high (5) on factor importance ratings. This is a multiple choice question

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Top 5 factors influencing Indian consumers shopping at modern retail stores

* 1=very low importance, 5=very high importance

Factor
Product Quality Assortment Selection and Newness Customer Service Store Ambience and Convenience Price

Mean Importance*
4.64 4.47 4.29 4.27 3.71
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Demographic effects on Indian consumer annual spending on branded clothing and footwear
(Stepwise Regression)

Significant Variable

Standardized regression coefficient

t-Value

Significance level

Yearly household income Travelled abroad

.282 .188

5.161 3.440

.000 .001

Model R2 = .120, F = 20.19,

p < .001

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Demographic effects on Indian consumer purchase of branded products (Stepwise

Logistic Regression)
Dependent Variable > Independent Variable Handbags and Jewelry
Exp(B) Wald Sig.

Furniture
Exp(B) Wald Sig.

Fresh Fruits
Exp(B) Wald Sig.

Yearly household income Travelled abroad

.598 .336

16.13 .000 8.14 .004 .268 12.79 .000

.509 9.23 .000

Model Statistics:

-2 Log likelihood = 379.75 p < .001

-2 Log likelihood = 381.35 p < .001

-2 Log likelihood = 166.83 p < .005

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Demographic effects on consumer attitude toward allowing foreign brands enter India (Stepwise Logistic Regression)
Exp(B) Wald Sig.

Education

1.984

8.604

.003

Yearly household income

.661

6.868

.009

Model Statistics:

-2 Log likelihood = 258.74, p < .002

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Implications for Global Retailers

Brand consciousness is increasing but varies across different product categories Brands with longer presence are more likely to be known and used Mode of entry is not related to brand knowledge International travel increases brand awareness Branded product should be same as in international markets in terms of price and quality. Additional requirement of after-sale services and product customisation Indian consumers are price sensitive right product pricing May explore possibilities of sourcing from Indian market Customer brand loyalty is low. It varies across product category, gender, etc. India is not a homogenous market vast difference across regions Modern retailers cater to a small segment of the Indian population
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Implications for Global Retailers

Know your consumers: brand consciousness is increasing but varies across different product categories/regions.

Mode of entry is not related to brand knowledge.

Ensure branded products are the same as those in international markets in terms of price and quality. Additional requirement of after-sale services and product customisation. Use right product pricing: Indian consumers are price sensitive. Explore possibilities of sourcing from Indian market. Focus on creating brand/store loyalty. Government FDI restriction is not necessarily an entry barrier: select right mode of entry and right partners.
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Implications for Policy Makers

India is the only country in the world to have a FDI policy linked to brands
Government should allow FDI in multi-brand retailing Single brand retail policy largely targets rich, educated Indian consumers. would not lead to higher FDI inflows. has led to regional variations in growth of modern/ branded retailers. FDI in multi-brand retailers can lead to modernization of food and grocery retailing. additional investment in supply chain management. In some sectors such as fresh fruits and vegetables, costume jewellery, furniture, etc. government needs to promote branding.
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Next Step
Larger survey of Indian consumers (sample size around 1,000 focusing on heterogeneity across regions, cities, products, etc.) A survey of Indian large and small retailers to understand how they cater on Indian shoppers behavior A survey of retail consumers in four Chinese cities (Sample size 200) Comparison of Indian and Chinese consumers brand consciousness, shopping behavior, etc. through primary survey and stakeholders consultation
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