Final - Thesis - Full PDF

RETAIL SUPPLY CHAIN MANAGEMENT IN FOOD AND GROCERY
(A CASE STUDY OF BANGALORE CITY)
THESIS
Submitted for the award of the Degree of

DOCTOR OF PHILOSOPHY IN MANAGEMENT
By
S. PANNEERSELVAM
Under the Guidance of
Prof. G. ANJANEYA SWAMY, Ph.D.

Director
Directorate of Distance Education
Pondicherry University, Puducherry - 605 014.
DEPARTMENT OF MANAGEMENT STUDIES

SCHOOL OF MANAGEMENT
PONDICHERRY UNIVERSITY
PUDUCHERRY- 605 014
INDIA
NOVEMBER – 2011
DECLARATION
I, S Panneerselvam hereby declare that the thesis entitled “Retail Supply

Chain Management in Food and Grocery (A Case Study of Bangalore City)”
submitted to Pondicherry University, in partial fulfilment for the award of the degree
of Doctor of Philosophy in Management is based on the original and bonafide
research work done by me, under the guidance and supervision of Professor
G. Anjaneya Swamy, Ph.D., Director, Directorate of Distance Education,
Pondicherry University, and that no part of this thesis has previously formed the
basis for the award of any degree, diploma, associate ship or fellowship or any
other title.
I also declare that no part(s) of the thesis is/are a reproduction from any
other source, published or unpublished, without acknowledgement.
Place: Puducherry.
Date : S. Panneerselvam
ii
CERTIFICATE
This is to certify that the thesis entitled “Retail Supply Chain Management
in Food and Grocery (A Case Study of Bangalore City)” submitted to
Pondicherry University, in partial fulfilment for the award of the degree of Doctor of
Philosophy in Management is based on the original and bonafide research work
done by S. PANNEERSELVAM, during the period 2006–2011 in Department of
Management Studies, School of Management, Pondicherry University, under my
guidance and supervision, and that the thesis has not formed before, the basis for
the award of any degree, diploma, associate ship or fellowship or any other title.
Further, I certify that no portion of the thesis is a reproduction from any other
source, published or unpublished, without acknowledgement.
Place: Puducherry. Prof. G. Anjaneya Swamy, Ph.D.

Date : Research Guide
Director
Directorate of Distance Education
Pondicherry University
Puducherry - 605 014.
iii
DEDICATION
I dedicate this humble piece of work firstly to the Almighty, then to my

wife, Mrs. P.Kavitha, my sons P. Giridharan and P. Hari Prasath.
S. Panneerselvam
iv
ACKNOWLEDGEMENT
The completion of work of this nature is not possible without the involvement
and valued contributions from a number of persons. Firstly, I profusely thank my
guide Professor G. Anjaneya Swamy, Ph.D., Director, Directorate of Distance
Education, Pondicherry University for giving me an opportunity to do research
under him. He has been always forthcoming with his creative ideas and thoughts.
His support and motivation from the beginning to the thesis submission in all the
activities such as framing the research problem, designing the questionnaire,
conducting the study, analysis, and thesis writing is immense. I value his kind
heartedness, benevolence and humbleness. I am indebted to him.
I thank my doctoral committee members Professor R. Prabhakara Raya,
Head of the Department, Department of Management Studies, Pondicherry
University and Professor K. Chandra Sekhara Rao, Head of the Department,
Department of Banking Technology, Pondicherry University for their wholehearted
support, insights and help in carrying out the research study. I am grateful to them
for spending their valuable time with me in moulding and completing the research
study.
I thank all the faculty members and other staff of School of Management
Studies, Pondicherry University for their help and support.
Also, I thank Dr. M R Shollapur, Director, Post Graduate Department of
Management Studies, Siddaganga Institute of Technology, Tumkur for all his help
and support.
I am grateful to my wife and my sons for their patience all along the period of
study.
I thank my students of Post Graduate Department of Management Studies,
Siddaganga Institute of Technology, Tumkur, Mrs. Nayana, Mr. Vivek Reddy,
Mr.Satish G Patil, Mr. Shivaraj Kumar, Mr. Venkatesh and Mr.Shivabasava T,
for helping me in data collection. I thank my students Mr.Nagaraj and Mr.Veeresh
Malli who were the managers of ‘More’ outlets for collecting the data from their
colleagues in ‘More’ and other outlets.
Also, I thank all those who have directly or indirectly helped me in
completing the research study.
S.Panneerselvam
v
CONTENTS
Page No.
Chapter 1 – Introduction
Retailing in India 2
Food and Grocery Retail 6
Evolution of organised Food and Grocery Retail in South India 17
History and Growth of Bangalore City 18
Bangalore - The "Garden City" 21
Food and Grocery Retail in Bangalore 25
Retail Supply Chain Management 26
Chapter 2 - Literature Review, Research Design and Methodology
Retail Supply Chain 31

Private Labels 34
Supply Chain Efficiency 35
Store Attributes 37
Retailing in India 38
Shopping Behaviour 41
Retail Supply Chain in India 41
A C Nielsen on Retail and Retail Supply Chain 44
A.T. Kearney on Retail and Retail Supply Chain 45
Ernst & Young on Retail and Retail Supply Chain 46
FICCI on Retail and Retail Supply Chain 47
KPMG on Retail and Retail Supply Chain 48
KSA – Technopak on Retail and Retail Supply Chain 49
McKinsey on Retail and Retail Supply Chain 51
Other Report 51
The Research Problem 52
Need for the Study 52
Objectives of the Study 53
Testing of Hypothesis 53
Scope of the Study 54
Limitations of the Study 54
Research Methodology 55
Research Survey 58
Chapter 3 – Data Analysis on Organised Retail Outlets
LOGISTICS DRIVERS
Location, Size, Layout and Facilities/Amenities
Location 61
Size of Organised Outlets 62
Catchment Area of the outlets 64
Amenities and Facilities 65
Ownership and Kind of Outlets 67
Layout 69
Distribution Centre 70
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Page No.
Inventory
Number of SKUs in outlets 71
Stock (in days) of different SKU Categories in the Outlets 75
Stock-out in the Outlets 76
Fill-rate 77
Private Labels 78
Branded Products 79
Outsourced Products 79
Merchandise Classification 83
Supply Chain Management Inventory Technique 85
Inventory Control Techniques Adopted for SKU Categories 86
Shrinkage of Merchandise 88
Transportation
In-bound Transportation 90
Outbound Transportation 91
Cross-Functional Drivers
Sourcing
Responsibility of Sourcing 92
Supplies to Outlets 93
Lead time between the order and Delivery of SKUs 94
Mode of Payment to the Suppliers 96
Number of Suppliers 97
Vendor Rating/Supplier Assessment 99
Suppliers Replenishment Policy 100
Pricing Strategy 101

Information
Bar Coding of SKUs and PoS 103
Major Application Areas of Computers 104
Benefits of using Computers 106
SUPPLY CHAIN PROCESSES

Customer Relationship Management (CRM)
External Customers
Outlet-wise Customers 110
Number of footfalls at an outlet per Day 111
Age of the customers 111
Regular and Occasional Customers 113
Buying behaviour of Customers in Group 116
Customer Contact 124
Customer Services and Benefits 126
Internal Customers (Employees) 129
vii
Page No.
Internal Supply Chain Management (ISCM)
Demand Forecasting 137
Measures to Meet the Excess Demand 138
Reverse Supply Chain Management 140
Security Mechanisms for the upkeep safety of merchandise 142
Sales over a Month 144
Sales through Alternate Ways 145
Competition 148
Future Plans of the outlets and Satisfaction of the Business 152
Performance Analytics of Organised Outlets

Operating Expenses and Operating profit 153
Monthly Sales (Rs. in Lakhs) 159
Sales per Square Foot (in Rs.) per Month 160
PBDIT/Month (Rs. in Lakhs) 162
PBDIT/Sq. foot per month (in Rs.) 163
Sales/Employee per month (Rs. in Lakhs) 164
Data Analysis on kirana Stores

Profile of the kirana Stores 167
Location of Stores 168
Size of the Stores 168
SKU category Management 169
Number of Days Inventory Carried 171
Sourcing 174
Benefits/Incentives on purchase 175
Mode of Payment and Credit Period 176
Pricing 178
Application of Computers 179
Customer Base 180
Footfalls, Sales per Customer and Sales per day 181
Time Spent by Customers in kirana Stores 183
Nature of Customers 185
Personal Rapport with the customers 187
Backordering 188
Staff-Relatives 189
Sales during different spells of a month 191
Phone Orders and Home Delivery 193
Wrong Merchandise 196
Customer Migration and Addition of New Customers 197
Sources of Finance 199
Density of Food and Grocery 200
Intensity of Competition 201
Problems faced by the kirana Stores 204
Future Plans of the kirana Stores and Customer satisfaction 206
Monthly Sales 208
Sales per Square foot 209
Sales per Employee 211
viii
Page No.
Chapter 4 – Testing of Hypothesis and Model Building

Organised Retail Outlets 213
kirana Stores 227
Comparison of traditional kirana Stores and modern organised 230
retail outlets
Cluster Analysis 240
Regression Models 243
Chapter 5 – Summary of Findings, Suggestions and Conclusion

Findings - Organised Retail Outlets 251
Findings - kirana Stores 260
Suggestions 271
Further Research 279
Conclusion 280
Bibliography 284
Annexures i-xv
ix
LIST OF TABLES
Table Page
No. No.
1.1 Global Retail Development Index – 2011 5
1.2 Segment wise share and growth of Indian Retail ($ billion) 7
1.3 Consumer spending (excluding institutional and government 8
spending)
1.4 Proportion of young population (< 25 years) 9
1.5 Shoppers visiting supermarket/hypermarket in a 4-week period 13
1.6 Shoppers spending most of their grocery budgets at modern 13
trade stores
1.7 Share of Food in Total Consumer Expenditure (in percentage) 14
1.8 Per capita net national income (in Rs. 2004-05 prices) 15
1.9 Monthly per capita consumer expenses (in Rs.) 15
1.10 Share in spending 15
1.11 Per cent Share in food spending 16
1.12 Expenditure on food ( in Rs.) 16
1.13 Some of the rich and poor states in India 19
1.14 GSDP Growth of Select States in India 19
1.15 Bangalore City Corporation Limits over the years 22
1.16 Demographic Trends of Bangalore – 2011 22
1.17 Twenty Cities to Watch 24
1.18 Malls in Bangalore 26

2.1 Sources of Information 55
2.2 Determination of Sample Size (kirana stores) 56
2.3 Retail Chains and number of outlets surveyed 57
2.4 Total Sample Size Surveyed 57
2.5 Location of Organised Outlets 58
2.6 Year of Establishment of Organised Outlets 59

3.1 Location of the Outlets 62
3.2 Size of Organised Retail Outlets 63
3.3 Catchment Area of Organised Outlets 64
3.4 Central Tendencies – Size and Catchment Area of Outlets 65
3.5 Outlets and Amenities 65
3.6 List of Amenities available at the Outlets 66
3.7 Satisfaction with Amenities 67
3.8 Ownership of the Outlets 68
3.9 Number of Locations of Outlets 68
3.10 Form of Organisations 69
3.11 Layout of the Outlets 69
3.12 SKUs Range 72
3.13 Central tendencies of SKUs 73
3.14-a SKU Categories in an Outlet – I 73
x
Table Page
No. No.
3.14-b SKU Categories in an Outlet – II 74

3.14-c SKU Categories in an Outlet (Central Tendencies) 74
3.15 Stock in days of different SKUs 76
3.16 Occurrence of Stock-outs 76
3.17 Percentage and central tendencies of Stock-outs 77
3.18 Fill-rates of SKUs 77
3.19-a Different Kinds of SKU Categories – I 79
3.19-b Different Kinds of SKU Categories – II 80
3.19-c Kinds of SKUs in Food Category 80
3.19-d Kinds of SKUs in Non-Food Category 81
3.19-e Kinds of SKUs in Staples 81
3.19-f Kinds of SKUs in Beverages 82
3.19-g Kinds of SKUs in ‘Others’ Category 82
3.20 Inventory Classification 84
3.21 Type of Inventory Classification Technique Adopted 84
3.22 Supply Chain Management Inventory Techniques 86
3.23-a Inventory Control Techniques – I 87
3.23-b Inventory Control Techniques – II 87
3.24-a Shrinkage in Outlets 89
3.24-b Shrinkage in Outlets (Central Tendencies) 89
3.25 Secondary Transportation Cost 91
3.26 Mode of Transport for Home Delivery 91
3.27 Responsibility of Sourcing 92
3.28-a Outlets and Suppliers - I 93
3.28-b Outlets and Suppliers - II 93
3.29-a Lead time between order and delivery – Food, Vegetables and 94
Non-food
3.29-b Lead time between Order and Delivery – Staples, Beverages and 95
‘Others’
3.29-c Lead Time Between the Order and Delivery of different SKUs – 96
Central Tendencies
3.30-a Mode of Payment 97
3.30-b Credit Period 97
3.31-a Number of Suppliers for different SKU Categories (Central 98
Tendencies)
3.31-b Number of Suppliers for different SKU Categories – I 98
3.31-c Number of Suppliers for different SKU Categories – II 99
3.32 Vendor Rating Policy 100
3.33 Satisfaction Level about the Suppliers’ Replenishment Policy 100
3.34 Merchandise Returning Policy (Suppliers) 101
3.35-a Pricing Strategy at the Outlets – I 102
3.35-b Pricing Strategy at the Outlets – II 102
3.36 Selling Price of the SKUs 103
3.37 Outlets with PoS and Inventory Management Software Interface 104
3.38-a Major Application Areas of Computers – I 105
3.38-b Major Application Areas of Computers – II 105
3.39 Software Integration among different Modules 106
xi
Table Page
No. No.
3.40 Benefits of Usage of Computers 106

3.41 Satisfaction Level of the Software Used 107
3.42 Scope for Computer Software Improvement 108
3.43-a Number of Customers 110
3.43-b Central Tendencies - Number of customers for Outlets 110
3.44-a Number of footfalls per day 111
3.44-b Footfalls per day - Central Tendencies 111
3.45-a Age group of the customers and the number of outlets 112
3.45-b Age group of the customers and the percentage of outlets 112
3.46-a Regular Customers and Outlets 114
3.46-b Occasional Customers and Outlets 115
3.46-c Central Tendencies of Regular and Occasional Buyers 115
3.47-a Profile of Customers visit with family - Central Tendencies 117
3.47-b Percentage of Customers visit with Family 117
3.47-c Time spent by the Customers visit with Family 118
3.47-d Purchases (in Rs.) made by Customers visit with family 118
3.48-a Profile of Customers visit with Friends - Central Tendencies 119
3.48-b Percentage of Customers visit with Friends 119
3.48-c Time spent by the customers visit with Friends 120
3.48-d Purchases (in Rs.) made by Customers visit with Friends 120
3.49-a Profile of Customers visit alone - Central Tendencies 121
3.49-b Percentage of Customers visit alone 122
3.49-c Time spent by the Customers visit alone 122
3.49-d Purchases (in Rs.) made by customers visit alone 123
3.50-a Customer Database with the outlets 124
3.50-b Frequency of Contact with the Customers 125
3.50-c Measures to keep in contact with the customers 125
3.50-d Customer Feedback 125
3.50-e Frequency of the Feedback 126
3.51-a Home Delivery Service 127
3.51-b Outlets giving Credit Card Service Facility 127
3.51-c Benefits to the Customers 128
3.51-d Days allowed for returning the merchandise 128
3.51-e Customer’s Satisfaction Level with Merchandise Return Policy 129
3.52-a Distribution of Number of Employees in outlets 130
3.52-b Central Tendencies of number of employees 130
3.52-c Number of male and female employees – I 131
3.52-d Number of male and female employees – II 131
3.52-e Male-Female Employees in the outlets (Percentage) 132
3.52-f Male and Female Employees at different levels 133
3.52-g Number of Customer Service Associates (CSA) at the Outlets 134
3.52-h Qualification of Employees 134
3.52-i Benefits to Employees – Leave for the Employees (in Days) 136
3.52-j Bonus to the Employees 136
3.52-k Other Benefits to the Employees 136
3.52-l Number of Shifts 137
3.52-m Uniform to the Employees 137
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Table Page
No. No.
3.52-n Existence of Human Resources Department 137

3.53-a Demand Forecasting at the Outlets 138
3.53-b Forecasting Techniques adopted by the Outlets 138
3.54-a Measures to meet the excess Demand - I 139
3.54-b Measures to meet the excess Demand - II 139
3.55-a Return rate of food and vegetable SKUs 141
3.55-b Return rate of non-food and staple items 141
3.55-c Return rate of beverages and other items 142
3.56 Merchandise Returning Policy Documentation 142
3.57-a Security Mechanisms at the Outlets – I 143
3.57-b Security Mechanisms at the Outlets – II 143
3.58-a Sales over a Month 144
3.58-b Sales over a Month - Central Tendencies 145
3.59-a Sales through Phone and the Internet 146
3.59-b Central Tendencies of percentage of Sales through Phone and 147
Internet
3.59-c Central Tendencies of Time between Order and Delivery through 147
Phone and Internet
3.59-d Time between Order and Delivery through Phone 147
3.59-e Time between Order and Delivery through Internet 147
3.60-a Competition from Others 149
3.60-b Outlets facing Competition 149
3.60-c Distribution of number of Outlets in One Square Kilometre 150
3.60-d Distribution of number of kirana stores in One Square Kilometre 150
3.60-e Number of Outlets in One Square Kilometre – Central 150
Tendencies
3.60-f Distribution of number of outlets in One Square Kilometre 151
3.60-g Sales Affected by Competition 151
3.61-a Future Plans of the Outlets - I 152
3.61-b Future Plans of the Outlets - II 152
3.62 Overall Business Satisfaction 153
3.63-a Distribution of expenditure on SKU and Employee Salary as 154
percentage of Sales
3.63-b Expenditure on SKU and Employee Salary as percentage of 154
Sales
3.63-c Expenditure on Rent, Transportation, Warehousing and 155
Advertisement as percentage of Sales
3.63-d Distribution of Expenditure on Rent, Transportation, 155
Warehousing and Advertisement as percentage of Sales
3.63-e Expenditure on CRM, IS and others as percentage of Sales 156
3.63-f Distribution of expenditure on CRM, IS and Others as percentage 156
of Sales
3.63-g Central Tendency of distribution of various SKUs as percentage 157
of Sales
3.63-h Total Expenditure to Sales 158
3.63-i PBDIT Percentage 159
3.64 Monthly sales of the Outlets 160
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Table Page
No. No.
3.65 Sales per Square Foot/Month 161

3.66 PBDIT/Month (Rs. in Lakhs) 162
3.67 PBDIT/Sq. Foot 163
3.68 PBDIT/Sq. Foot per month (Rs. in Lakhs) 165
3.69 Central Tendencies of the various Metrics 166

3.70 Year of Establishment (kirana Stores) 167
3.71 Location of kirana Stores 168
3.72 Size of the Stores (Sq. feet) 169
3.73 Stores selling different SKUs 169
3.74 Number of SKUs in kirana Stores 170
3.75 Percentage of SKUs in kirana Stores 170
3.76 Stock Held (in days) 172
3.77 Central Tendencies of stock held (in days) 173
3.78 Stock-out 173
3.79 Percentage of Stock-out 173
3.80-a Sourcing SKUs – I 175
3.80-b Sourcing SKUs – II 175
3.81-a Benefits on Purchases – I 176
3.81-b Benefits on Purchases – II 176
3.82 Mode of Payment 177
3.83 Period of Credit 177
3.84-a Price Discount on MRP 178
3.84-b Price Discount on Purchases 178
3.84-c Discount on Purchases 178
3.85-a Computer Usage 179
3.85-b Area of Computer Application – I 179
3.85-c Area of Computer Application – II 180
3.86-a Total Number of Customers 180
3.86-b Central Tendencies of number of Customers 181
3.87-a Average Number of Customers per day 182
3.87-b Sales/Customer per Visit 182
3.87-c Sales/Day of kirana Stores 182
3.87-d Central Tendencies - No. of Customers, Sales per Customer and 183
Sales per Day
3.88 Time spent by a customer in a Store 184
3.89-a Percentage of Customers buy on ‘Cash’ 185
3.89-b Customers Buy on ‘Monthly Account’ and on ‘Credit 186
Occasionally’
3.89-c Central Tendencies of Customers Buy on ‘Monthly Account’ and 186
on ‘Credit Occasionally’
3.90 Customers known ‘personally’ 187
3.91-a Customers willingness to wait, if stock not available 189
(backordering)
3.91-b Willingness of the customers to wait 189
3.92-a Number of Staff and Percentage of Stores 190
xiv
Table Page
No. No.
3.92-b Staff-Relatives Matrix 190

3.93-a Sales spread in the month 192
3.93-b Sales during a month over different spells - Central Tendencies 192
3.94-a Phone Order and Home Delivery – I 194
3.94-b Phone Order and Home Delivery – II 194
3.95-a Time to Home Delivery Distribution (in Minutes) 195
3.95-b Time to Home Delivery 195
3.96 Wrong Merchandise 197
3.97-a Switch over of Customers and Addition of New Customers 198
3.97-b Central Tendencies of Percentage of customers switched over 198
and added in the last one year
3.98-a Stores financed 199
3.98-b Source of Financing 200
3.99-a Number of kirana Stores within one Square Kilometre 201
3.99-b Number of Organised Retail Outlets within one Square Kilometre 201
3.99-c Central Tendencies of Number of kirana Stores and Organised 201
Retail Outlets within one Sq. Kilometre.
3.100-a Existence of Competition 202
3.100-b Sales affected by competition from kirana Stores and Organised 203
Retail Outlets
3.100-c Central Tendencies - Percentage of Sales affected by 203
competition from kirana Stores and Organised Retail Outlets in
one Square Kilometre
3.101-a Problems Faced by the kirana Stores 204
3.101-b Weighted Scores of the Problems faced 205
3.102-a Future Plans – I 206
3.102-b Future Plans – II 206
3.103-a Customer Satisfaction with SKUs 207
3.103-b Customer Satisfaction with Services 207
3.103-c Satisfaction Level of kirana store owners 207
3.104 Monthly Sales (Rs. in Lakhs) 209
3.105 Sales per Square Foot (Rs.) 210
3.106-a Sales per Employee (Rs.) 211
3.106-b Central Tendencies of Monthly Sales, Sales per Sq. foot and 212
Sales per Employee

4.1 Descriptive Statistics (Time Spent) 214
4.2 Test of Homogeneity of Variances (Time Spent) 214
4.3 ANOVA (Time Spent) 215
4.4 Contrast Coefficients (Time Spent) – I 215
4.5 Contrast Tests (Time Spent) – II 215
4.6 Multiple Comparisons – Least Significant Difference (LSD) 216
Method (Time Spent)
4.7 Descriptives (Percentage of Sales) 217
4.8 Test of Homogeneity of Variances (Percentage of Sales) 217
4.9 ANOVA (Percentage of Sales) 218
xv
Table Page
No. No.
4.10 Contrast Coefficients (Percentage of Sales) 218
4.11 Contrast Tests (Percentage of Sales) 218
4.12 Post Hoc Tests – Multiple Comparisons (Percentage of Sales) 219
Least Significant Difference (LSD) Method
4.13 Case Processing Summary (Independence of Location) 220
4.14 Location * Footfalls Cross-tabulation 220
4.15 Chi-Square Tests (Location) 221
4.16 Symmetric Measures (Location) 221
4.17 Case Processing Summary (Size) 222
4.18 Outlets Area and Customers - Cross-tabulation 222
4.19 Chi-Square Tests (Size) 222
4.20 Symmetric Measures (Size) 223
4.21 Case Processing Summary (Footfalls) 223
4.22 Outlets Area and Footfalls Cross tabulation 224
4.23 Chi-Square Tests (Footfalls) 224
4.24 Symmetric Measures (Footfalls) 223
4.25 Correlations (Catchment Area and No. of Customers) - I 225
4.26 Correlations (Catchment Area and No. of Customers) - II 225
4.27 Correlations (Footfalls Vs Catchment Area) - I 226
4.28 Correlations (Footfalls Vs Catchment Area) - II 226
4.29 One-Sample Statistics (Competition) 227
4.30 One-Sample Test (Competition) 227
4.31 Correlation between the Size and the Number of Customers 228
(kirana Stores)
4.32 Correlations (Relatives Vs No. of Staff) 228
4.33 Variables Entered/Removed (Multiple Correlation) 229
4.34 Coefficients (Multiple Correlation) 229
4.35 Coefficient Correlations (Multiple Correlation) 230
4.36 Comparison of Sales per Square foot 231
4.37 One-Sample Kolmogorov-Smirnov Test (Sales per Square foot) 232
4.38 Mann-Whitney Test (Sales per Square foot) 232
4.39 Test Statistics (Sales per Square foot) 233
4.40 Independent two-sample t-test (Sales per Square foot) 233
4.41 Equality of Variances (Sales per Square foot) 234
4.42 Comparison of Sales per employee (Rs. in Lakhs) 234
4.43 One-Sample Kolmogorov-Smirnov Test (Sales per Employee) 235
4.44 Mann-Whitney Test (Sales per Employee) 236
4.45 Test Statistics (Sales per Employee) 236
4.46 Group Statistics (Sales per Employee) 236
4.47 Equality of Means (Sales per Employee) 237
4.48 Comparison of Monthly Sales (Rs. in Lakhs) 237
4.49 One-Sample Kolmogorov-Smirnov Test (Monthly Sales) 238
4.50 Mann-Whitney Test (Monthly Sales) 239
4.51 Test Statistics (Monthly Sales) 239
4.52 Independent t-Test (Monthly Sales) 240
4.53 Test for Equality of Means (Monthly Sales) 240
4.54 Clusters based on performance 241
4.55 Clusters based on Customer Groups 242
xvi
Table Page
No. No.
4.56 Correlations (Number of Customers, Footfalls and Catchment 243

Area)
4.57 Correlations - Spearman's rho (Number of Customers, Footfalls 244
and Catchment Area)
4.58 Regression Model 1 (Number of Customers, Footfalls and 245
Catchment Area)
4.59 Coefficients (Number of Customers, Footfalls and Catchment 245
Area)
4.60 Excluded Variables (Number of Customers, Footfalls and 246
Catchment Area)
4.61 Correlations (Estimation of PBDIT) 247
4.62 Model Summary (Estimation of PBDIT) 247
4.63 ANOVA (Estimation of PBDIT) 248
4.64 Coefficients (Estimation of PBDIT) 248
4.65 Variables Entered/Removed (Average Sales of a kirana Store) 249
4.66 Model Summary (Average Sales of a kirana Store) 249
4.67 ANOVA (Average Sales of a kirana Store) 250
4.68 Coefficients (Average Sales of a kirana Store) 250
4.69 Coefficient Correlations (Average Sales of a kirana Store) 250
Chapter 5 – Summary of Findings, Suggestions and Conclusion

5.1 Comparison of traditional kirana stores and organised retail 269
outlets
xvii
LIST OF FIGURES
Figure No. Page No.
1.1 Size of Indian Retail 4
1.2 Modern Retail as percentage of total retail sales 5
1.3 Global Retail Development Index 2011 – Country 6
attractiveness
1.4 Share of Modern and Traditional retail 9
1.5 Median Age of Population (in years) 10
1.6 Major spending of Indian Households 13
1.7 Share of Food in Total Consumer Expenditure (in 14
Percentage)
1.8 Bangalore City 21
1.9 Stages in a Manufacturing Supply Chain 27
1.10 Retail supply chain 27
1.11 Supply Chain Decision-Making Framework 29
1.12 Supply Chain Macro Processes 30

2.1 Selection of Samples 56
2.2 Year of Establishment of Organised Retail Outlets 59

3.1 Location of the Outlets 62
3.2 Size of the Outlets (in Sq. ft.) 63
3.3 Role of Distribution Centre 71
3.4-a SKU Categories - I 74
3.4-b SKU Categories - I I 75
3.5 Private Labels 83
3.6 Inventory Control Technique adopted 88
3.7 Lead Time - Time between Order and Delivery 95
3.8 Number of Suppliers 99
3.9 Benefits of the Usage of Computers 107
3.10 Customers in Different Age Group 113
3.11 Customer Types 116
3.12 Customers in Group 123
3.13 Male-Female Employees 132
3.14 Employees at Different Levels (in Percentage) 134
3.15 Qualification of Employees 135
3.16 Sales over a Month 145
3.17 Time between Order and Delivery through Phone (in 148
Minutes)
3.18 Time between Order and Delivery through the 148
Internet (in Hours)
3.19 No. of kirana Stores within one Sq. Km. 150
3.20 No. of Organised Outlets within one Sq. Km. 150
xviii
Figure No. Page No.
3.21 Sales Affected by Competition 151

3.22 Expenditure on SKU and Employee Salary 157
3.23 Expenditure on Various Overheads 158
3.24 Monthly Sales Vs Sales per Sq. Foot 162
3.25 PBDIT Vs PBDIT/Sq. Foot per Month 164
3.26 No. of Employees and Sales per Employee 165

3.27 Year of Establishment of kirana Stores 167
3.28 Category Management of SKUs 171
3.29 Stock Held (in days) 172
3.30 Stock-out 174
3.31 Mode of Payment 177
3.32 Number of Customers/Day and Sales/Customer per 183
Visit
3.33 Time spent by a customer (in minutes) 184
3.34 Percentage of Customers buy on Monthly Account 186
and on Credit Occasionally
3.35 Customers Known Personally 188
3.36 Relatives among the Staff 191
3.37 Sales during different spells of a month 193
3.38 Venn Diagram depicting the kirana stores offering 195
Home Delivery and Phone Order Services
3.39 Home Delivery (in Minutes) 196
3.40 Customers Left and new customers added in the 199
Last One Year
3.41 Venn diagram Showing the Competition from kirana 202
Stores and Organised Outlets
3.42 Impact of Competition on Sales 203
3.43 Problems Faced by the kirana Stores 205
3.44 Customer Satisfaction with SKUs and Services 208
3.45 Monthly Sales Vs Sales per Sq. Foot 210
3.46 Monthly Sales Vs Sales per Employee 212

4.1 Sales per Sq. Foot (Rs.) 231
4.2 Sales per Employee (Rs. in Lakhs) 235
4.3 Monthly Sales (Rs. in Lakhs) 238
xix
CHAPTER – 1
INTRODUCTION
A supply chain is a network of facilities and distribution options that performs

the functions of procurement of materials, transformation of these materials into
intermediate and finished products and the distribution of these finished products to
customers. A supply chain consists of all parties involved, directly or indirectly in
fulfilling a customer request. The supply chain includes not only the manufacturer
and supplier, but also transporters, warehouses and customers themselves.
Supply chain exists in both service and manufacturing organizations,

although the complexity of the chain may vary greatly from industry to industry and
firm to firm. The concept of supply chain management has undergone tremendous
changes over a period of time. In the earlier decades companies used supply chain
basically to cut costs from existing operations rather than a strategic way to gain
competitive advantage and differentiation. The advent of Information Technology
broke down communication barriers, helped to reach out disparate audiences and
fostered collaboration – all of which contributed to the growth of supply chain
management.
The innovative companies such as Toyota, 7-Eleven Japan, Dell, Nokia,

Wal-Mart and Zara that were in the forefront of implementing supply chain
management practices resulted in outperforming their competitors and enhancing
customer satisfaction. Nokia with fast moving product and discerning customers
altered its playing field with rapid response manufacturing, quick ship logistics and
a global supply web enabled to link its suppliers and plants and to also support its
vendor managed inventory and collaborative planning. These capabilities have
contributed 20 per cent to profit margins, a 35 percent market share and an
average cost to make and sell phones that is 18 per cent lower than its rivals.
Improving supply chain performance can help companies cut down their
inventories by 25-50 per cent, throughput time by more than 60 per cent while
completely eliminating stock-outs and improving service levels. This could result in
1
increased sales at least by five per cent. A research study by Accenture Supply
Chain Management Service in conjunction with Accenture Institute for Strategic
Change, Stanford University and Insead based on 600 global companies found
that transforming supply chain operations had a substantial impact on growth in
market capitalization.
RETAILING IN INDIA
Retailing consists of all activities involved in selling goods and services to
consumers for their personal, family, or household use. It covers sales of goods
ranging from automobiles to apparel and food products, and services ranging from
hair cutting to air travel and computer education.1
Retailing is one of the largest sectors in the global economy. In India, for a
long time the corner grocery store was the only choice available to the consumers.
With the increasing demand of the customers spurred by changing trends, aspiring
needs for variety, the traditional retail gave rise to modern retail format. The
traditional food and grocery segment has seen the emergence of
supermarkets/grocery chains, convenience stores and hypermarkets.
Traditionally, retailing has not been a structurally organized industry in India.

Organized retail network was seen only in fabrics, with large mills building their
own exclusive stores like Raymond’s, Bombay Dyeing etc.
The Indian Retail Industry on the whole is divided into organised and
unorganised sectors. Unorganised/Traditional retailing refers to the traditional
formats of low-cost retailing, for example, the local kirana shops, owner manned
general stores, paan/beedi shops, convenience stores, hand cart and pavement
vendors, etc.2
In India, the terms large-scale, modern-format and organized are used

synonymously even though they have different meanings. Large-scale refers to the
1
Chetan Bajaj et al, Retail Management, Oxford Publishers, 2005.
2
Corporate Catalyst India, “A report on Indian Retail Industry”, 2006.
2
scale of operation of retail business which in turn implicitly refers to a chain of
stores. Modern-format basically refers to self-service. However, many of the self-
service stores also called as “Supermarkets”, are in the range of 500 square feet or
less in size and are nothing more than independent mom-and-pop stores. And
organized retail typically means large-scale chain stores which are corporatized,
apply modern-management techniques and are very likely to be self-service in
nature. Most of the estimates of organized retail market size refer to only large-
scale retail.3
Modern Retail has seen a significant growth in the past few years with large
scale investments made by Indian corporate houses primarily in Food and Grocery
retailing. The total retail (organised and unorganised) industry in India is estimated
to be Rs 20 lakh crore in 2010. This is expected to reach Rs 27 lakh crore by 2015.
Organised retail, which is estimated to be Rs 1.0 lakh crore (5 per cent share) in
2010, is projected to reach Rs 3.0 lakh crore (11 per cent share) by 2015. This
means a tripling of the current size and scale of organised retail in the next five
years, i.e. 2010 - 2015. While organised retail will grow at a fast pace, it is
important to note that a larger part of the Rs 7.0 lakh crore growth in total retail will
come from unorganised retail. This segment (unorganised retail) is projected to
grow by over Rs 4.5 lakh crore in the next five years.4
The retail market in India is about $410 billion in 2010 and may rise to $637
billion in 2015 (Figure 1.1), according to consultancy Technopak Advisors.5 The
Indian retail business employs nearly 21 million people, about 7% of total
employment. There are about 15 million retail outlets, the largest number in the
world.
3
Vijay Anand and Vikram Nambiar, “Indian Food Retail Sector in the Global Scenario”,
Business Line, 23rd July 2007.
4
Raghav Gupta, Rohit Bhatiani, and Pranay Gupta, “An Overview of India’s Consumer
and Retail Sectors”, pp 27-32, Technopak Perspective, Volume 4, 2010.
5
Retail biz, January 2010.
3
Figure 1.1: Size of Indian Retail
Source: CII, 2007 and Technopak Analysis, November 2010.
However, the size of Indian organized retail is merely 5% compared to the

US – 80%, Western European Countries – 70% and Brazil – 40% (Figure 1.2).
This indicates the huge scope for the growth of the organized sector in India and its
potential to grow to a significant 20% by the end of the decade.6,7
The Global Retail Development Index (GRDI) 8 is an annual study that ranks
the top 30 developing countries for retail expansion worldwide. The Index analyzes
25 macroeconomic and retail-specific variables to help retailers devise successful
global strategies and to identify emerging market investment opportunities. India
continues to be one among the top five countries for the last five years (Table 1.1).
6
Economic Times, 4th July 2011.
7
Business World, 20th December 2010.
8
“Retail Global Expansion: A portfolio of Opportunities”, A T Kearney, 2011.
4
Figure 1.2: Modern retail as Percentage of Total Retail Sales
Source: Economic Times, 4th July 2011 and Business World, 20th December 2010.
Table 1.1: Global Retail Development Index – 2011
Change
Market Country Market
Time
2011 GRDI in rank
Country Attractiveness risk Saturation
Pressure
Rank Score compared
(25%) (25%) (25%)
(25%)
to 2010
1 Brazil 100.0 79.4 42.9 63.9 71.5 +4
2 Uruguay 85.0 73.8 63.6 39.6 65.5 +6
3 Chile 54.3 100.0 30.3 44.3 64.7 +3
4 India 28.9 59.9 63.1 1000.0 63.0 -1
5 Kuwait 80.4 80.6 57.3 27.1 61.3 -3
6 China 49.5 76.5 31.0 87.7 61.2 -5
0=Low 0=High 0=Saturated 0=no time
Attractiveness Risk 100=Not pressure
100=High 100=Low Saturated 100=urgency to
Attractiveness Risk enter
Source: A.T. Kearney, 2011.
India and China both fell this year, 2011. While these countries are large
and growing, on a relative basis, several Latin American markets outshine both
India and China. And as retailers continue to enter India and China—particularly in
5
tier 2, 3 and 4 cities where consumers are increasingly accepting global brands
with rising disposable incomes and are becoming more discerning in their tastes—
in several instances, traffic to stores has yet to meet expectations.
Figure 1.3: Global Retail Development Index 2011 – Country Attractiveness
Source: A.T. Kearney, 2011.
FOOD AND GROCERY RETAIL

Organised food retailing is relatively a new phenomenon in India, with the
emergence of small western-style supermarkets since the 1990s. Most of the food
products are sold through local 'wet' market vendors, roadside pushcart sellers or
small grocery stores. Out of 15 million retail outlets, almost seven million sell food
and grocery products. The vast majority of these are small kiosks (17 per cent),
general provision stores (14 percent) and grocery stores (56 per cent of all rural
retail outlets) run by a single trader and his family (M. Bhasi).9
9
Dr. M Bhasi, Retailing in Kerala, http://www.indianmba.com/Faculty_Column/
FC612/fc612.html.
6
Food and grocery retail in India is poised to grow further. According to KSA
Technopak study, food and grocery retail sales have grown from Rs 3,81,000 crore
in 1996, to Rs 8,66,000-crore in 2007 (Business Line: January 03, 2007).10
Table 1.2: Segment wise Share and Growth of Indian Retail ($ billion)
2006 2010
Market Size Share Market Size Share
Food & Beverages 195 65% 256 60%
Personal Care 15 5% 23 5%
Apparel 21 7% 33 8%
Footwear 5 2% 7 2%
Furnishings 4 1% 7 2%
Consumer Durables & IT 14 5% 24 6%
Furniture 9 3% 16 4%
Jewellery & Watches 15 5% 24 6%
Medical Care 8 3% 12 3%
Recreation 2 1% 3 1%
Others 12 4% 23 5%
Total 300 100% 428 100%
Source: CII Logistics, 2008.
India's strong growth fundamentals—9 percent real GDP growth in 2010;

forecasted yearly growth of 8.7 percent through 2016; high saving and investment
rates; fast labour force growth; and increased consumer spending—make for a
very favourable retail environment. Indian consumers continue to urbanize, have
more money to spend on non-food purchases, and have more exposure to brands.
The result is a powerful, more discerning consumer class. Going by the adage
‘markets are there where people are’, India's population of nearly 1.2 billion—
forecast eventually to overtake China's—also is an attractive target.11
Food accounts for 70 percent of Indian retail, but it remains under-

penetrated by organized retail. The food business in India is largely unorganised
10
Business Line Bureau, Heritage Food joins food retail bandwagon, Business Line, Jan
03, 2008.
11
“Retail Global Expansion: A portfolio of Opportunities”, A T Kearney, 2011.
7
adding up to barely Rs. 400 billion, with other large players adding another 50
percent to this. The share and growth of different retail sectors in India are given in
the Table 1.2. The All India food consumption is close to Rs. 9,000 billion, with the
total urban consumption being around Rs. 5,300 billion (Table 1.3). This means
that aggregate revenues of large food players is currently only 5 per cent of the
total Indian market (Figure 1.4), and around 15-20 per cent of total urban food
consumption. According to McKinsey report, the share of an Indian household’s
spending on food is one of the highest in the world.
Table 1.3: Consumer Spending

(Excluding Institutional and Government Spending)
Size in
Size in Likely
Consumer spending (excluding 2014
S. No 2009 (in Ranking
institutional and government spending) (US$
US$ Billion) in 2014
billion)
1 Food and grocery 260 325 1
2 Healthcare 34 55 2
3 Apparel and home textiles 32 43 4
Education (K-12, higher education &
4 28 45 3
vocational)
5 Telecom 25 41 5
6 Jewellery & watches 25 34 7
Personal transport (vehicles + fuel +
7 240 37 6
repairs)
8 Travel and leisure 12 20 8
9 Consumer durables and IT products 11 17 9
10 Home (furniture, furnishings, etc.) 10 15 10
11 Personal care 10 14 11
12 Eating out 5 7 12
13 Footwear 4 5 13
14 Health and beauty services 1 2 14
Source: “Changing India, Changing Consumption, Changing Consumers”, Technopak,

Perspective, Volume 03, 2010
8
Figure 1.4: Share of Modern and Traditional Retail
Source: Indian Retail Report, 2009.
The Growth Factors

One of the key contributing factors for the retail growth is the young
population in India. India’s 45% of population is below 25 years and 81% below 45
years. A large young population – possessing both the ability (disposable income)
and willingness (consumer confidence) to spend – is driving the growth of the
Indian retail industry. Furthermore, increasing household incomes are boosting
consumption to new levels.12 Table 1.4 and Figure 1.5 highlight the information.
Table 1.4: Proportion of Young Population (< 25 years)

Country Percentage
India 53%
China 42%
Indonesia 30%
USA 30%
Brazil 29%
Japan 27%
Germany 26%
Source: Technopak, 2nd November, 2007.
12
CII – Logistics, 4th January 2007.
9
Figure 1.5: Median Age of Population (in years)
Source: Technopak, 2nd November, 2007.
The other key factors that have enormous importance in increasing demand
for food and are expected to play a major role in the transformation of the demand
are13:
- Rising population and incomes
- Increasing number of nuclear families and working women
- Palate and lifestyle changes
These factors are likely to impact demand for food individually as well as in
combination, and result in significant changes in not only the demand for food
quantitatively but also in terms of where, how, what and when food is consumed.
This is likely to translate to new and innovative modes of delivery mechanisms,
retailing formats, packaging formulations and a range of convenience and ready-to-
eat food products.
Rising Population and Incomes
13
V. Sridhar and Nimisha Chhabra, “India’s Food Vision: The Next Decade”, pp 73-79,
Technopak Perspective, Volume 4, 2010.
10
India’s population estimated to be 1.2 billion out of which approximately 60
per cent – are expected to fall in the age group below 40 years, making it a
demanding segment to cater to. In addition, with real per capita income likely to
nearly double in the next 10 years and more than two-thirds of the current
population still just above or below the poverty line, in the consumption basket,
obviously, the first category to see increased spending will be food.
The increase in population combined with the increase in the disposable

income will translate into not only an increase in demand in value-added sectors
such as meat, dairy, fresh vegetables and fruits but also an accelerated demand
for primary food products. This demand will graduate into an exponential demand
for primary commodities, deriving partly from the fact that it takes greater quantities
of primary food to get processed and aggregated into a value-added product. On
top of this requirement for accelerated usage or absorption of primary commodities
or food conversion from raw to processed form, the demand for basic commodities
would increase with the growing population.
Increasing Nuclear Families and Working Women

Liberalisation of the economy and the incentives to private sector growth
have led to a rise in new trade formats and increased employment creation. This in
turn has led to the migration of both the skilled and unskilled workforce from rural
areas to major cities resulting in an increasing proportion of nuclear families
combined with higher employment possibilities for women. The rural-to-urban
migration trend coupled with other factors such as increased exposure to the media
and paucity of time has not only led to changes in awareness of gender equality
and rights but also changes in the habits of people towards traditional household
chores such as grocery-shopping and cooking. The trend towards preference for
ready to eat or frozen food is bound to intensify with improvements in packaging
technology and infrastructure.
Palate and Lifestyle Changes
Rising income and growing urbanisation are primarily responsible for the
shift in traditional Indian food habits. Driven by higher disposable incomes, Indians
are increasingly travelling within India and globally and are exposed to diverse
11
lifestyles. This has given birth to a new generation of consumers with a global
orientation in food habits. According to a Euromonitor report, it is anticipated that
there would be a dramatic rise in the number of Indians travelling abroad – 132 per
cent between 2006 and 2011. It is also expected that the total number of outbound
travellers is set to reach 16.3 million in 2011 alone.
High-income urban dwellers are seeking variety in their choice of foods and
are willing to spend more on international cuisine, including fast food. Indians have
become open to experimenting with newer tastes and multiple cuisines have found
a way into Indian kitchens, leading to a diversification in the Indian palate. This has
created opportunities for imported food products such as pasta, sauces, salad
dressings, dairy products such as yoghurt, cheese, etc.
The survey by Technopak on the volume of private consumption in India and

National Sample Survey Organisation (NSSO) survey 2011 shows the spend on
food is going to be an important component of expenditure. Nielsen’s shopper
trends show how the consumers have slowly started adapting to the organised
retail.
Changes in Consumption and Retail Growth14
Private consumption in India currently is about Rs 34 lakh crore and

accounts for 60 per cent of GDP. With growth in GDP expected at over 8 per cent,
inflation expected at 6-7 per cent, and private consumption expected to stay at 60
per cent of GDP, nominal growth in private consumption is expected to be 14-15
per cent. As such, private consumption is expected to double in five years hence to
reach about Rs 67 trillion by 2015. This throws open significant opportunities for
Indian and international companies to develop and create large businesses in the
consumer products and retail sectors in India.
Nielsen’s Shopper Trends – 201115
14
Raghav Gupta, Rohit Bhatiani, and Pranay Gupta, “An Overview of India’s Consumer
and Retail Sectors”, pp 27-32, Technopak Perspective, Volume 4, 2010.
15
Bhusan Ratna, “Attractive deals and promotions help big retailers grow”, Economic
Times, 5th July 2011.
12
According to Nielsen’s consumer research survey, modern business in India
is recovering from the slump and is growing faster than traditional trade. One in
every five consumers in Indian cities and towns buy most of their groceries from a
modern retail store (Table 1.5), says the study. Now a shopper might shop at both
the formats (traditional and modern) but prefers to allocate most of their spend to
purchases made at modern formats (Table 1.6). The major spending of an Indian
household on various heads is given in the Figure 1.6.
Table 1.5: Shoppers Visiting Supermarket / Hypermarket

in a 4-week Period
2009 30%
2010 37%
Source: Nielson’s Shopper Trends, July 2011.
Table 1.6: Shoppers Spending most of their Grocery Budgets at

Modern Trade Stores
2009 14%
2010 21%
Source: Nielson’s Shopper Trends, July 2011.
Figure 1.6: Major Spending of Indian Households
Source: Indian Retail Report, 2009.
13
The shoppers are not neglecting the local kirana store too. The rise of
traditional grocery stores continue to be strong driven by convenience, availability
of home delivery and trusted relationships between the shopper and local grocer.
The National Sample Survey Organisation (NSSO)16,17 66th round survey,
covering the period from July 2009 – June 2010 is based on data collected from
over one lakh households. The survey shows (Table 1.7 and Figure 1.7) an
average rural Indian household allocating 53.6 per cent of their total monthly
consumption expenditure on food items. The corresponding share for urban
household was less, at 40.7 per cent.
Table 1.7: Share of Food in Total Consumer Expenditure (in percentage)
Year Rural Urban

1987-1988 64.0 56.4
1993-1994 63.2 54.7
1999-2000 59.4 48.1
2004-2005 55.0 42.5
2009-2010 53.6 40.7
Source: Economic Times, 11th July 2011.
Figure 1.7: Share of Food in Total Consumer Expenditure (in percentage)
16
Business Line Bureau, “Consumers still spend most on food”, Business Line, 9th July
2011.
17
“Key indicators of household consumer expenditure in India, 2009-10”, Ministry of
Statistics and Programme Implementation, National Sample Survey Organisation, 8th July
2011.
14
The striking fact about the data is that the decline in the share of food in
total consumer spending is not as significant as in the previous quinquennial
survey rounds. Table 1.8, Table 1.9 and Table 1.10 depict the per capita net
national income, per capita monthly consumer expenses and share in spending of
urban and rural households respectively.
Table 1.8: Per capita Net National Income (in Rs. 2004-05 prices)
FY 2005 FY 2010
24,143 33,731
Table 1.9: Monthly Per capita Expenses (in Rs.)
FY 2005 FY 2010
Rural 559 1,052
Urban 928 1,786
Table 1.10: Share in Spending
FY 2000 FY 2010
Rural Urban Rural Urban
Consumer Durables 2.6 3.6 4.8 6.7
Miscellaneous goods and
services 19.6 31.3 24.0 37.8
According to the survey, cereals still make up the largest chunk of an

average Indian household’s consumption budget: 15.6 per cent in rural and 9.3 per
cent in urban areas; milk and milk products 8.6 per cent and 7.8 per cent and
vegetables 6.2 per cent and 4.3 per cent (Table 1.11 and Table 1.12) respectively.
The survey has estimated the all India average monthly per capita expenditure at
Rs. 1,052 in rural and Rs. 1,786 in urban areas.
15
Table 1.11: Per cent Share in Food Spending
Rural Urban
FY FY FY FY
2005 2010 2005 2010
Cereals 18 15.6 10.1 9.1
Pulses 3.1 3.7 2.1 2.7
Milk 8.5 8.6 7.9 7.8
Vegetables 6.1 6.2 4.5 4.3
Fruits 1.9 1.6 2.2 2.1
Egg, Meat & Fish 3.3 3.5 2.7 2.7
Total 40.9 39.2 29.5 28.7
Source: Economic Times, 11th July 2011 .
Table 1.12: Expenditure on Food (in Rs.)
Rural Urban
FY 2005 FY 2010 FY 2005 FY 2010
Cereals 101 145 106 163
Pulses 17 34 22 48
Milk 48 80 83 139
Vegetables 34 58 47 77
Fruits 11 15 23 38
Egg, Meat & Fish 18 32 28 48
Total 229 364 309 513
All the analysis and forecasts undoubtedly show that food retailing in India
has lot of potential and is expected to grow exponentially. In this context, the
retail supply chain management takes the central stage in the retail trade.
With the advent of Foreign Direct Investment (FDI) in retail, retail majors around
the world such as Wal-Mart, Tesco and Carrefour who are looking for an
opportunity would invest heavily to set up chain of outlets. As these food retail
majors are known for leveraging on their efficient supply chain, they would try to
use their expertise in India too to capture the market pie within a short span of time.
16
EVOLUTION OF ORGANISED FOOD AND GROCERY RETAIL IN SOUTH
INDIA18
Organized retail is spreading and making inroads into different parts of the
country. The trend in grocery retailing, however, has been slightly different with a
growth concentration in the South. The south of the Vindhyas is a cosmopolitan
stew of ingredients favourable for organised retail. It’s a motley mix of
experimentative consumers aided by a generous and affordable infrastructure
blended with long-standing entrepreneurial activity.
In a way, the genesis of organised retail was scripted from South India. The
four southern states rank highest in penetration of retail outlets in India and a
sizeable chunk of corporate sales. The south is considered to be the largest and
most developed region for modern trade. This also has to do with consumers in the
region with a positive disposition in terms of propensity to shop at such
formats. Adoption is typically higher in south India.
Though there were traditional family owned retail chains in South India such
as Nilgiri’s since as early as 1905, the retail revolution happened with the RPG
group starting the Foodworld chain of food retail outlets in South India with focus
on Chennai, Hyderabad and Bangalore markets. Owing to the success of
Foodworld of RPG group, several new models such as Trinethra, Subhiksha,
Margin Free and others have made their foray into this sector albeit at regional
levels.
The regional entrepreneurs in south India kick-started organised retail.

Examples include the supermarket chains such as Saravana stores in Chennai,
acknowledged as the inspiration of Kishore Biyani's Big Bazaars, Varkey's
supermarkets in Kerala, Ratnadeep in Hyderabad or Nilgiri's, MK Retail and
Foodworld in Bangalore. This has been backed up by a strong supply chain.
18
Sarah Jacob, “Retail Reach: Highest in South India”, South India Features, Economic
17
Heterogeneous Mix
This retail expansion has been helped along by the growing nuclear families
in the south, who are typically young professionals in the age group of 24 – 31
years. They form the double income base that travels frequently, experiments and
welcomes new lifestyles. A large part of this consuming base is further
strengthened by the migration of globally exposed IT employees.
Ecosystem Strength
Added to the linguistic divisions across the four states, retailers have the
opportunity to target consumers by city and even test out new formats.
The higher levels of education in the south, on an average, allows many chains to
get a quick snapshot of the success of their format through online customer
database services. The demographics act as a key differentiator between the
south Indian consumers and their counterparts in the north and west, offering more
analytical data for retailers. Consumers are well informed of the durability,
functionality, price and virtues of a product and as such they are quick to compare
it with similar multinational offerings.
In order to succeed in food retailing in India, customers need to be drawn

away from the roadside hawkers and kirana stores to supermarkets. This transition
can be achieved to some extent through pricing. So the success of a food retailer
depends on how best he understands and squeezes his supply chain. The other
major factor is that of convenience shopping which the supermarket is endowed
with over the traditional kirana stores.19
HISTORY AND GROWTH OF BANGALORE CITY20
Karnataka is one of the richest states in India (Table 1.13) and the GSDP
growth rate during 2005-2009 was 7.85 per cent (Table 1.14). Bangalore is the
principal administrative, cultural, commercial, industrial, and knowledge capital of
19
Indian Food Retail Sector in The Global Scenario, Vijay Anand & Vikram Nambiar, 2007.
20
Sudhira H.S., Ramachandra T.V. and Bala Subrahmanya M.H., "City profile –
Bangalore", www.elsevier.com/locate/cities. Vol. 24, No. 5, p. 379-390, 2007.
18
the state of Karnataka. A short description about the history and growth of
Bangalore is elucidated here.
Table 1.13: Some of the Rich and Poor States in India

Rich States Poor States
Delhi Jharkhand
Maharashtra Orissa
Goa Chattisgarh
Sikkim Nagaland
Himachal Pradesh Madhya Pradesh
Punjab Bihar
Kerala Assam
Karnataka Uttar Pradesh
Andra Pradesh West Bengal
Source: Economic Times, July 18, 2011.
Table 1.14: GSDP Growth of Select States in India

2000 - 2004 2005 - 2009
All India 6.3 8.33
Karnataka 4.9 7.85
Tamil Nadu 4.2 8.21
AP 6.1 8.46
Delhi 7.1 10.57
GDP 1999-2000 prices annual average growth, (2000-01 to 2004-05),

estimates as on 9/9/10 (%).
GDP 20004-05 prices annual average growth, (2005-06 to 2009-10), estimates
as on 9/3/11.
Source: Business Standard, 17th March 2011.
The topography of Bangalore makes it an unlikely spot for a metropolis,

since it lies on a semi-arid plateau between 900 and 1,000 metres above sea level,
with no major rivers running near the city. Its early history was unremarkable. By
the ninth century, the agricultural economy rested on irrigation through artificial
lakes (tanks) along with gardening and dry farming. The construction of tanks
required the mobilisation of local labour to raise artificial bunds that trapped run-off
water, with small irrigation channels feeding water to fields lying downstream. Near
this fields stood small villages in which local notables founded the construction of
temples, and on the temples, they inscribed records of their religious donations.
19
The relative paucity of surviving temples and inscriptions from the Bangalore region
probably reflects a mixture of such village farming communities with extensive
areas where animal husbandry and hunting-and-gathering lifestyles remained
important. There is no indication that this region, part of old Gangavadi named after
local Ganga rulers, had any political significance.21
The earliest reference to the name, in the form ‘Bengalooru, is seen in a

ninth century Ganga inscription (hero-stone) from Begur, referring to a battle that
was fought in that place. The present name of the city, Bangalore is an anglicised
form of Bengalooru which according to the popular belief is derived from Bengaalu
– synonymous of Benda kaalu or boiled beans and ooru meaning a town.
However, the founding of modern Bangalore is attributed to Kempe Gowda, a scion
of the Yelahanka line of chiefs, in 1537. Kempe Gowda is also credited with
construction of four towers along four directions from Petta, the central part of the
city, to demarcate the extent of city growth.
Later on, the city was administered by the Wodeyars, rulers of Mysore, until
it was given as Jagir (with rights for general administration and collection of taxes)
to Hyder Ali during late 18th century. Hyder Ali and later, his son, Tippu Sultan,
were responsible for growth and development of Bangalore in a significant way
with the construction of summer palace and Lalbagh. Indeed, Bangalore was
already the commercial capital during Tippu’s time and the second important city
after Srirangapatna, Tippu’s capital. The fall of Bangalore in the Second Mysore
War of 1792, may also have led to the fall of Tippu Sultan in Third Mysore War of
1799, after which Bangalore became a base for the British troops and saw the
establishment of the Cantonment in 1802.
By 1831, the administration of the city was taken over by the British, and in
1862 two independent municipal boards were established: Bangalore City
Municipality (in the older areas), and Bangalore Civil and Military Station
Municipality. At Independence, Bangalore was notified as the Capital of Mysore
(now Karnataka) State. In 1949, the two municipalities were merged and the
Bangalore City Corporation was formed. Subsequently, to keep up with the pace of
21
Heitzmann, James, Network City – Planning the Information Society in Bangalore,
Oxford University Press, 2004.
20
growth and development, there have been reorganizations with respect to the
zones and wards within the corporation, rising from 50 divisions in 1949 to 95
wards in 1980s, 100 wards in 1995 and about 150 wards in 2006. With the 2006
notification, the Bangalore City Corporation is now reorganized as Greater
Bangalore City Corporation.
BANGALORE – The “GARDEN CITY”
Greater Bangalore, an area of 741 km2 agglomerating the city, neighbouring

municipal councils and outgrowths, was ‘notified’ (established) in December 2006
(Figure 1.8). A tiny village in the 12th century, it grew to become one of the fastest
growing cities in the world by the 21st century. Bangalore has grown spatially more
than 10 times since 1949 (Table 1.15).
Figure 1.8: Bangalore City
Source: Sudhira H.S. et al., 2007.
21
Table 1.15: Bangalore City Corporation Limits over the Years
Year Area (sq. km)

1949 69
1963–1964 112
1969 134
1979 161
1995 226
2007 741
Source: Sudhira H.S. et al., 2007.
The city is known for its tree-lined streets, beautiful gardens, numerous
parks, abundant greenery and flowers. Hence it is known as the “Garden City”.
Bangalore is India's fifth largest metropolitan city with a population of about 8
million as per the 2011 census (Table 1.16).
Table 1.16: Demographic Trends of Bangalore – 2011

Bangalore Karnataka
2001 45.92 Lakh 5,27,33,958
2011 84.74 Lakh 6,11,30,704
Male 44+ Lakh 3,10,57,742
Female 40+ Lakh 3,00,72,962
Others 650+
2007 onwards
Average Birth Rate 1.35 Lakh / Year
Average Death Rate 40,000 / Year
Population Density 4,378
Literacy Rate 88.48
Source: Times of India, 20th March 2011 and Deccan Herald 1st April 2011.
Further, Bangalore is one of the fastest growing cities in India and by virtue
of being the national hub for Information Technology (IT) and Telecommunication
Industry, is often called the ‘Silicon Valley of India’. With the advent and growth of
IT industry, as well as numerous industries in other sectors and the onset of
economic liberalisation since the early 1990s, Bangalore has taken the lead in
service-based industries fuelling substantial growth of the city both economically
and spatially. Thus, Bangalore has emerged as a cosmopolitan city over the last
22
two decades attracting people and business alike, from within and across the
nations (Sudhira H.S. et al., 2007).22
Moreover, Bangalore has also transformed into a manufacturing hub with

organisations such as Hindustan Aeronautics Limited (HAL), Indian Space
Research Organization (ISRO), Bharat Earth Movers Limited (BEML), etc. The
landscape of Bangalore is dotted by the concentration of hi-tech ICT (Information
and Communication Technology) sector based firms, besides a few manufacturing
giants. Some of the companies which are pride of India and are globally known like
Infosys, Wipro, Mindtree, etc. are located in Bangalore. That apart, almost all the
global IT majors have their presence in Bangalore, to name a few, IBM, HP,
Accenture, Philips, Sun Micro Systems, Oracle, Apple, Google, Dell, Motorola, 3M,
etc. have substantial Indian operations in Bangalore, besides several Business
Process Outsourcing (BPO) units. IT firms in Bangalore employ about 30% of
India's pool of one million IT professionals.
Bangalore is also one of the scientific hubs of India. The scientific

establishments in Bangalore include Indian Institute of Science, Indian Institute of
Astrophysics, Raman Research Institute, Jawaharlal Nehru Centre for Advanced
Scientific Research, National Centre for Biological Sciences, Indian Institute of
Information Technology and the Indian Statistical Institute.
Bangalore is also known for its architectural monuments, flora and fauna
and rich heritage. There are numerous gardens and historical sites within the city.
The Vidhan Soudha or the State Secretariat is the prime attraction. The
Government Museum of Bangalore and the Visvesvaraya Technological and
Industrial Museum are worth visiting. The Lal Bagh Botanical Gardens, which holds
a number of flower shows especially during the Republic Day, attracts a large
number of tourists. The Fort and Palace of Tipu Sultan are the other important
places in Bangalore. The temple dedicated to Nandi, the Bull besides the
Venkataramanaswamy Temple, the Gavi Gangadhareswara Cave Temple and the
22
op cit.
23
Someshwara Temple are the pilgrimage places. The Ulsoor Lake is an ideal spot
for picnics.
Bangalore is situated in the Deccan Plateau, with an average elevation of

920 metres above sea level. Due to its elevation, Bangalore enjoys a pleasant and
equable climate throughout the year. Winter temperatures rarely drop below 12 °C
(54 °F) and summer temperatures seldom exceed 38 °C (100 °F). The summer
heat is moderated by fairly frequent thunderstorms and occasional squalls.
All the above place specific strengths catapulted Bangalore into a prime
place. It tops the list in the Morgan Stanley report on India's booming cities 2011
(Table 1.17). Its findings are based on a City Vibrancy Index (CVI), which looks at,
among other factors, infrastructure, job opportunities, modern consumer services
and a city's ability to mobilise savings.23 A year-long net census study by eBay
ranks Bangalore as the third largest e-commerce hub in terms of buying and selling
online after Delhi and Mumbai.24, 25
Table 1.17: Twenty Cities to Watch
Niche Annual Household

Megacities Boomtowns All India
Cities Income Growth (%)
7.5 8.5 7.3 6.6 2002-‘05
11 12.6 10.5 9.5 2005-‘08(E)
9.8 11.7 9.3 8.4 2008-16(E)
Mumbai Surat Faridabad
Delhi Kanpur Amritsar
Kolkata Jaipur Ludhina
Chennai Lucknow Chandigarh
Bangalore Nagpur Jalandhar
Hyderabad Bhopal
Ahmedabad Coimbatore
Pune
Source: NCAER - Future Capital Research's "The Next Urban Frontier: Twenty Cities to
Watch" and Economic Times, August 08, 2008.
23
'Bangalore shines among booming cities', The Indian Express, 18th February, 2011.
24
The Hindu Bureau, “When it comes to online shopping, Bangaloreans are way up there”,
The Hindu, 29th September 2011.
25
BS Reporters, “E-commerce gain steam in towns and villages: Survey”, Business
Standard, 29th September 2011.
24
FOOD AND GROCERY RETAIL IN BANGALORE26
Despite traffic snarls, pollution and booming real estate growth, the retail
sector in Bangalore is witnessing an explosive growth. The reason for the retail
boom is the city's growing affluence. In the last 10 years Bangalore's population
has increased around 30 per cent and is ranked the seventh most affluent city in
India. It is estimated that over one-third of the households in Bangalore have an
annual expenditure between Rs 50,000 and Rs 1 lakh, while 40 per cent of the
city's population has annual incomes ranging between Rs 70,000 and Rs 1.4 lakh.
The 15-45 age group is a retailer's delight.
The retail boom in Bangalore is not merely visible in bigger malls but also
among the smaller ones which are basically large stand-alone departmental stores
and have sprung up in shopping areas in several localities. The retail boom can be
seen in every nook and corner. Smaller shops, which not so long ago struggled for
survival, have started expanding and at least three-four supermarkets exist in
almost every locality. In some cases, the established large kirana shops have
morphed into still bigger stores.
There are many malls in Bangalore. To name a few, the Forum Mall (3.5-
lakh sq ft), Garuda Mall (2.3-lakh sq ft), Bangalore Central and Mantri Square (1.7
million sq ft), etc. deserve a special mention. Bangalore is expected to have about
30 malls in the near future (Table 1.18).
Further, Organized Food Retail Chains in Bangalore include Food Bazaar,

Reliance Retail, Aditya Birla More, Food World, @Fresh and Spencer’s. These
corporate chains have set up a number of outlets in the city. There are many stand-
alone retail outlets as well. Bangalore is a hot bed for innovations. As the city
represents mini India, one could find people from all parts of the country. With the
above citations and studies, it is justified that Bangalore is an ideal place for
conducting the research study of this kind.
26
K Giriprakash, Bangalore’s Retail Boom, Business Line, December 24, 2005.
25
Table 1.18: Malls in Bangalore27
Operational Under Construction Upcoming

Forum Mall Brigade Metropolis Soul Space Arena
Sigma Mall Brigade Gateway (Yeswanthpur) Orion Mall
Forum Mall (Shantiniketan, Soul Space Spirit
Garuda Mall Whitefield)
G Corp Lido Centre (old Lido Signature mall
Esteem Mall Theatre) in Ulsoor
Galaxy Embassy (old Galaxy Phoenix Market City
Eva Mall Theatre) on Residency Road
Total Mall Mantri House (Sarjapur Road) Alliance mall
Vaswani Cosmos Ozone (Factory Outlet, Whitefield) Innovation Mall
Gopalan Legacy Sigma Grand Karle Mall
Mall
Oasis Mall Sobha Minerva (Minerva Mills) Royal Meenkshi Mall
The Collection Tata Imperial (Old Imperial ITPL Mall
Theatre) off Brigade Road
Garuda Swagath Poorva Mall on Old Madras Road Inorbit Mall
Mall
Arch Mall Maximus Mall
Forum Value Mall Central (International
brands)
Viva City
Total Mall (office+retail)
Mantri Square/
Mantri Mcube mall
Source: www. karnataka.gov.in and www.virtualbangalore.com.
RETAIL SUPPLY CHAIN MANAGEMENT

The supply chain in retailing is different from a traditional manufacturing
supply chain. In a manufacturing supply chain, a manufacturer gets raw materials
and components from its suppliers to make the finished goods. Materials can come
directly to the manufacturer’s factory or can be outsourced or can be consolidated
at a warehouse and supplied. These materials are processed in the plant,
converted into the finished goods and delivered to customers through warehouses,
distributors, dealers, regional offices and retailers (Figure 1.9).
27
Purvita Chatterjee, Mall tales, Business Line, January 03, 2004.
www. karnataka.gov.in and www.virtualbangalore.com.
26
Figure 1.9: Stages in a Manufacturing Supply Chain
Source: Sunil Chopra, 2010
In a retail supply chain, items are sourced from a supplier or directly from
the manufacturer. These items can be delivered directly to the store, or at the
retailer’s distribution centre from where it is distributed to the stores. Further the
items are purchased or sold to the customers. There may be a backward
distribution flow in case of deficiency, poor quality or for any other reason from
customer to retailer to the supplier (Figure 1.10).
Figure 1.10: Retail Supply Chain
Source: http://www.emeraldinsight.com/fig/0050290704003.png
In the organized retail market in India, the role of supply chain is very
important for Indian customer is price and quality conscious. It is the supply chain
that ensures various offerings to the customers that a company decides, be it cost,
service, or the quickness in responding to ever changing tastes of the customer.
27
The Indian organized retail sector is growing; so the role of supply chain
becomes all the more important. It needs to become all the more responsive and
adaptive to customers demand. There is also need for the supply chain to be more
cost efficient and collaborative to win the immense competition in this sector.
In the first phase of the retail revolution, the focus of food retailers had been
largely on capturing the consumers’ attention and providing them with a new
shopping experience. As Indian retail experience has revealed what matters most
is not just the shopping ambience, but the price and quality, also to play a
dominant role.
As such, the increasing scale of organised retail distribution network and

increasing competition are forcing the players to focus on restructuring the whole
supply chain to improve productivity and provide a better deal to customers. 28
Till recently, the retail investments in India were focused more on the front
end than on the back-end. As a result, though most players have several stores in
place, they have no rigorous supply chain to generate the cost efficiencies and fill
rates needed to improve the bottom line and improve customer experience.29
In spite of the importance of supply chain management and its ability to pass
on the benefits to the customer in terms of price and quality, it is disheartening to
note that India lacks quality logistics infrastructure which hinders the scaling up of
retailing operations. Supply chain is a key bottleneck for retail sector growth. The
country lacks efficient and reliable logistics infrastructure in roads, rail and ports.
Truck industry is also highly fragmented and has no reliable national service
provider. Hence the supply chain management system has very low penetration
especially in the vast hinterland.30
28
Chetan Ahya, “The retail supply chain revolution”, Economic Times, 7 Dec, 2006.
29
Anil Rajpal, Pragya Singh, S, “The Indian Retail Landscape: Now and Beyond, The
Indian Retail Landscape: Now and Beyond”, Technopak Perspective ,Volume 01, 2009.
30
Retail in India: Getting organized to drive growth, AT Kearney –CII report, November
2006.
28
According to Sunil Chopra (2010), the strategic fit requires a company’s
supply chain achieve the balance between responsiveness and efficiency that best
meets the needs of the company’s competitive strategy. To understand how a
company can improve supply chain performance in terms of responsiveness and
efficiency, one must examine the logistical and cross functional drivers of supply
chain performance: facilities, inventory, transportation, information, sourcing and
pricing. These drivers interact with each other to determine the supply chain’s
performance in terms of responsiveness and efficiency (Figure 1.11).31
Figure 1.11: Supply Chain Decision-Making Framework
Source: Sunil Chopra, 2010.
According to Chopra, supply chain processes in a firm can be classified into

three macro processes as shown below. There need to be coordination among
these three processes for efficient supply chain management (Figure 1.12).
31
Sunil Chopra and Peter Meindl, Supply Chain Management Strategy, Planning &
Operations, 4th Edition, 2010.
29
Figure 1.12: Supply Chain Macro Processes

30
CHAPTER – 2
LITERATURE REVIEW, RESEARCH DESIGN AND METHODOLOGY
LITERATURE REVIEW
Retail supply chain is a contemporary and evolving field which is a
culmination of two different areas of management, namely, supply chain
management and retailing. Even though there are many refereed papers in the
area of supply chain management and retailing, there are not many research
papers/articles in the area of retail supply chain, especially food retail. Moreover,
most often the research papers cover a specific topic such as the relevance of
Radio Frequency Identification (RFID) systems in food supply chain, customer
behaviour in a food and grocery etc.
In India, supply chain management with respect to organised retail is gaining

importance of late only. And scouring for research papers in the area of food retail
supply chain with reference to Indian context is a herculean task. In spite of the
paucity of literature in the specific field, a humble attempt is made to unearth the
research papers/articles relevant to the research study.
Retail Supply Chain

The study by Bourlakis, Michael and Bourlakis, Constantine (2006)32
focussed on the integration process of retailer’s information technology strategy
with logistics strategy and to find out those aspects of the retailer’s distribution and
operational performance that are mostly influenced via that integration.
The findings show that logistics and information technology strategies are
developed and implemented in a parallel way by both local and multinational food
retailers. A financial ratio analysis carried out for these firms suggests that
multinational firms possess greater operational efficiency at both secondary and in-
32
Bourlakis, Michael and Bourlakis, Constantine (2006), “Integrating logistics and
information technology strategies for sustainable competitive advantage”, Journal of
Enterprise Information Management, Vol. 19 No. 4, pp. 389-402.
31
store distribution operations compared to domestic firms. This is largely attributed
to the integration of logistics and information technology operations. Multinational
firms superior operational efficiency also contributes for a higher profitability
performance.
Leigh Sparks (2006)33 gave a detailed account of the evolution of retail

supply chain management in his paper. He discussed a number of changes that
are taking place in modern retail supply chain in direct response to the changing
demands of consumers. He also explained how these changes prompt a number of
implications for the management of the retail supply chains.
That logistics is an important component of modern supply chain

management needs no emphasis. Logistics may be external or internal to the retail
outlets. Kotzab (2005)34 shows the importance of logistics in (instore) an outlet.
Through his empirical study, Kotzab proves the importance of instore

logistics as a key determinant on the success of retail business. In the model, he
has included the logistics processes that are carried out within a retail outlet
ranging from incoming dock to the checkout as the in-store logistics.
As part of the study, Kotzab interviewed 202 store managers from three
different kinds of stores namely supermarkets, small hypermarkets and large
hypermarkets.
Seyed-Mahmoud Aghazadeh (2004),35 in his paper explores ways of

improving logistics and distribution supply chains of the food retail industry. The
paper explains the concepts of logistics and supply chain as well as the new
33
Leigh Sparks, “Changing Scenario – In tune with consumer demands, retail logistics and
supply chains are undergoing major changes”, Retail Biz, June 2006, pp 21-23.
34
Herbert Kotzab, Frederiksberg and Christopher Teller (2005), “Development and
Empirical Test of a grocery retail instore logistics model, British Food Journal, Vol. 107 No.
8, pp. 594-605.
35
Seyed-Mahmoud Aghazadeh (2004), “Improving logistics operations across the food
industry supply chain”, International Journal of Contemporary Hospitality Management.
Volume 16 No. 4, pp 263-268.
32
challenges in the food industry. The paper also discusses the successes and
failures of the industry. The results reveal slow progress in accomplishing the goals
of leaner supply chains and easier distribution. The study discusses how consumer
driven, time-phased planning provides solutions to these challenges such as
including the consumer in the supply chain planning process, managing product life
cycles, promotional planning, planning for seasonal products, integrating with
category management, determining cost-effective supply channels and planning
capacities at the store level.36
Shopping behaviour
Shopping behaviour is an important phenomenon. The next two papers
discuss the shopping behaviour of the consumers.
Customers usually buy their requirements once a month (regular purchase)

and also when they exhaust requirements (emergency purchases). In his research
paper, Nordfalt, Jens (2009)37 views shopping trip as either a (more or less)
contingency-dependent construction or as the execution of a well-defined
behaviour and proves that larger (major) trips are more well defined, whereas
smaller (fill-in) trips are found to be largely contingency dependent constructions.
Bawa Kapil and Ghosh Avijit (1999)38 present a model of shopping

behaviour based on the assumption that households seek to minimize the travel
cost associated with shopping and the cost of holding goods in inventory. They
prove a point that the relationship between household characteristics and shopping
behaviour can be fairly complex – for some households shopping may have a
recreational aspect while for others it may compete directly with wage-earning
activity.
36
“Improve Profits, Competitiveness & Satisfaction with a 'High Performance' Retail Supply
Chain”, Nuthink, Inc. 2001.
37
Jens Nordfalt, “Unplanned grocery purchases: the influence of the shopping-trip type
revisited”, Journal of Consumer Behaviour, Volume 8, 2009, pp 1-13.
38
Bawa Kapil and Ghosh Avijit (1999), “A Model of Household Grocery Shopping
Behaviour”, Marketing Letters, Volume 10 No. 2, pp 149-160.
33
Private Labels
When customers buy their requirements they buy both branded as well as
private labels. The first paper presents the growth of private labels in different
countries and the factors influencing the growth of private labels. The second
paper tries to distinguish international, national or regional private brands. The
paper gives an account of the national brands and the private labels. The third
paper gives a new dimension to the customer’s buying behaviour of private labels.
The growth of private labels is enormous over the past few years in many
countries and in particular, countries such as Germany, Belgium, the UK, Austria
and Spain. The private labels amount to nearly 40% in these countries. Retailers
resort to produce their own private labels because of high margins, to outsmart the
national brands, to gain control over shelf space, to introduce lower prices to
consumers by controlling the costs and to gain bargaining power with
manufacturers etc. (Altintas et al, 2010).39
Walsh, Gianfranco and Mitchell, Vincent-Wayne (2010)40 observed that

private label brands enjoy growing popularity and are increasing in both their
quantity and quality, they continue to attract the attention of scholars and
practitioners. One major shortcoming of previous research is that it focuses on
price as the dominant driver of buying intentions. The findings of the study reveal
that brand consciousness and attitude instead play a role on the intention to buy
private label brands.
Cheng et al (2007)41 research study concentrates on the question how do

customers perceive the differences between national brands, international private
labels and local private labels? The study finds that national brands lead private
39
Murat Hakan Altıntas, Serkan Kılıc and Gokhan Senol (2010), “Strategic objectives and
competitive advantages of private label products - Manufacturers’ perspective”,
International Journal of Retail & Distribution Management Vol. 38 No. 10, pp. 773-788.
40
Walsh, Gianfranco and Mitchell, Vincent-Wayne (2010), “Consumers’ intention to buy
private label brands revisited”, The Braybrooke Press Ltd. Journal of General
Management, Volume 35, Issue 3.
41
Cheng J M, Chen L S, Lin J Y and Wang E S (2007), “Do consumers perceive
differences among national brands, international private labels and local private labels?
The case of Taiwan”, Journal of Product & Brand Management Vol. 16 No. 6, pp. 368–376
34
labels on most dimensions of customer perceptions and the study finds very little
difference in consumers’ price perceptions between national brands and
international private labels. However, in the case of convenience goods,
international private labels are found superior in quality compared to local private
labels and consumers are willing to pay more for the former. At the same time, with
respect to shopping goods even though they find the international private labels
are superior in quality than the local private labels, they are not willing to pay more
for the same.
Miranda M J et al (2006)42 in his research paper brings forth the effect of

stock-out on the behaviour of the customers in buying. He studied the effect of
stock-out on buying behaviour of the customers, and found that the age, family size
and the kind of customers determine whether the customer goes for variant of the
same brand or prefers a different brand or obsessive enough to go for the same
brand in another outlet. Also, the paper suggests the strategies for the retailers to
be followed to overcome the situation such variances in customer preferences.
Customers habits are changing. While the customers by and large make
purchases by visiting the retail chain, some also buy online. The following paper
lists the parameters that influence online customers.
Online grocery shopping by consumers was studied by Morganosky M.A.

(2000).43 The study found that the online users are of age less than 55 years.
Convenience and time saving are the most important factors influencing them to go
for online purchase. Some attributed the physical inability or physical constraints as
the reasons to go for shopping online.
Supply Chain Efficiency

Supply chain management holds the key for success in modern retailing. As
such, it is appropriate to know how the supply chain affects the retailers. The
42
Miranda M J, Kandiah J (2006), “Family Size Underpins Grocery Shoppers’ Behavioural
Response to Stock-outs”, Journal of Marketing Channels, Vol. 14(1/2), pp. 97-115.
43
Morganosky, M. A. and Cude B. J. (2000), “Consumer response to online grocery
shopping”, International Journal of Retail & Distribution Management, Vol. 28 No. 1, pp.
17-26.
35
following two papers bring forth the efficiency of supply chain in enhancing the
store image.
Avirat Sonpal (2006)44 states that retail supply chain efficiency is all about
learning what the customer needs and then actively working to fulfil those needs
through sourcing, merchandising and product development mechanisms. The
author enumerates the benefits of effective supply chain management in retailing.
Steckel (2004)45 using simulation models shows how the changes in the
order and delivery cycles, availability of shared Point-of-sale (PoS) information and
the pattern of customer demand affect the supply chain efficiency. The paper is
based on “beer game” simulation. He proves that speeding up of the cycle time is
always beneficial. But at the same time, the benefits of sharing of PoS information
depend on the nature of demand pattern.
Gibson, Brain et al (2009)46 observe that the retailers are more reliant than
ever on supply chain management for organizational success. The focus of SCM is
to cut down inventory levels while maintaining high in-stock availability, reducing
transportation expenses in the context of fuel price volatility. Efforts are well under
way to link SC strategies to organizational plans. The best performing retailers
have developed a culture in which the majority of employees share a core belief in
the mission of the organization, and are committed to helping the organization
achieve that mission. These retailers have developed formal training programs to
suit the needs of rank and file employees, along with the managers.
The importance of supply chain inventory management technique Vendor

Management Inventory (VMI) is reinforced by Waller M (2001). According to him,
44
Avirat Sonpal (2006), “A Valuable System – Different aspects of managing the supply
chain in retail”, Retail Biz, December, pp. 37-38.
45
Joel H. Steckel, Sunil Gupta and Anirvan Banerji (2004), “Supply Chain Decision
Making: Will Shorter Cycle Times and Shared Point-of-Sale Information Necessary Help?”,
Management Science, Vol.50, No.4, pp. 458-464.
46
Brian J. Gibson, C. Clifford Defee, Wesley S. Randall (2009), “The State of the Retail
Supply Chain: Results and Findings”, Retail Industry Leaders Association (RILA).
36
VMI is one of the most widely discussed partnering initiatives for improving multi-
firm supply chain efficiency. The research article showcases the effect of VMI on
improved service and reduced cost in an organisation.47
Using New Jersey as a case study, this paper investigates the challenges
faced by food retail stores. Policy recommendations proposed by industry
representatives for improving the business climate are also presented. Although
the case is New Jersey specific, many of the issues discussed in the paper may be
relevant elsewhere. The findings can be helpful in identifying broad categories of
factors affecting the vitality of the industry and in designing investigative research
into problems facing the food retail industry (Adelaja, A.O, 1999). 48
Store Attributes
Reutterer, Thomas and Teller, Christopher (2009)49 paper identifies store
format attributes that impact the store format choice when consumers conduct fill-in
or major trips to buy groceries. By doing so, the authors take into consideration that
consumers patronise multiple (store based) formats depending on the shopping
situation operationalised by the type of shopping trip. The results reveal a
considerable moderating effect of the shopping situation on the relationship
between perceived store format attributes and store format choice. Consumers’
preference is significantly higher for discount stores and hypermarkets when
conducting major trips. In contrast, supermarkets are preferred for fill-in trips in the
focussed retail market. Merchandise-related attributes of store formats have a
higher impact on the utility formation regarding major-trips, whereas service- and
convenience-related attributes do so with regard to fill-in trips.
47
Walter M et al (2001), “Vendor Managed Inventory in the Retail Supply Chain”, Journal
of Business Logistics.
48
Adelaja, A O. et al (1999), “A note on challenges facing food retail stores: The case of
New Jersey”, International Journal of Retail & Distribution Management, Volume 27. No.
8. pp. 302-310.
49
Reutterer, Thomas and Teller, Christopher (2009), “Store format choice and shopping
trip types”, International Journal of Retail & Distribution Management, Vol. 37 No. 8, 2009,
pp. 695-710.
37
Retailing in India
The following three papers give an account of linkages between economic

growth and consumer spending pattern, the retail distribution network and the
changing Indian retail sector.
Srivastava (2009),50 in his research brings forth the retail scene in India. He
has extensively used the reports of Mckinsey, HSBC, Technopak, CII and others to
capture the growth of organised retail and shopping malls in India. Also, he gives
an account of the different organised formats promoted by the Indian business
houses. He finds that the malls are more developed in Northern and Eastern part of
India. Malls are becoming centre for outings for the families and they spend about
1-3 hours in malls. Food, groceries and apparel purchases by customers
contributed to 52 per cent of these organised retail formats in 2006. Srivastava
further elaborated on the time spent by the customers in the malls and how the
food courts, play places, etc in the malls are becoming the attractions for family
outings. According to him, the small retailers in order to compete and to retain their
customers offer better service by means of credit and home services.
Sengupta A, (2008)51 discusses the birth of the first supermarket, Nilgiri’s

established in Bangalore in 1971. The emergence of modern retail business in
India has a history spanning over 30 years. The paper is on food and grocery retail,
biggest in India and the author tries to detail the drivers of revolution and growth
focusing on the role of manufacturers, retailers and consumers.
Chetan Ahya (2006)52 argues that the rising scale of organized retail
distribution network and increasing competition will force players to focus on
restructuring the whole supply chain to improve productivity and to provide a better
deal to the customers.
50
Srivastava, R.K. (2009), “Changing retail scene in India”, International Journal of Retail
& Distribution Management, Vol. 36 No. 9, pp. 714-721.
51
Sengupta A (2008), “Emergence of modern Indian retail: an historical perspective”,
International Journal of Retail & Distribution Management, Vol. 36 No. 9, pp. 689-700.
52
Chetan Ahya, “The Retail Supply Chain Revolution”, Economic Times, 7th December
2006.
38
He is critical of the organized retail chains ability to offer customers the right
price for staple vegetables during the crisis situation because of disorganized
supply chain. He concludes that unavailability of cheap funds for investment in the
back-end infrastructure for aggregating the fresh produce, grading, packaging and
storing in cold storage are the primary reasons. Similarly, FICCI is also of the
opinion that the long chain of intermediaries and insufficient price-discovery
mechanisms were the reasons for high price mark-ups between farmers and
consumers. FICCI suggest farmers need to be encouraged to form farmer
cooperatives and aggregate the produce, which could be directly sold on electronic
spot exchanges or to retailers.53
Modern retail has a huge potential to not only benefit from India’s increasing
consumption demand but also create demand for value added products. Structured
employment and better life for people are the two major benefits that modern retail
is looked upon. Speeding up the modernization process is extremely vital as the
retail sector has the ability to create about 10 million additional jobs in the next five
years (2010-15). Over one million sq. feet of quality retail and entertainment space
with annual revenue of Rs. 12,00,000 crore, a whopping Rs 1,30,000 crore in
annual Value Added Tax (VAT) collection and over Rs 12,000 crore in additional
income tax revenues to the exchequer are expected to accrue in the next five
years according to Mr Amitabh Taneja, Chief Convenor, India Retail Forum 2010.54
According to Arvind Singhal, Chairman, Technopak, modern retail and food

services in India are at a very early stage of evolution. They have to keep pace with
the changes in demography and consumption patterns. Changes in the format
size, categories, merchandise mix or brand positioning are the need of the hour.
Accordingly, some of the established chains like The Future Group, Spencer’s
Retail etc, are in the revamp mode. They are rebranding their stores, restructuring
categories and formats to catch up with the changing landscape of modern retailing
and to cater to the emerging niches.55
53
Vishal Krishna, “Retail - Disorganised Supply Chain”, Businessworld, 31st January 2011.
54
“Expanding Business Opportunities”, The Economic Times, 14th September 2010.
55
Writankar Mukherjee and Sreeradha D. Basu, “Retailers revamp for more business”,
The Economic Times, 15th September 2010.
39
Driven by the growth of organized retail coupled with changing consumer
habits, food retail market size in India is set to double to $150 billion (around Rs
6.7 lakh crore) by 2025. Therefore, Indian food retail sector, which is currently
estimated at $70 billion (around Rs 3.13 lakh crore) has a long way to go in the
years to come. Evolution of innovative food processing capacity, emergence of
organized retail and change in consumption patterns along with fast changing
demographics and habits are expected to fuel the next growth trajectory for the
food industry in India, according to KPMG. Though the expectations are high about
the growth prospects of the sector, it is a paradox that the growth in real terms is
crippled by the sub-optimal supply chain management largely caused by low
investments in the sector.56
In the days to come, almost all sales will be captured through Personal
Digital Assistant (PDA) or computers at the retail outlet and transmitted to the
suppliers as being done by leading companies such as Dell and Wal-Mart. This will
definitely bring down the wastages in supply chain. The logistics cost which is
currently at 12 per cent of GDP could go down by about 1 per cent as a result of
application of IT.
The cycle time of supply chain operations from manufacturing to retailers in

terms of information flow which used to be about 30 to 35 days in the early 1990s
has been brought down to almost one or two days in the 2010s. This was made
possible by using various hardware and software technologies and communication
links at various levels such as the mobile network, satellite communications,
personal digital assistants, automated tracking devices, vehicle tracking systems
and so on.57
56
Press Trust of India, “Food Retail Sector to double to $150 billion by 2025: KPMG”,
Business Line, 8th December 2010.
57
Murali D, “Logging into improved Logistics”, In conversations with Mr. V. Sanjeevi, MD,
eLogistics P Ltd., Business Line, 14th February 2011.
40
Shopping behaviour
A recent research study reveals some important insight about an Indian
shopper.58 The customer: 1. keeps a brand in mind but buys the brand that gives
him value 2. is more decisive than the Chinese about the brands they want to buy
3. confidence on the shopkeeper is high 4. takes time to read the information and
to make sure that he gets what he wants. Also compares products before deciding
5. usually takes whatever the storekeeper suggests if preferred brands are not
available 6. does not look for promotions because most of the shopping is routine
7. enjoys shopping 8. likes reading the ingredients and product benefits before
buying 9. will buy a slightly pricey brand if it can give him an experience/ feeling like
no other.
Goswami Paromita (2009),59 seeks to understand whether Indian

consumers are likely to move from traditional kirana stores to large organized
retailers while shopping for groceries. Major findings show that customer
patronage to grocery stores is found to be positively related to location, helpful and
trustworthy salespeople, home shopping, cleanliness, promotional offers, quality
and negatively related to travel convenience. kiranas do well on location but poorly
on cleanliness, offers, quality, and helpful trustworthy salespeople. The converse is
true for organized retailers.
Retail Supply Chain in India

According to Rajesh Sinha,60 Chief Operating Officer (COO), Godrej
Consumer Products, focus on supply chain improvement based on a
replenishment-based model rather than a forecast-based mode enables
companies to increase sales by 20 to 30 per cent in three to six months. In two
years, a company can register a 5 per cent increase in gross margin. The
58
Economic Times (ET) Brand Equity, “What Lies Beneath?”, The Economic Times,
August 08, 2010.
59
Goswami, Paromita and Mishra S. Mridula (2009), “Would Indian consumers move from
kirana stores to organized retailers when shopping for groceries?”, Asia Pacific Journal of
Marketing and Logistics, Vol. 21, No. 1, pp. 127-143.
60
Business Line Bureau, “Supply Chain must ‘get’ as much ‘focus’ as marketing”,
Business Line, April 22, 2011.
41
effectiveness of advertising or promotions increases with increase in supply chain
efficiency. Strategic sourcing can reduce expenses by 10 to 30 per cent.
Collaborative models with multiple suppliers are the order of the day.
Vishwanadham N (2010)61 analyses the deficiencies in the Indian supply

chain in the food retail. The most important problem associated with the Indian food
industry is the inefficient supply chain as a result of which about 20 per cent of the
food produce worth Rs. 10,000 crore is wasted. Only through developing an
efficient supply chain can India’s population have access to affordable superior-
quality food produce while ensuring remunerative prices to the farmers.
The food supply chain is complex, with perishable goods and numerous
small stakeholders. In India, the infrastructure facilities connecting these
components are very weak. Each stakeholder – farmers, wholesalers, food
manufacturers and retailers work in silos. Demand forecasting, data integration,
financial flow management, supply-demand matching, collaborative forecasting,
information sharing and synchronisation of the movement of goods through
efficient transport scheduling have to find their way into the food supply chain.
Manufacturers, wholesalers, distributors and retailers can achieve tangible

benefits through innovative network and inventory optimisation. The benefits may
include enhanced demand intelligence, improved sales and services, optimised
inventory levels, increasing profitability and margins and enhanced trading partner
collaboration. Inventory management helps reduce purchasing and inventory costs;
connect inventory control, purchasing and sales order processing with demand
planning; reduce costs, improve cash flow and ensure that the right stock is
available whenever needed.62
Cut-throat competition in India’s organised retail industry has given way to

harmony. The retailers have formed a rainbow coalition that will align their source
operations and share private labels, logistics, warehouses and hiring details on a
61
Vishwanadham N (2010), “From farm to fork”, Retail Biz, July 2010.
62
Debjani Baidyaray, “Selling it right – Effective supply chain management hold the key to
successful operations for retailers”, Retail Biz, October 2010.
42
transactional payment basis. The retailers may fight on the front-end but
collaborate on the back-end – an approach that would help retailers focus their
resources on the front-end to meet the customer expectations. The move
essentially focuses on how to cut costs in supply chain and third party
manufacturing. Right now, the supply chain cost is about 12-50% across product
categories.63
India is the world’s second largest producer of fruits and vegetables. But it
loses between 30% and 40% of its fresh produce annually due to wastage along
the supply chain. India wastes more fruits and vegetables than it consumes. Gaps
such as poor infrastructure, insufficient cold-storage capacity, unavailability of cold-
storage in close proximity to farms and poor transportation infrastructure are the
contributing factors. To overcome the debilitating impact of wastage, it is crucial
that three supply chain issues are addressed. They are reduction of food miles,
development of truly world-class supplier and fixing the infrastructure.64
Sahay B.S. (2006)65 studied the current state of supply chain management
practices followed by Indian organisations in an attempt to identify the important
areas that need to be addressed in order to gain competitive advantage. The
findings reveal that most of the Indian organisations have aligned their supply
chain objectives with their business objectives. They are now on aligning their
processes and management focus. The author concludes that the enhanced level
of competitiveness would require Indian organisations to manage the three-
dimensional (supply chain objectives, supply chain processes and management
focus on supply chain activities) alignment.
For organised retail, while the last decade has been one of experimentation,
the coming decade would be that of consolidation. The retailers have been
63
Kala Vijaraghavan & MV Ramsurya, “Retail Cos cuts costs by uniting back-end work”,
The Economic Times, 10th August 2009.
64
Raj Jain, “A wake-up call to maximise supply chain efficiencies”, The Economic Times,
12th October 2009.
65
Sahay, B.S. Gupta, Jatinder N.D. and Ramneesh Mohan (2006), “Managing supply
chains for competitiveness: the Indian scenario”, Supply Chain Management: An
International Journal, Vol. 11, No. 11, pp. 15–24.
43
dabbling with a variety of formats, supply chain configurations, product portfolio,
project financing, manpower planning and so on. Towards the end of the decade,
confidence level amongst the organised retailers on how to really tap the Indian
opportunity has increased. However, the key issues to be addressed remain are
battle hardened retailers, growing dominance of private labels, supply chain
innovations, enabling infrastructure and policy liberalisation.66
Increasing uncertainty of supply networks, globalization of businesses,

proliferation of product variety and shortening of product life cycles have forced
Indian organizations to look beyond the four walls for collaboration with supply
chain partners. Considering this scenario, a research study was conducted by
Sahay B.S. (2003)67 to study the supply chain practices followed by the Indian
industry. Sahay focused on the four major supply chain dimensions namely supply
chain strategy, supply chain integration, inventory management and IT. The paper
recommends that Indian industry need to align supply chain strategy with business
strategy, streamline processes for supply chain integration, form partnerships for
minimizing inventory and focus on infrastructure and technology deployment to
build an India-specific supply chain.
The following tables present in brief the studies conducted by different

agencies, consulting firms, institutions and centres of excellence on Indian retailing
and retail supply chain.
A C Nielsen on Retail and Retail Supply Chain

Title Issue Focus Area/Key Result
Global Online A Nielsen The report is based on the survey conducted
Consumer Report, between May 20 and June 7, 2011 covering more
Confidence, July 2011 than 31,000 consumers in 56 countries throughout
Concerns and Asia Pacific, Europe, Latin America, the Middle East,
Spending Africa and North America. The report shows that the
Intentions Indian consumers (with an index of 126) remained
most positive and have consistently reported the
highest consumer confidence scores since Nielsen
consumer confidence tracking began in 2005.
66
Karthik Ramamurthy and Pratik Puprediwar, “The New Level”, the strategist, Business
Standard, 14th February 2011.
67
Sahay B.S. and Ramneesh Mohan (2003), “Supply chain management practices in
Indian industry”, Distribution & Logistics Management, Vol. 33 No. 7, pp. 582-606
44
However, the few unpleasant factors associated with

higher prices spurred by inflation, and general
economic volatility across the globe in terms of
recessionary trends are dampening the Indian
consumers spirit as well with respect to spending
and could be gauged by the slight dip in the
purchases of some of the consumer goods.
A.T. Kearney on Retail and Retail Supply Chain

The Case for Debasish The analysis suggests that organized retailers use
"Compact Mukherjee smaller formats called ‘compact hypermarkets’ which
Hypermarkets" & Hemant can tap India's significant urban retail opportunities.
in India Kalbag, A.T. Compact hypermarkets are 4,000- to 6,000-square-
Kearney, foot stores; offer the amenities of hypermarkets but
2011. are smaller and easier to navigate, and they can
compete head-to-head with the kiranas.
Indian Hemant The authors propose four guiding principles to
Retailers: Kalbag, capture top and bottom line improvements while
Improving Debasish keeping the customers happy. They are i. Take a
category Mukherjee Customer Focus ii. Define category role iii. Watch
management & Subhendu the competitors and suppliers and iv. Strengthen
Roy, A.T. operations and performance.
Kearney,
2010
Measure A.T. This study provides a blueprint for achieving an
Twice, Cut Kearney, operational excellence. This study gives a four stage
Once – 2010 framework consisting of i. Driving store value
Planning, through voice of the customer, channel strategy and
attention to store business planning ii. Delivering core store
details, and value through supply chain interfaces and store
tested operations iii. Enhancing store value through store
programs build life-cycle management, operating expense control
excellence in and store technology and finally iv. Using the
retail learning store for roll out.
operations
Unleashing Laura The article gives a detailed picture about shopper

the shopper Gurski, marketing, vision, focus, approach and philosophy. It
marketing Melanie details about the three gears namely sales-marketing
engines Schmidt et connectivity, insights-driven decision making, and in-
al, 2009 store brand activation. It aims to differentiate and
activate the consumer products in an increasingly
competitive retail environment.
45
Retail in India: Confederati The report is divided into three parts namely: i.
Getting on of Indian Retail landscape in India, ii. Key issues in the way of
organized to Industry retail growth in India, iii. Key imperatives. The first
drive growth (CII) – A.T. part deals with the status of organised retail in India,
Kearney its growth, category wise market share in organised
Report, retail and different retail formats. The key issues
November related to the growth include underdeveloped supply
2006 chain, inadequate utilities, IT infrastructure hurdles,
inadequate real estate hurdles, inadequate human
resource, taxation hurdles, supply base hurdles,
limited consumer insights, insufficient government
incentives etc. forms the second part.
The third part covers the measures to be taken to
overcome the hurdles listed in the second part. The
concluding part details the impact of recommended
changes on the retail sector.
Ernst & Young on Retail and Retail Supply Chain

Turn risks and Olivier This report is based on the interviews with a panel of
opportunities Macard and retail sector professionals. The top 10 risks are Low-
into results – Daniel growth consumer markets, Regulation and
Exploring the Valerio, July compliance, Inability to control costs/rising input
top 10 risks 07, 2011 prices, Inability to benefit from e-commerce, Wrong
and price image, Supply chain disruptions, Inability to
opportunities penetrate emerging markets, Failure to respond to
for global shifting consumer behaviour, Sourcing and Volatility
organizations: in commercial real estate markets.
Retail sector
The top 10 opportunities are Rising emerging market
demand and rise of global middle class, New
marketing channels and social media, Competitive
differentiation via CSR and green branding,
Multichannel approach, Demographic change,
Private label, Launching new products and services,
Global urbanization, Competitive differentiation via
local branding and Enhancing efficiency in the SC.
Flavours of FICCI – According to the report, the Indian food industry is

Incredible Ernst & poised to grow by a whopping 42.5% from US$ 181
India – Young billion (Rs 8,43,460 crore) in 2009 to US$ 258 billion
Opportunities Report, (Rs 12,02,280 crore) by 2015 and by 76% to US$
in the Food October 24, 318 billion ( Rs 14,81,880 crore) by 2020, throwing
Industry 2009 up huge opportunities for investment across the
entire value chain.
46
Growth in size of the middle to very rich class is
projected to increase at more than 300% between
2005 and 2015. During the same period the
proportion of young population (age group 15- 25) in
India is expected to grow by 11%. This will lead to an
increasing demand for food products to meet
demands of convenience, variety, health and a
changing palate.
Winning with Pinakiranjan This survey was conducted jointly by FICCI and
Intelligent Mishra, E&Y. It highlights the key drivers of retail, drivers of
Supply Chains Ernst & change in supply chain, the paradigm shift from the
Young, traditional supply chain towards adoptive and real-
December time supply network with bi-directional information
17, 2007 flow, retail supply chain challenges and mitigation
strategies.
FICCI on Retail and Retail Supply Chain

Challenges Ketan The article focuses on the following issues i.
faced by Retail Dewan, competition from local kirana stores ii. knowing and
Industry in Footfalls, understanding the target customers iii. supply chain
India June – July, management (SCM) issues such as inventory level
2010, at stores and distribution centre, demand forecasting,
Volume 4, logistics infrastructure, cold storage chains and
Issue 7 quality transportation and procurement of goods, iv.
lack of trained and skilled manpower and v.
shrinkage. Also, the article discusses strategies to
overcome these issues and challenges.
RFID Ravi Mathur This article focuses on the tracking technology RFID
Technology in and Gopal and its different standards. It also gives a detailed
Retail Supply Valecha, description about benefits of RFID in achieving
Chain Footfalls, supply chain efficiency such as increasing visibility,
February- lowering operating costs, real-time information
March 2010, processing, reducing stock-outs and increasing the
Volume 2, competitiveness.
Issue 6
Can modern Raghav This article identifies interesting things that kiranas
retail learn Gupta, do that could be adapted by modern retail for
from the Footfalls, increased business success, namely: i. Customer
humble March – Relationship Management ii. Dynamic Merchandising
kirana? April 2009. and iii. Efficient store operations.
Organised FICCI Retail This report is based on information collated from key
Retail: Report , industry players, trade associations, government
Unfinished 2007. agencies, trade publications and various industry
47
Agenda and sources. It gives a detailed view of retail global
Challenges scenario vis-a-vis Indian retail market. It discusses
Ahead changing real estate scenario, requirement of
finances in retail, varied unfinished agenda in retail
such as simplifying tax structure, single window
clearance, FDI in retailing etc. The report covers in
detail the retail supply chain management issues in
India.
KPMG on Retail and Retail Supply Chain

Title Issue Focus Area
Sectoral KPMG This report highlights the current and future scenario of
Snippets – Report, the retail market in India. It also presents a picture of
India Industry April Indian companies’ strategic actions to cope with the
Information 2009. current economic stress. In the days to come, the
Indian retail is going to focus on value retail and food
retailing, the study reports. Also, there will be more
concentration in Tier II and Tier III cities. According to
the study, the companies will invest more in supply
chain efficiencies and emphasizes the fact that there is
a long term outlook for retail in India and this sector
continues to be attractive and there are huge prospects
for expansion.
Indian Retail: KPMG This report brings forth the impact of slowdown in
Time to Report, different parameters of Indian retail sector. Also, it
change lanes March proposes a bouquet of strategies for the retailers to
2009 cope up with recession. According to the report, the
recession has affected the footfalls, operating margin,
put pressure on the liquidity and the rentals increased
etc. It also suggests the ways to build a competent
retail supply chain management system.
Skill gaps in KPMG This report is the outcome of the CII Logistics Summit –
the Indian Report, 2007. It details the status of the logistics sector in India,
Logistics 2007 identifies and assessed the skill gaps in this sector, a
Sector: A deeper look at the critical areas, finds the root causes
white paper of the skill gaps and recommends suitable solutions to
fill up the gaps.
Indian retail: KPMG According to the report, there are many drivers
on the fast Report, contributing to the unprecedented consumption boom.
track. Bridging 2006 The report enlists the fastest growing retail segments in
the capability India, organised retail as percentage of FMCG sales by
gaps. city, experimentation by ITC on rural retailing, evolution
of retail formats, growth of malls etc. It thoroughly
figures different parameters related to supply chain
48
such as supplier integration, supplier maturity, sourcing,
fragmentation of supply chain, technology adoption and
usage, private labels etc.
KSA – TECHNOPAK on Retail and Retail Supply Chain

Changing Arvind The first part of the report lists down the factors
India, Singhal, contributing to a dynamic economy. The study
Changing Perspective, forecasts the consumption pattern for the year 2014.
Consumption , Volume 3, The food and grocery spending continues to be a
Changing 2010 major component and it continues to top the
Consumers categories of consumption. The consumers will shift
from ‘low-price’ platform to ‘price-plus’ platform.
There will be a strong increase in the trend of going
shopping as a ‘family’, the study opines.
Increasing Baqar Iftikar The economic slowdown has significantly increased

Private Label Naqvi and the pace of shift from national brands to private
Share in Madhulika labels or store brands among the organized retailers.
Indian Retail Tiwari, It has increased the private label sales.
Perspective,
Volume 3, This migration is not only linked to price (5-10% less
2010 than national brands), but also to various factors like
improvement in product quality, packaging,
presentation and retail experience. The study reports
that the rise of private labels is resulting in many
conflicts between retailers and brands owing to
issues like margins, display and shelf space.
India’s Food Sridhar V. & This paper details the growth prospects of India,
Vision: The Nimisha followed by key factors that have enormous
Next Chhabra, importance in increasing demand for food and are
Decade Perspective, expected to play a major role in the transformation of
Volume 4, demand drivers in the growth of food demand –
2010. rising population and incomes, increasing number of
nuclear families and working women and palate &
lifestyle changes. It also gives an account of key
issues and challenges in food industry.
India’s Veenu This article throws light on the smaller cities

Emerging Hot- Sharma, becoming nodes of attraction for the marketers. The
Spots Perspective, infrastructure developments, the changing
Volume 4, customers, the ripple effect of the metros on the
2010. cities are contributing to the growth of these cities.
These hot-spots are going to bring to the forefront
the next wave of new cities that the retailers would
49
be interested in looking at in order to gain ‘first
mover’ advantage and a foothold in the market.
Overview Raghav The first part of the research article delves into the
of India’s Gupta, impact of slowdown on consumer confidence, private
Consumer Rohit consumption and organised retail. The later part of
and Retail Bhatiani and the article finds that the EBITDA and ROC for the
Sectors Pranay retail sector is about 10-12 per cent, while for the
Gupta, FMCG sector, the numbers are higher.
Perspective,
Volume 4, The low level of returns in retail is primarily due to
2010. the high level of inefficiencies at the back end.
Inventory management which is an integral part of
any successful retail operation is currently lacking. A
significant amount of capital of an Indian retailer is
blocked in inventory leading to a strain on the
balance sheet.
The Indian Anil Rajpal This article looks at how modern retail’s landscape is
Retail and Pragya changing and what can be expected in the near
Landscape: Singh, term. It analyses how some retailers are entering the
Now and Perspective, rebuilding phase with a focus on resizing, relocating
Beyond Volume 1, and restructuring stores. It also looks at the impact of
2009. consumer product companies investing in traditional
retail, outlines the emergence of collaborative
models in retail real estate, and defines the required
focus on retail back-end, i.e. supply chain.
Supply Chain KSA – The report presents an overview of Retail Supply

Challenges in Technopak, Chain Management (SCM) in India. It discusses the
the Indian A quarterly current market size and future estimation; the factors
Retail Sector report, affecting organised retail SCM in India, compares
January and benchmarks with international retail supply
2008. chains.
The second part of the study focuses on supply

chain objectives, symptoms and pain areas, strategic
SCM areas and improvement projects for Indian
retailers
Changing KSA – The presentation is divided into four sections namely

Retail Technopak, the i. Economic update on India ii. Impact Areas iii.
Landscape in 2nd Emerging Conflicts and iv. Implications for
India: November Stakeholders. It gives an insight into the factors
Emerging 2007 influencing the growth of retail in India.
Conflicts and
Implications
50
McKinsey on Retail and Retail Supply Chain
Building India A McKinsey This is a comprehensive report that covers the
– Report, India’s current logistics infrastructure. The report
Transforming 2007. finds it inadequate to meet the growth aspirations
the nation’s and presents a logistics infrastructure strategy. The
Logistics strategy suggested revolves around the proposal to
Infrastructure bring out a National Integrated Logistics Policy
(NILP).
Tracking the Eric D. The study reports the linkage between India’s rapid
growth of Beinhocker, economic growth and its influence on consumers.
India’s middle Dianna The author predicts that in the next two decades,
class Farrel, and India will become world’s fifth largest consumer
Adil S. economy. Consumer spending will quadruple from
Zainulbhai, about Rs 17 trillion ($372 billion) in 2005 to Rs. 70
trillion in 2025. The country’s middle class is
estimated to grow from about 5 percent of the
McKinsey population to more than 40 percent, i.e. from 318
Quarterly million in 2007 to 5,283 million in 2025. India will
No. 3, 2007 become the world’s fifth largest consumer market by
2025 from the 12th position now. India will witness
the rapid growth of its middle class – households
with disposable income from Rs. 2,00,000 to
10,00,000 a year. Food will remain the single largest
category of expenditure and growth in consumption
will accelerate from 3 per cent annually now to 4.5
per cent.
Other Report
India in Report of The report gives authentic information about
Figures – A the Ministry population characteristics, economic characteristics,
ready of Statistics infrastructure, industry, energy, agriculture, social
reference, and characteristics and also that of BRICS countries.
2011 Programme
Implementat
ion,
Government
of India
51
THE RESEARCH PROBLEM
The supply chain has a key role to play in the expansion and profitability of
retailers. Retailing and logistics are concerned with product availability.68 The
retailers must be familiar and adept with the flows of product and information both
within the business and in the wider supply chain. In order to make products
available, retailers have to manage their supply chain in terms of product
movement and demand management. They need to know what is selling in the
stores, anticipate and react quickly to changes in the demand.
The fact that logistics and supply chain management play a decisive role in
modern retailing needs no emphasis. Advanced tools and techniques in the retail
supply chain have led to the improvements in the management of inventory,
distribution networks and vehicle scheduling. Retailers need the timely delivery of
merchandise if they are to satisfy and retain the customers. To quote Newman, If
it’s not in store, you can’t show it! If you can’t show it, you can’t sell it! (Andrew J
Newman, 2007).69 The most significant challenge that impedes the development of
an efficient and modern retail sector is an underdeveloped supply chain.
NEED FOR THE STUDY

The underdeveloped, traditional, and unidirectional supply chain increases
inventory build-up coupled with operational inefficiencies for companies (Business
Line: April 24, 2008).70The spurt in the organised retail business in terms of the
number of retail chains across the country testifies the growing acceptance of the
modern retail format and the shift in the customer preferences from the traditional
kirana stores to huge retail outlets which have made shopping a pleasant
experience. The earlier reluctance to visit the small typical grocery store is replaced
by new enthusiasm and excitement on the part of the 21st century consumers. The
new realities and changing dynamics of the retail trade prompted the researcher to
68
John Fernie & Leigh Sparks, Logistics and Retail Management, Kogan Page, London
and Sterling VA, 2004.
69
Andrew J Newman and Peter Cullen, Retailing: Environment & Operations, Thomson
Learning, 2007.
70
D. Murali and Kumar Shankar Roy, Biggest Challenge for retail is ‘underdeveloped
supply chain’, Business Line, April 24, 2008.
52
examine in detail how issues related to supply chain – the critical success factor in
the F&G retail format – are addressed. Hence the research topic “Retail Supply
Chain Management in Food and Grocery (A case study of Bangalore City)”.
OBJECTIVES OF THE STUDY

– To examine the management of logistics and cross-functional drivers of the
Food and Grocery (F&G) retail outlets;
– To study the management of supply chain processes like the Customer
Relationship Management (CRM), Internal Supply Chain Management
(ISCM) and Supplier Relationship Management (SRM);
– To assess the degree of competition among the food and grocery (F&G)
retail outlets;
– To determine the performance of the Food and Grocery (F&G) retail outlets
using different metrics, and
– To suggest ways and means to improve the supply chain management
practices of Food & Grocery (F&G) outlets.
TESTING OF HYPOTHESIS
H 1: The time and the amount of purchase made by different customer groups
(family, friends and individuals) are different.
H 2: Mean of the percentage of sales over different periods of a month
(namely 1st -10th, 11th – 20th and 21st – 30th) are same.
H 3: The number of footfalls at an organised retail outlet is independent of the
location of the outlets
H 4: The number of footfalls at an organised retail outlet is independent of the
size of the outlets
H 5: Number of customers for an outlet depends on catchment area.
H 6: Number of customers is independent of the size of the organised retail
outlets.
H 7: Competition has affected the sales of organised retail outlets.
H 8: Distribution of the sales per square foot of organised retail outlets and the
kirana stores are different.
53
H 9: Distribution of monthly sales of organised retail outlets and the kirana
stores are different.
H 10: Distribution of sales per employee of organised retail outlets and the
kirana stores are different.
SCOPE OF THE STUDY

Retailing in India is gaining momentum over the years. The city such as
Bangalore has great potential for organized food retail. The research study
examines the logistics and cross-functional drivers of supply chain in detail as
practised by the organised retail outlets in Bangalore. Towards that the study
identifies the areas where the outlets are doing better and also enlists the areas
where they have to improve upon. This gives the scope for the operators/owners of
the outlets for enhancing the customer service, product availability, etc.
It also helps the managements of the retail outlets devise appropriate supply
chain strategies to achieve competitive strategic objectives. For planners, the study
gives the insights which will enable them to frame policies, procedures and
schemes to create a congenial environment and impetus for further growth of food
retail in Bangalore.
LIMITATIONS OF THE STUDY

In spite of the efforts undertaken by the scholar, given the vastness and spread
of the city of Bangalore and at times coupled with the reluctance of the
respondents to divulge information wholeheartedly, the researcher has confronted
with certain limitations in the field work. Therefore, like any other project of this
magnitude, the present research study is also not free from some limitations.
– The focal point of the study is to examine the six supply chain drivers of the
food and grocery outlets/stores in Bangalore City. Therefore, inferences
drawn from the study will have limitation of generalisation of findings.
– The data analysis, interpretation and inferences are based on the data
collected from the managers, operators and employees of the
outlets/stores. Their perceptions may have personal bias and subjective
view points.
54
– Food and Grocery outlets operate in a dynamic environment. The
observations and inferences drawn out of the study pertain to the particular
period of time. This would have changed or may change over a period of
time.
RESEARCH METHODOLOGY
The Food and Grocery (F&G) retail segment in India is unique. F&G can be
broadly categorised into organised and unorganised retail. The organised retail can
be further categorised into corporate retail chains and individual standalone retail
outlets. For the purpose of the study, the researcher has considered all the three
segments namely, corporate retail chains, standalone retail outlets and kirana
stores.
Also, an attempt is made to ascertain the practices adopted by unorganised
sector (kirana stores) in comparison with organised sector with respect to the
adoption of modern practices.
Table 2.1: Sources of Information

Universe Retail outlets (kirana stores, corporate retail chains
and standalone retail outlets) in Bangalore.
Sampling unit Retail outlets
Sampling Technique Judgemental Sampling
Primary Sources a) Structured Questionnaire – Different sets of
questionnaires were administered on organised
outlets and unorganised kirana stores.
b) Personnel Interviews with corporate office
personnel, store managers, operators,
supervisors of organised outlets and kirana store
owners.
Secondary Sources Journals, Periodicals, Business Magazines,

Newspapers, Corporate Retail Chains’ Websites,
Retail Organisations’/Associations’ Websites,
pamphlets and catalogues.
Given the structure of the Indian retail sector (F&G) which is still in the
‘growth’ stage, it was felt appropriate to select the sample units from both
organised and unorganised sectors as shown in the Figure 2.1.
55
Figure 2.1: Selection of Samples
DETERMINATION OF SAMPLE SIZE

Kirana Stores
An appropriate sample size has been arrived at after taking into account the
confidence level of 95%, confidence interval of 7% and the population (number of
kirana stores). The sample size determined is given in table 2.2. Thus, the sample
size of kirana stores considered for the study was 200.
Table 2.2: Determination of Sample Size (kirana stores)

Confidence Level 95%
Confidence Interval 7%
Population (No. of stores – Estimate) 2,00,000
Sample size Required 196
Source: http://www.surveysystem.com/sscalc.htm.
Organised Retail Outlets

As the number of organised outlets was limited, a minimum of 25 per cent of
the total number of outlets of retail chains was considered for the study. The break-
up of the number of organised outlets surveyed is given in table 2.3 and it was
150.
56
Table 2.3: Retail Chains and Number of Outlets Surveyed
Name of the Total Number of Number of outlets Percentage of
Retail Chain outlets in Bangalore surveyed outlets surveyed
@Fresh 16 12 75
Spencer's 19 14 74
More For You 76 38 50
Nilgiris 56 14 25
Food World 48 12 25
Reliance Fresh 36 9 25
Safal Daily Fresh 32 8 25
Smart
28 7 25
Supermarket
Standalone
36
Outlets
Total 150
Thus, the total sample size was 350 and is shown in table 2.4.
Table 2.4: Total Sample Size Surveyed*

Type Number
kirana Stores 200
Food and grocery retail outlets 150
Total 350
*Note: Only one outlet/store from a location (E.g. Shopping Complex) is selected for the
survey.
Pilot Survey
A pilot survey was conducted at Banshankari II and III stage, Bangalore to

ascertain the validity of the questionnaire. About 15 kirana stores and 10 organised
retail outlets were covered as part of the pilot survey. The objective of the survey
was to understand from the respondents the relevance, usability, reliability etc of
the instrument. Based on the insights gained in the pilot survey, some of the
questions were rephrased, some were redesigned, re-categorised and refined.
57
Research Survey
The survey is exploratory in nature. As part of the survey, the researcher

has covered almost all major locations in the city of Bangalore. Though the
sampling method adopted was convenience/judgemental sampling, only one outlet
from a location is selected. This is to make sure that as many outlets as possible
may be covered from different locations and information collected is not biased or
skewed. In case of organised outlets, it was ensured that the outlet selected was in
operation for at least one year. The number of outlets of retail chains and
independent outlets where the survey was conducted are given in Table 2.5.
Table 2.5: Location of Organised Outlets
1. Adugodi 2. Frazer Town 3. Narayana Pura Main

4. Airport Road 5. Gandhi Nagar 6. Padmanabha Nagr
7. Annapoorneshwari Nagar 8. HAL I Stage 9. Pai Layout
10. Ayanagar 11. Indira Nagar 12. Prasanth Nagar
13. Banaswadi 14. J P Nagar 15. Puttenhalli
16. Bangalore 17. Jalahalli West 18. Raja Rajeshwari Nagar
19. Bannerghatta Road 20. Jayanagar 21. Rajaji Nagar
22. Bapuji Nagar 23. Kamakshi Palya 24. Rajaji Nagar 2nd Stage
25. Basavangudi 26. Kamaraj Street 27. Ramamurthy Nagar
28. Basveswara Nagar 29. Kasba Hobil 30. RPC Layout
31. Begur Hobli 32. Kasturnagar 33. RT Nagar
34. Bhanashankari 35. Kengeri 36. Rustum Garden
37. Bhanashankari 2nd stage 38. KHB Colony 39. Sahakara Nagar
40. Bhanashankari 3rd Stage 41. Kodihalli 42. Sarajapur Road
43. Brookefield 44. KonanaKuate 45. Shivaji Nagar
46. BTM Layout 47. Koramangala 48. Sultan Palya
49. C V Raman Nagar 50. Kothanur Road 51. Teacher's Colony
52. Canara Bank Layout 53. Magadi Main Rd 54. Tippasendra
55. Chamrajpet 56. Mahalakshmi Layout 57. Uttarahalli
58. Chandra Layout 59. Malleswaram 60. Vidyarayanapuram
61. Chord Road Extension 62. Martahalli 63. Vijaya Nagar
64. Doddabanaswadi 65. Nagarbhavi 66. Vijayanagar
68. Nagarbhavi Main
67. Dommalur Layout Road 69. West Of Chord Road
70. Ejipura 71. Nandini Layout 72. White Field
73. Electronic City 74. Yelahanka
Source: Field Survey.
58
In case of kirana stores, sample units were chosen in such a way that they
represent different location in the city of Bangalore.
The number of outlets surveyed and their year of establishment are given in
the Table 2.6 and Figure 2.2. The concept of organised retail is very new in India.
In the country, the growth of organised retail gained momentum in 2003-04. The
sample of the outlets collected also replicates the same. That is, the number of
outlets opened over the years has increased and may continue to grow further in
the years to come. The survey was conducted during the year 2009.
Table 2.6: Year of Establishment of Organised Outlets
Year No. of Outlets Percentage

2000 1 1
2001 1 1
2002 3 2
2003 4 3
2004 6 4
2005 12 8
2006 19 13
2007 46 31
2008 58 39
Total 150 100
Figure 2.2: Year of Establishment of Organised Retail Outlets
59
Reliability Analysis
Reliability of the questionnaire was tested using Chronbach’s Alpha (also

referred to as coefficient alpha) technique. The test showed a satisfactory index of
0.6 to 0.9 which is adequate for the analysis of the data.
Data Tabulation and Analysis:
1. Microsoft Access 2007 was used for database creation and data entry
purposes.
2. Microsoft Access 2007 and Microsoft Excel 2007 were used for data
filtering, sorting and drawing charts.
3. SPSS Ver 16.0 was used for descriptive analysis, testing of hypothesis (both
parametric and non-parametric) and multivariate analysis.
CHAPTER SCHEME
Chapter 1 Introduction
Chapter 2 Literature Review, Research Design and Methodology
Chapter 3 Data Analysis
Chapter 4 Testing of Hypothesis and Model Building
Chapter 5 Summary of Findings and Conclusion
Bibliography
Annexures

60
CHAPTER - 3
DATA ANALYSIS ON ORGANISED RETAIL OUTLETS
The questionnaire on organised retail outlets was administered on 170

organised outlets in different parts of Bangalore after a test survey and refinement
of the questionnaire. After due data cleansing, checking for data integrity and
consistency, the number of questionnaires was pruned to 150.
The data analysis on organised retail outlets falls into three parts: First part
of the analysis focuses on logistics drivers such as location, transportation and
inventory; the second part deals with cross-functional drivers namely sourcing,
pricing and information; thirdly, the processes related to supply chain namely
customer relationship management, internal supply chain management and
supplier relationship management are analysed.
I. LOGISTICS DRIVERS
1. LOCATION, SIZE, LAYOUT AND FACILITIES/AMENITIES
i. Location
The location of a store determines the accessibility, footfalls, the cost of

operation etc. According to Sunil Chopra (2010),71 decisions regarding the role,
location, capacity, and flexibility of facilities have a significant impact on supply
chain’s performance. Location is an important factor that influences the customer’s
choice of the outlet, regular visit of the customers to the outlet, repeat purchases at
the same outlets etc.
The data presented in Table 3.1 and the chart in Figure 3.1 show that about
half of the outlets were located on the main road; another 25% of the outlets were
located on the junction points and about 17% were located in the shopping
complex.
71
Operations, Pearson Education, 4th Edition, 2010.
61
Table 3.1: Location of the Outlets
No. of Outlets Percentage

Main Road 75 50
Junction Points 40 27
Shopping Complex 26 17
Street Corner 8 5
Mall 1 1
Total 150 100
It may thus be seen that the organised F&G outlets have spread across the
city of Bangalore.
Figure 3.1: Location of the Outlets
ii. Size of Organised Outlets
Location decision is always followed by the size. Size of the outlet

determines the capacity of the customers the outlet can handle, the categories,
variety and quantity of merchandise, the layout, the space and other facilities the
retailer can provide to the customers.
The rentals and real estate prices are alarmingly so high in Bangalore that it
is very difficult for a retailer to put up a huge size in the normal circumstances. So it
is evident that many a retailer in Bangalore tries his best to optimise the size.
62
The size of the outlets surveyed are shown in the Table 3.2 and Figure 3.2.
As could been seen from the data that most of the outlets surveyed were in the
range of 1,000 – 3,000 Sq. feet. Of which, about one-third (33%) of the outlets
were of 1,500 – 2,000 sq. ft. and another one-third (32%) were of 2,000 – 2,500 sq.
ft. in size. It is interesting to note that about 8% of the outlets were more than 3,000
sq. ft. The outlets were not too big and were of moderate size. Table 3.4 shows the
central tendencies of the size of the outlets surveyed.
Table 3.2: Size of Organised Retail Outlets
Area (in Sq. feet) No. of Outlets Percentage

1,000 – 1,500 24 16
1,501 – 2,000 49 33
2,001 – 2,500 48 32
2,501 – 3,000 17 11
3,001 – 3,500 6 4
3,501 – 4,000 5 3
4,001 – 4,500 1 1
Total 150 100
Figure 3.2: Size of the Outlets (in Sq. ft.)
63
iii. Catchment Area of the outlets
The term catchment area is borrowed from geography and describes the
sphere of influence around an area of interest or importance. As regards retail
location strategy, the retail catchment area is the geographical area from which a
store draws its customers. A retail catchment area is the sphere of influence
around a retail attraction from which the retailer draws the customers (Newman,
2007).72
The larger the catchment area, the higher is the number of customers who
visit within the domain of an outlet depending on the density of population in the
area. The catchment area is influenced by the location of the outlet, the level of
competition in the catchment area, the store offerings, accessibility of the outlets,
customers convenience etc.
It may be interpreted from Table 3.3, that the catchment area was two to
three square kilometres for majority of the outlets. In a place like Bangalore, where
the density of population is quite high, the catchment area of 2 – 3 square
kilometres is sufficient to draw enough customers. Table 3.4 shows the central
tendencies of the catchment area of the outlets surveyed.
Table 3.3: Catchment Area of Organised Outlets

Catchment Area No. of
Percentage
(in Sq. Kms.) Outlets
1 1 1
2 75 50
3 69 46
4 2 1
5 2 1
6 1 1
Total 150 100
72
Andrew J Newman and Peter Cullen, Retailing: Environment & Operations, Thomson
Learning, 2007.
64
Table 3.4: Central Tendencies – Size and Catchment Area of Outlets
Catchment
Area of the Outlet
Area in Sq.
in Sq. feet
Kms.
Mean 1,958 3
Median 2,000 2
Mode 2,000 2
Std. Deviation 549 1
Range 2,900 5
Minimum 1,100 1
Maximum 4,000 6
iv. Amenities and Facilities
The best retail facilities are more like amusement parks than retail stores. In
these, customers do not only buy a product, they buy an experience (Finne, Sam &
Sivonen, Hanna).73 Amenities at the outlet are important factors that influence the
customer’s choice of the outlet, regular and repeat purchases at the same outlets.
The researcher attempted to know the different amenities provided at the outlets
and their influence on customer satisfaction.
The result (Table 3.5 and Table 3.6) show that organised outlets were well
equipped with amenities such as drinking water, air-conditioning, wash rooms and
parking facility, but not all amenities were available at all the outlets.
Table 3.5: Outlets and Amenities
Facility/Amenities No. of Outlets Percentage
Drinking Water 150 100
Wash Room 140 93
Air conditioning 119 79
Parking Facility 100 67
Lounge 61 41
Telephone Booth 31 21
Cafeteria 30 20
ATM 21 14
Play Area 7 5
Internet Café 4 3
73
Finne, Sam & Sivonen, Hanna, “The Retail Value Chain”, Kogan Page, 2009.
65
Drinking water was provided to the customers in all the outlets. Wash Room
facility was available in almost all the outlets (93%), air-conditioning in about 79%,
parking facility in about 67% and lounge in 41% of the outlets. Other facilities such
as telephone booth, cafeteria, ATM, Play Area and Internet Cafe were in very few
outlets only.
Though air conditioning was available in all the outlets, it was observed that
they were either not working or switched off in order to save electricity charges
leave alone occasional power cuts. With low roof, false ceiling and customer
density in the outlet, in the absence of effective air-conditioning systems, no doubt,
was a cause of concern for many a customer.
Table 3.6: List of Amenities Available at the Outlets
No. of
Amenities Percentage
Outlets
Air Conditioning, Drinking Water, Parking Facility &
20 13
Wash Room
Air Conditioning, Drinking Water, Lounge & Wash Room 16 11
Air Conditioning, Drinking Water & Wash Room 14 9
Air Conditioning, Drinking Water, Lounge, Parking
11 7
Facility & Wash Room
Air Conditioning, Drinking Water, Parking Facility,
9 6
Telephone Booth & Wash Room
Drinking Water, Parking Facility & Wash Room 9 6
Drinking Water & Wash Room 8 5
Air Conditioning, Cafeteria, Drinking Water, Parking
6 4
Facility & Wash Room
Air Conditioning, Drinking Water, Lounge, Parking
5 3
Facility, Telephone Booth & Wash Room
Air Conditioning, Cafeteria, Drinking Water, Lounge,
4 3
Parking Facility, Play Area & Wash Room
Air Conditioning, Cafeteria, Drinking Water, Lounge,
4 3
Parking Facility & Wash Room
Air Conditioning, Cafeteria, Drinking Water & Parking
4 3
Facility
Other Combinations 40 27
Total 150 100
Visit to the modern retail outlets these days is a planned one given the
hectic life style, job stress and the time and effort that goes into the shopping
66
exercise, needless to say that ambience of the shop matters a lot in influencing the
customers to step in, shop around and relax for a while. It is in this context, a good
lounge for the customers to relax and spend time over a cup of coffee/tea is
important. Lounge is an important facility/amenity that was not available in more
than half of the outlets.
With respect to the satisfaction level of the customers with the amenities, the
customers were satisfied with the facilities/amenities in the outlets (Table 3.7).
Table 3.7: Satisfaction with Amenities
Satisfaction Level No. of Outlets Percentage

Highly Satisfied 7 5
Satisfied 140 93
Neither Satisfied nor Dissatisfied 3 2
Total 150 100
v. Ownership and Kind of Outlets
Table 3.8 shows the ownership of the outlets. Ownership determines the
relationship between the operator and the outlet. Different ownerships pattern were
found among the outlets.
About 73% of the outlets were retail chain outlets owned by Business
Groups/Corporate Houses such as Reliance Industries (Reliance Retail), Aditya
Birla Group (More), RPG Group (Food World), Heritage Foods (@Fresh) and
others. In this case, the outlets are owned and controlled by respective corporate
houses.
Some of the F&G outlets were run by cooperatives such as Mother Dairy
which runs the outlets like Safal Daily Fresh. About 5% of the outlets surveyed
constituted this type.
67
About 13% of the outlets were ‘proprietary’. In other words, they were owned
by individuals. The other type of independent outlets was owned by more than one
person – ‘Partnership’. About 9% of the outlets surveyed were of this kind. Many
standalone outlets in various localities of Bangalore were managed by
individuals/groups belonging to traditional business families.
Table 3.8: Ownership of the Outlets

Private 72 48
Public Limited 37 25
Proprietary 19 13
Partnership 14 9
Cooperative 8 5
Total 150 100
Table 3.9 shows whether the outlets surveyed were of multiple locations or
standalone i.e. more than one outlet in the city or only one outlet in the city. About
80% of the outlets surveyed were of multiple locations category and the remaining
20% were standalone outlets.
Table 3.9: Number of Locations of Outlets

Multiple Locations 120 80
Stand Alone 30 20
Total 150 100
The third kind of categorisation was based on the form of organisation of the
outlets. The data as given in the Table 3.10 reveals that about 70% of the outlets
surveyed were company owned; about 20% of the outlets were independent and
about 10% of the outlets were of franchisee type.
68
Table 3.10: Form of Organisations

Company Owned 105 70
Independent 30 20
Franchisee 15 10
Total 150 100
vi. Layout
Stores layout is the way merchandise is laid out for customers view and
access so that they can see, touch, compare and pickup at ease. The layout has
two significant effects on the consumer behaviour and buying activity, namely i. it
determines the aesthetics/appearance of the store and ii. it influences the way in
which customers negotiate their way along the aisles around the store. Store layout
has a bearing on the customer traffic flow and circulation inside the store.
These two aspects affect customer’s impressions of the store and customer
spending in the store. The layout should be consistent with the customer’s mood
while entering the store and work with the customer’s natural inclinations
(Newmann, A J, 2007).
The data presented in Table 3.11 shows that the ‘Grid’ type is widely
adopted layout form among the outlets surveyed (76%). Grid type of layout uses
space efficiently, allows easy stacking of merchandise, allows free movement of
customers in the outlet at anytime.
Table 3.11: Layout of the Outlets
Layout No. of Outlets Percentage
Grid 114 76.00
Free Flow and Grid 14 9.33
Free Flow 11 7.33
Loop 2 1.33
Spine 1 0.67
No Idea 8 5.33
Total 150 100.00
69
In the city like Bangalore where space is at premium, Grid layout may be the
best option available to the retailers, followed by a hybrid form free flow and grid
9.33%, pure free flow format 7.33% and loop and spine forms in about 1% of the
outlets respectively.
vii. Distribution Centre
Distribution Centre (DC) is an important facility that plays a dominant role in

distribution network among the retail chain outlets. The DC is an extra layer
between suppliers and retail locations and plays two key roles, viz., to store
inventory and to serve as a transfer location. In both the cases, the presence of
DCs help reduce supply chain cost when suppliers are located far away from the
retail outlet locations where the transportation costs take a substantial proportion.
The presence of a DC helps the supply chain to achieve economies of scale

for inbound transportation to a point close to the final location because each
supplier sends a large shipment to the DC that contains products for all the
locations the DC serves. Because DCs serve locations nearby, the outbound
transportation cost is not very large (Chopra, 2010).74
In Bangalore, it was observed that most of the retail chains such as

Heritage, More, Food World etc, had set up their DCs at Hosakote from where they
transfer the merchandise to the outlets in the city using their own vehicles adopting
the milk run type of distribution. A milk run is a route on which a truck either
delivers product from a single supplier to multiple retailers or goes from multiple
suppliers to a single buyer location. The Figure 3.3 illustrates the role of a DC. In
the figure, the dotted line indicates the reverse flow.
74
op. cit.
70
Figure 3.3: Role of Distribution Centre
2 INVENTORY
i. Number of SKUs in Outlets
A Stock-Keeping Unit (SKU) is the smallest measure of a product unit

available for inventory control. Each different item of merchandise is called an SKU
(Levy, 2008).75 In organised F&G, a category refers to a manageable group of
products that the consumer perceives to be interrelated and/or substitutable in
meeting consumers need (Rajesh Ray, 2010).76 As such, SKUs are broadly
categorised into five categories namely Food, Fruits & Vegetables, Non-Food,
Staples, Beverages and others.
Table 3.12 shows the range of SKUs in the outlets and Table 3.13 shows
the central tendencies of SKUs. As could be seen in the data, majority of the
retailers had SKUs in the range of 1,500 – 3,000 units. Further, about two-fifth
(36%) of the outlets were having about 1,500 – 2,000 units and in another one-third
of the outlets, the SKUs were in the range of 2,000 – 2,500 units. Regarding
75
Levy Michael, Weitz Barton A, Pandit Ajay, Retailing Management, The McGraw Hill
Companies, Sixth Edition, 2008.
76
Rajesh Ray, Supply Chain Management for Retailing, Tata McGraw Hill, First Edition,
2010.
71
different categories, the food and non-food items were in the range 250 – 1,000
units depending upon the total SKUs. Of which, about two-fifth (40%) of the outlets
had food and non-food items each in the range of 500-750 units and another 30%
of the outlets had food and non-food items each in the range of 750-1,000 units.
The staples were in the range of 250 – 750 units. The vegetables and beverages
each were in the range of 25 – 100 units.
Table 3.14-a and Table 14-b show the SKUs range in the outlets. Figure
3.4-a and Figure 3.4-b depict different SKU categories. From the data, it may be
noted that the food and non-food items constituted about 30% each. The staples
constituted about 20-22% of the total SKUs. The vegetables and beverages each
were about 3-5%. About 10-12% of the SKUs were ‘other’ miscellaneous items.
Table 3.14-c shows the central tendencies of the distribution of different SKUs in
the outlets.
The total number of SKUs was moderate in number. The food, non-food and
staples occupied majority of the SKUs in the outlets.
Table 3.12: SKUs Range
No. of
SKU Range Percentage
Outlets
1,000-1,500 7 4.7
1,501-2,000 54 36.0
2,001-2,500 49 32.7
2,501-3,000 26 17.3
3,001-3,500 7 4.7
3,501-4,000 4 2.7
4,001-4,500 0 0.0
4,501-5,000 2 1.3
5,001-5,500 0 0.0
5,501-6,000 1 0.7
Total 150 100.0
72
Table 3.13: Central Tendencies of SKUs
No. of SKUs
Mean 2,403
Median 2,300
Mode 2,000
Std. Deviation 681.74
Skewness 1.77
Kurtosis 5.89
Range 5,000
Minimum 1,000
Maximum 6,000
Table 3.14-a: SKU Categories in an Outlet – I
Food Non-food Staples others
SKU Range No. of Percent No. of Percent No. of Percen No. of Percent
Outlets age Outlets age Outlets tage Outlets age
1-250 0 0.0 1 0.7 6 4.0 91 68.4

251-500 28 18.7 33 22.0 83 55.3 30 22.6
501-750 65 43.3 62 41.3 49 32.7 8 6.0
751-1,000 46 30.7 44 29.3 12 8.0 2 1.5
1,001-1,250 5 3.3 4 2.7 - - 2 1.5
1,251-1,500 3 2.0 1 0.7 - - - -
1,501-1,750 - - 2 1.3 - - - -
1,751-2,000 3 2.0 3 2.0 - - - -
Total 150 100.0 150 100.0 150 100.0 133 100.0
73
Table 3.14-b: SKU Categories in an Outlet – II
Vegetables Beverages
SKU Range No. of No. of
Percentage Percentage
Outlets Outlets
1-25 0 0 1 0.7
26-50 30 21 22 14.7
51-75 24 17 22 14.7
76-100 83 59 89 59.3
101-125 4 3 1 0.7
126-150 - - 15 10.0
Total 141 100 150 100
Table 3.14-c: SKU Categories in an Outlet (Central Tendencies)
Food Vegetables Non-food Staples Beverages Others
Mean 740 85 728 528 93 254

Median 700 100 700 500 100 200
Mode 600 100 600 500 100 200
Skewness 2.3 -0.7 2.0 0.2 0.1 2.5
Kurtosis 7.4 -1.0 5.6 0.6 0.4 8.0
Range 1,600 85 1,800 921 125 1,185
Minimum 400 40 200 79 25 15
Maximum 2,000 125 2,000 1,000 150 1200
Figure 3.4-a: SKU Categories – I
74
Figure 3.4-b: SKU Categories – II
ii. Stock (in days) of different SKU Categories in the Outlets
In spite of the advancements in transport and telecommunication facilities

and modern practices like Just-in-time (JIT) inventory and Quick Response (QR)
systems, the practice of inventory is in its traditional form – holding stocks of
merchandise readily available for the store’s day-to-day requirement is fully evident
in many stores, possibly due to the mismatch between supply and demand.
Inventory plays an important role in the supply chain. Proper inventory
management practices enable the store to meet and manage the demand by
ensuring ready stocks of the various SKUs. Inventory is a major source of cost in a
supply chain and has a huge impact on responsiveness (Sunil Chopra, 2010).
Table 3.15 shows the central tendencies of the inventory held in terms of
number of days. The data reveals that the vegetables were stocked for 2 days;
food, non-food and staple items were inventoried for 5 – 7 days and beverages for
9 days.
The number of days of SKUs stocked was influenced by demand from the
customers, the lead time in ordering, replenishment and economies of scale related
to the order size.
75
Table 3.15: Stock in Days of Different SKUs
Inventory
Food Vegetables Non-Food Staples Beverages Others
in Days
Mean 4.6 1.7 5.6 6.5 8.6 5.4
Median 4.5 1.5 5.5 6.5 8.5 5.5
Mode 4.5 1.5 5.5 6.5 8.5 5.5
Std.
1.5 0.4 1.3 2.0 1.7 1.5
Deviation
Skewness -0.1 1.5 0.4 0.2 0.7 0.7
Kurtosis 1.1 1.0 0.8 0.1 3.2 1.5
Range 8.5 1.5 7.5 11 11.5 9.0
Minimum 1.5 1.0 2.5 1.5 3.5 2.0
Maximum 10.0 2.5 10.0 12.5 15.0 11.0
iii. Stock-out in the Outlets
A stock-out occurs when an SKU that customer wants is not available.

Though it is undesirable it is also unavoidable. So, it is the responsibility of the
retailer to minimise the stock-out. The percentage of stock-out has to be within a
limit. If the stock-out occurs quite often, the retailers will lose sales and also the
good will of the customers.
Table 3.16 shows whether the outlets had the stock-outs or not and Table
3.17 shows the percentage of stock-outs in the outlets. Majority (83%) of the
organised retailers experienced a stock-out of 1-10% which is quite normal for the
industry. At the same time, retailers need to take efforts to peg it at an average
level of 5%.
Table 3.16: Occurrence of Stock-outs

Yes 132 88
No 18 12
Total 150 100
76
Table 3.17: Percentage and Central Tendencies of Stock-outs
Percentage of Mean 5.5

No. of Outlets Percentage Median 3.0
Stock-out
0 18 12.0 Mode 8.0
1-5 60 40.0 Std. Deviation 3.9
6-10 64 42.7 Skewness 1.1
11-15 4 2.7 Kurtosis 2.8
16-20 3 2.0 Range 23.0
21-25 1 0.7 Minimum 0.0
Total 150 100.0 Maximum 23.0
iv. Fill-Rate
Fill-rate measures the fraction of orders/demand that were met on time from
the stock. It is the probability of meeting the customer’s demand as and when it
arises (Sunil Chopra, 2010).77
Table 3.18 shows the central tendencies of the fill-rate of different SKUs
maintained by the outlets. The data shows that the fill-rate of SKUs was in the
range of 86%-91%. The figures are not too low or too high. However, the retailers
need to take efforts to raise the service level to 95% and above.
Table 3.18: Fill-Rate of SKUs
Food Vegetables Non-Food Staples Beverage Other

Mean 0.88 0.88 0.89 0.91 0.86 0.88
Median 0.89 0.89 0.89 0.90 0.89 0.89
Mode 0.90 0.89 0.89 0.90 0.90 0.89
Std. Deviation 0.09 0.07 0.06 0.07 0.06 0.07
Skewness -5.99 -1.19 -3.40 -4.69 -2.48 -4.56
Kurtosis 48.03 12.53 16.98 31.16 9.29 23.54
Range 0.91 0.75 0.50 0.65 0.45 0.48
Minimum 0.09 0.50 0.50 0.38 0.50 0.50
Maximum 1.00 1.25 1.00 1.03 0.95 0.98
77
op. cit.
77
v. Kinds of SKUs
There are three ways by which SKUs are procured and maintained in the
outlets. They could be purchased from the FMCGs majors such as Hindustan
Unilever Limited (HUL), Proctor & Gamble (P&G) etc, which, of course, are
branded products. The SKUs could also be bought from local vendors or
manufacturers which may be termed ‘outsourced’. Further, SKUs may as well be
bought from local manufacturers or vendors or produced/made by the retailers
themselves and self-labelled known otherwise as ‘store-brand’ or ‘private labels’.
Table 3.19-a and Table 3.19-b show the central tendencies of different
kinds of SKUs of various categories. Table 3.19-c to Table 3.19-g show the
distribution of different kinds of SKUs of various categories.
a. Private Labels
The onus of managing processes such as procurement, pricing, quality etc.
of private labels rest completely on the retailers. The private labels are of great
significance to the retailers because they fetch more margins to the retailers. World
over, retail majors such Wal-Mart, Carrefour, Tesco, Trent, etc, have full range of
products in private labels. In India also, private labels are gaining wider preference
among the retailers.
As regards the type of SKUs, ‘staples’ category dominates the SKUs in

terms of private label choice by the outlets. Private Label constitutes 50-80% in the
‘staples’ category of SKUs. This is for the reason that most of the staple items were
bought from outside and branded by the outlets themselves. The margins were
quite high in the case of staples. It was also found that many an outlet tries to
maximise the proportion of staples in the total sales through discounts and
promotional offers, largely due to the high profit margins.
In case of food and non-food items, the percentage of private label was in
the range of 10 – 40%. The spread of private label in beverage category was found
to be in the range of 10 – 30%. Figure 3.5 shows the percentage of private labels
of food, non-food, staples and beverages.
78
b. Branded Products
The proportion of branded products across various categories like staples,
food and non-food, beverages, etc also explains the outlets leeway in terms of
margins, stature of the outlets and dependence on the vendors. While the outlets
dependence on the vendors is about 100% in the case of beverages, it varies from
51% to 80% with respect to staples and food products. From this, it may be
understood that given a choice, retailers prefer to promote their own brands.
c. Outsourced Products
About 10-30% of the items were outsourced in food, non-food and
beverages category and about 10-40% of the items were outsourced in staples
category.
Table 3.19-a: Different Kinds of SKU Categories – I
Food (in Percentage) Non-Food (in Percentage) Staples (in Percentage)

Statistics
Private Out Brand Private Out Private Out Brand
Branded
Label sourced ed Label sourced Label sourced ed
Mean 23.5 19.3 58.9 24.6 20.3 56.8 61.2 18.9 22.4
Median 20 20 60 20.0 20.0 60.0 60 20 20

Mode 20 20 60 20.0 20.0 60.0 60 20 20
Std.
11.1 6.9 12.5 9.9 5.8 12.2 14.2 7.6 10.3
Deviation
Skewness 1.1 2.9 -0.6 1.0 1.4 -0.4 0.1 0.8 2.6
Kurtosis 2.0 20.9 1.3 2.5 6.3 1.6 1.5 2.0 13.6
Range 50 60 73 60.0 40.0 70.0 80 50 90
Minimum 10 10 17 5.0 10.0 20.0 20 0 0
Maximum 60 70 90 65.0 50.0 90.0 100 50 90
79
Table 3.19-b: Different Kinds of SKU Categories – II
Beverages (in Percentage) Others (in Percentage)

Statistics Private Private
Outsourced Branded Outsourced Branded
Label Label
Mean 12.7 12.6 79.9 20.0 19.5 59.8
Median 10.0 10.0 80.0 20.0 20.0 60.0
Mode 10.0 10.0 80.0 20.0 20.0 60.0
Std. Deviation 5.5 6.5 12.4 6.1 3.1 9.1
Skewness 2.0 0.8 -0.4 -0.1 -1.1 -0.8
Kurtosis 5.3 1.1 1.4 0.1 6.7 5.5
Range 35.0 30.0 70.0 25.0 20.0 70.0
Minimum 5.0 0.0 30.0 5.0 10.0 20.0
Maximum 40.0 30.0 100.0 30.0 30.0 90.0
Table 3.19-c: Kinds of SKUs in Food Category
Private Labels Outsourced Branded

Percentage No. of Percentage No. of Percentage No. of Percentage
Outlets of Outlets Outlets of Outlets Outlets of Outlets
0-9 - - - - - -
10-19 34 23 29 20.6 1 1
20-29 54 36 100 70.9 2 1
30-39 47 32 10 7.1 3 2
40-49 7 5 1 0.7 6 4
50-59 2 1 - - 42 29
60-69 4 3 - - 45 31
70-79 - - 1 0.7 38 26
80-89 - - - - 7 5
90-100 - - - - 2 1
Total 148 100 141 100.0 146 100
80
Table 3.19-d: Kinds of SKUs in Non-Food Category

Percentage No. of No. of No. of
Percentage Percentage Percentage
Outlets Outlets Outlets
0-9 1 1 - - - -
10-19 18 12 17 12 - -
20-29 64 44 105 77 4 2.76
30-39 49 34 12 9 3 2.07
40-49 7 5 2 1 7 4.83
50-59 4 3 1 1 49 33.79
60-69 2 1 - - 52 35.86
70-79 - - - - 24 16.55
80-89 - - - - 4 2.76
90-100 - - - - 2 1.38
Total 145 100 137 100 145 100.0
Table 3.19-e: Kinds of SKUs in Staples

Percentage No. of No. of No. of
0-9 - - 3 2.2 1 0.7

10-19 - - 37 26.8 20 14.3
20-29 2 1 78 56.5 83 59.3
30-39 4 3 16 11.6 25 17.9
40-49 11 8 3 2.2 8 5.7
50-59 17 12 1 0.7 1 0.7
60-69 62 44 - - 1 0.7
70-79 34 24 - - - -
80-89 9 6 - - - -
90-100 1 1 - - 1 0.7
Total 140 100 138 100 140 100.0
81
Table 3.19-f: Kinds of SKUs in Beverages

0-9 3 3 8 7 - -
10-19 83 73 82 67 - -
20-29 24 21 26 21 - -
30-39 2 2 6 5 1 0.7
40-49 1 1 - - - -
50-59 - - - - 4 2.7
60-69 - - - - 6 4.1
70-79 - - - - 31 21.2
80-89 - - - - 71 48.6
90-100 - - - - 33 22.6
Total 113 100 122 100 146 100.0
Table 3.19-g: Kinds of SKUs in ‘Others’ Category

0-9 2 2 - - - -
10-19 20 16 10 8 - -
20-29 82 65 113 90 2 1.6
30-39 23 18 3 2 - -
40-49 - - - - 1 0.8
50-59 - - - - 24 18.9
60-69 - - - - 75 59.1
70-79 - - - - 21 16.5
80-89 - - - - 3 2.4
90-100 - - - - 1 0.8
Total 127 100 126 100 127 100.0
82
Figure 3.5: Private Labels
From the above data analysis, it may be inferred that the private label was
highest in staples category and lowest in the beverage category and the branded
items were highest in beverage category and lowest in staples category. The
underlying reasons may be quite evident from the kind of category of items itself. In
the case of staples, as such in India, there is not much branded items and the
customers are habituated to purchase from the traditional grocery shops. So they
are not averse to buy private labels in this category as they believe they are of
superior quality than that of traditional kirana stores. But in the case of beverages,
customers find it risky to go for private labels. That is the reason, they go for
branded products in beverages. In the food and non-food items, there is avenue for
further enhancement of private labels.
vi. Merchandise Classification
In the organised retail trade, merchandise is classified for better

management and control. Three methods are widely adopted to classify the
merchandise (Aswathappa K and Sridhar Bhat, 2010).78 They are based on
78
Aswathappa K, Sridhara Bhat K, Production and Operations Management, Himalaya
Publishing House, 2009.
83
i. Quantity of consumption (Always Better Control - ABC)
ii. Demand for inventory (Fast Moving, Slow Moving, Non-Moving – FSN)
iii. Essentiality of inventory (Very Essential, Essential, Desirable)
An organisation may use any of the above classification method or a

combination of these methods to achieve the desired objectives.
Table 3.20 shows whether classification was done by the outlets or not and
Table 3.21 shows the type of classification method practised by the outlets.
Table 3.20: Inventory Classification

Yes 138 92
Not Aware 12 8
Total 150 100
Table 3.21: Type of Inventory Classification Technique Adopted
Technique(s) No. of Outlets Percentage No. of

Technique(s) Percentage
FSN 46 30.67 Outlets
ABC 41 27.33 FSN 85 57
ABC & FSN 21 14.00 ABC 74 49
FSN & VED 8 5.33 VED 22 15
ABC, FSN & HML 8 5
6 4.00
VED Any Other 1 1
ABC & VED 6 4.00 No Answer 11 7
FSN & HML 4 2.67
HML 4 2.67
VED 2 1.33
Any Other 1 0.67
No Answer 11 7.33
Total 150 100.00
The data reveal that almost all the outlets use modern methods for effective
merchandise management. Among the three most popular methods, FSN method
was found to be more popular (57% of the outlets). However, it was also found that
84
almost all the outlets adopt a combination of the three methods depending on the
nature of SKUs and the frequency of purchase.
It can be inferred from the above analysis that FSN and ABC were the most
popular inventory classification techniques adopted by the outlets.
vii. Supply Chain Management Inventory Techniques
As regards, the management of merchandise, the ‘thumb rule’ or guiding

philosophy seems to be ‘Achieving high level of customer service with minimum
investment in inventory’. Towards this, retailers invariably strive to hit breakthrough
ideas for managing the merchandise. The two important techniques found
patronage by retailers all over the world over the years are: Vendor Managed
Inventory (VMI) and Collaborative Planning, Forecasting and Replenishment
(CPFR) (Wisner Joel D et al, 2005).79
Vendor Managed Inventory (VMI): In this method, instead of retailer

managing the stock of items in retail shelves, the supplier takes the responsibility of
managing the stock based on stock and sales information from retailer. As stock is
replenished more frequently and managed by supplier who has better information
about the sales trend of the product, the inventory in the chain is drastically cut
down.
Continuous Replenishment Programme (CRP): In this method, the

wholesaler or manufacturer replenishes a retailer regularly based on PoS data. In
CRP, inventory at the retailer is owned by the retailer.
Collaborative Planning, Forecasting and Replenishment (CPFR): In this

method, the retailer and suppliers jointly make the business plan, future forecasting
and replenishment plan for the product. Regular sharing of information helps in
better inventory replenishment decisions, lesser stock and improved customer
service.
79
Wisner Joel D, Keong Leong and Keah-Choon Tan, Principles of Supply Chain
Management: A Balanced Approach, Thomson Press, 2005.
85
The data in the Table 3.22 reveals that the VMI was adopted by about 43%
of the outlets followed by CRP (about 32% of the outlets). The CPFR technique
was not very popular among the retailers and it was preferred by only 2% of the
outlets.
Table 3.22: Supply Chain Management Inventory Techniques

VMI 64 42.7
CRP 48 32.0
CPFR 3 2.0
CRP & VMI 1 0.7
No Technique 34 22.7
Total 150 100.0
It can be inferred from the above analysis that VMI and CRP were the two
merchandise management techniques widely adopted by the sample units. Also,
the analysis show that the inventory techniques related to supply chain
management was not used by about one-fourth (23%) of the retailers. Thus, there
is a scope for adoption of these techniques.
viii. Inventory Control Techniques Adopted for SKU Categories
The inventory control models help a retailer to take two fundamental

decisions related to merchandise: i. When to order? and ii. How much to order?
Continuous Review Model – Q Model wherein the inventory is monitored

continuously and when the inventory falls below the Reorder Level (RoL), every
time a fixed quantity is purchased from the vendor. In this model, the quantity is
fixed but the time at which the order is placed varies.
P – Model – Periodic Review Model wherein the inventory is checked at

periodic intervals (e.g. once in every three days) and at the end of the interval, a
certain quantity will be purchased to take the level to the pre-determined level, the
reorder level. In this model, the time is fixed but the order quantity will vary.
86
Min – Max Model (Minimum – Maximum Batch Quantity Model): In this
model, a pre-determined minimum and maximum inventory level is defined for
each item. As soon as the stock reaches the minimum point, the ordering process
is initiated (Schroeder, 2009).
Table 3.23-a, Table 3.23-b and Figure 3.6 show the traditional inventory
control techniques adopted by the outlets for different SKU categories.
Table 3.23-a: Inventory Control Techniques – I

Food Vegetables Non-Food
Technique No. of Percent No. of Perce No. of Percent
Outlets age Outlets ntage Outlets age
Continuous Review 111 74.0 26 25.5 88 58.7
Periodic Review 29 19.3 72 70.6 28 18.7
EOQ 8 5.3 3 2.9 1 0.7
Continuous Review &
- - - - 27 18.0
MBQ method
Discount Model 2 1.3 1 1.0 6 4.0
Total 150 100 102 100 150 100
Table 3.23-b: Inventory Control Techniques – II

Staples Beverages Others
Technique No. of Percent No. of Perce No. of Percent
Outlets age Outlets ntage Outlets age
Continuous Review 90 60.0 42 28.0 81 55.5
Periodic Review 25 16.7 78 52.0 30 20.5
Continuous Review
27 18.0 26 17.3 28 19.2
& MBQ method
Discount Model 6 4.0 2 1.3 2 1.4
EOQ 2 1.3 2 1.3 1 0.7
Other 4 2.7
Total 150 100.0 150 100 146 100
87
Figure 3.6: Inventory Control Techniques adopted
The data reveal that in the case of food category, most of the retailers (74%)
followed continuous review method, where as in the case of vegetables, the
retailers followed periodic review method (71%) and continuous review method
(26%). In the case of non-food category, the continuous review method (59%) and
periodic review method (19%) were followed. Further, in the case of staples and
beverages, the continuous review and periodic review methods were used. The
reasons for adoption of different techniques for different categories of SKUs are not
trivial and needed further investigation.
The data reveal that the continuous review technique was the most widely
used technique followed by periodic review method.
ix. Shrinkage of Merchandise
Quite often, an important issue confronted by store management is reducing

inventory losses (shrinkage) due to theft, shoplifting, mistakes, inaccurate records,
and vendor errors (Levy, 2008).80 Ironically, shrinkage in the merchandise in India
80
op. cit.
88
is equivalent to 2.9 percent of retail sales and is the highest in the world (KPMG,
2009).81
Table 3.24-a shows the shrinkage as percentage of sales and Table 3.24-b
shows the central tendencies of the same. It may be seen that in more than four-
fifth of the sample outlets (82%), the shrinkage was in the range of 1-3%. And only
9% of the stores reported no loss due to shrinkage in the stores.
Table 3.24-a: Shrinkage in Outlets
Shrinkage (in No. of

Percent
Percentage) Outlets
NIL 14 9
<1 3 2
1-2 76 51
2-3 47 31
3-4 8 5
4-5 1 1
5-6 1 1
Total 150 100
Table 3.24-b: Shrinkage in Outlets (Central Tendencies)
Statistics Shrinkage
Mean 1.8
Median 1.5
Mode 1.5
Std. Deviation 0.9
Skewness 0.67
Kurtosis 3.72
Range 6.5
Minimum 0
Maximum 6.5
Shrinkage can be reduced through well-defined processes such as physical

counting of inventory, digital surveillance, electronic tags, etc. Loss prevention from
81
“Indian Retail: Time to change lanes”, KPMG, 2009.
89
shrinkage calls for coordination among different stakeholders such as vendors,
employees, management and also customers. The study corroborates the all India
average of the shrinkage.
3. TRANSPORTATION
The movement of merchandise/SKUs take place at Distribution Centres

(DC) in two stages: i. from the vendors to DCs (inbound) and ii. from the DCs to the
retail outlets (outbound). Same way, the movement of materials/SKUs take place in
two stages at the retail outlets: i. from DCs to retail outlets (inbound) and ii. from
retail outlets to the customers (outbound).
The interviews held with the managers of the outlets to find the practices in
vogue at the outlets to manage the in-bound and outbound transportation helped in
identification of the following practices.
i. In-bound Transportation
The vendors/suppliers send the SKUs to the distribution centre (DC) at their
own cost. Most often, they used the ‘direct shipment’ option. Sometimes, when the
demand from the outlets is insufficient to supply directly; the vendors supplied the
merchandise to different DCs using milk-run method.
All shipments to the outlets have taken place through DCs. Most often, the
DCs were used as ‘Cross-Docking’ facility. At a cross docking facility, inbound
trucks from suppliers are unloaded; the product is broken into smaller lots, and is
quickly loaded onto store-bound trucks. Cross-Docking is appropriate for products
with large, predictable demands and requires that DCs be setup such that
economies of scale in transportation are achieved on both the inbound and
outbound sides.
The DCs used their own trucks/mini vans to carry the SKUs to the retail
outlets in the city. In this, they used the ‘milk run’ to cover different outlets using a
truck in a single trip. By using the milk run, they are able to replenish many outlets
in a single trip and also cut down the transportation cost substantially.
90
Most often the cost of transportation was borne by the suppliers (Table
3.25). However, at times when the orders are placed by the outlets to meet the
stock-out situations and other contingencies, the transportation cost is borne by the
outlets.
Table 3.25: Secondary Transportation Cost
Borne By No. of Outlets Percentage

Suppliers 109 72.7
Outlet 23 15.3
Outlet and Suppliers 13 8.7
Regional Office 4 2.7
Regional Office and Suppliers 1 0.7
Total 150 100.0
ii. Outbound Transportation

Table 3.26 shows the mode of transport used by the outlets for home
delivery. Outlets these days use tricycles and small one tonne cargo carriers to
transport the merchandise to the customers’ homes. Home delivery is another
convenience added by many a retail outlet. When they used the motor vehicle,
they adopted milk run to cover more number of households in order to cut down the
cost. The home delivery as a practice is found to be paying rich dividends in terms
of store image, customer loyalty and goodwill compared to the transportation cost.
Table 3.26: Mode of Transport for Home Delivery
Mode No. of Outlets Percentage

Tricycle 69 46
Motor Vehicle 70 47
Both 11 7
Total 150 100.0
91
II CROSS-FUNCTIONAL DRIVERS
1. SOURCING
Sourcing is all about obtaining the merchandise at the right time, at the right
price and in the right quantity. Any retailer’s success to a large extent depends on
identification of the right sources of merchandise. In this regard, it is not only just
identifying the source of right supplier, but establishing a bond and nurturing a
long-term relationship and managing it successfully that lead to a win-win situation
for both are very important. Given the competition in the retail trade and the
pressure on the outlets to gain price advantage which could be passed on to the
customers, retailers are found to be conscious of maintaining vendor relationship.
The data was gathered about different processes involved in sourcing. The
data analysis is as follows.
a. Responsibility of Sourcing
At the retail outlets, the responsibility of indenting the requirement of
merchandise rests with the store manager. Most often, the Auto-Indent was
generated from the store to the DC or sometimes the store manager sends the
indent to the DC through retail chain’s intranet mail or phone.
Table 3.27 shows the person responsible for sourcing. Apart from the
designated person at the outlet, the DC also plays a role. The demand for different
merchandise of the outlets was aggregated at the DC and the order is placed with
the vendors.
Table 3.27: Responsibility of Sourcing

Store Manager 79 52.7
DC 64 42.7
DC & Store Manager 7 4.7
Total 150 100.0
92
b. Supplies to Outlets
The outlets received their supplies in many ways. The data analysis is
shown in the Tables 3.28-a and 28-b. Most often, the outlets (72%) received the
supplies from DCs. Also, about 42% of the outlets received their supplies from
wholesalers and other outlets (37%) received the merchandise directly from the
manufacturers.
Table 3.28-a: Outlets and Suppliers – I
Supplier No. of Outlets Percentage

DC 108 72
Wholesalers 63 42
Manufacturer 55 37
Mandi 22 15
Govt. Market 5 3
Table 3.28-b: Outlets and Suppliers – II

No. of
Supplier Percentage
Outlets
DC 51 34.0
DC and Manufacturer 24 16.0
Wholesalers 23 15.3
DC, Manufacturer and Wholesalers 14 9.3
DC and Wholesalers 8 5.3
Mandi and Wholesalers 8 5.3
Manufacturer 5 3.3
DC, Mandi, Manufacturer and Wholesalers 3 2.0
DC, Govt. Mg. Market, Mandi and Manufacturer 2 1.3
DC and Mandi 2 1.3
DC, Mandi and Manufacturer 2 1.3
Mandi, Manufacturer and Wholesalers 2 1.3
DC, Govt. Managed Market and Manufacturer 1 0.7
DC, Mandi and Wholesalers 1 0.7
Govt. Managed Market, Mandi and Wholesalers 1 0.7
Govt. Managed Market and Wholesalers 1 0.7
Mandi and Manufacturer 1 0.7
Manufacturer and Wholesalers 1 0.7
Total 150 100.0
93
ii. Lead Time between the Order and Delivery of SKUs
Lead time between the order and delivery of SKUs is one of the factors that
determine the cycle inventory. Cycle inventory is the average inventory required to
satisfy demand between two successive receipts of supplier shipments. Lead time
depends on the economic quantity the outlets buy, the supplier’s ability to meet the
demand, cost of transportation etc (Stevenson, Williams, 2010).82
Tables 3.29-a, 29-b, 29-c and Figure 3.7 show the replenishment time for
different SKU categories. The replenishment time was about one day in the case of
vegetables; in the case of food items, 3 days; 1-3 days for non-food and staples
while it is 1-4 days for beverages.
It may be seen that the lead time between the order and the delivery of
different SKUs was not too high. But at the same time, in the case of beverages,
the lead time needs to be brought down.
Table 3.29-a: Lead time between Order and Delivery

(Food, Vegetables and Non-Food)
Lead Food Vegetables Non-Food

Time
No. of No. of No. of
(in Percentage Percentage Percentage
Days)
0.5 27 18 44 30 4 3
1 80 53 87 60 21 14
2 30 20 13 9 88 59
3 13 9 1 1 35 23
4 - - - - 2 1
5 - - - - - -
6 - - - - - -
Total 150 100 145 100 150 100
82
Stevenson, J William, Operations Management, McGraw Hill Irwin, 9th Edition, 2009.
94
Table 3.29-b: Lead Time between Order and Delivery
(Staples, Beverages and ‘Others’ )
Lead Staples Beverage Others

Time
(in No. of No. of No. of
Days) Outlets Outlets Outlets
0.5 2 1 2 1 2 1.45
1 25 17 21 14 15 10.87
2 68 45 49 33 80 57.97
3 53 35 55 37 38 27.54
4 1 1 18 12 2 1.45
5 - - 3 2 1 0.72
6 1 1 2 1 - 0
Total 150 100 150 100 138 100
Figure 3.7: Lead Time – Time between the Order and Delivery
95
Table 3.29-c: Lead Time between Order and Delivery of
SKUs – Central Tendencies
Food Vegetables Non-Food Staples Beverage Other

Mean 1.3 1.0 2.1 2.2 2.6 2.2
Median 1.0 1.0 2.0 2.0 3,0 2.0
Mode 1.0 1.0 2,0 2.0 3.0 2.0
S.D. 0.7 0.4 0.7 0.8 1.1 0.7
Skewness 1.1 1.6 0.0 0.4 0.5 0.4
Kurtosis 0.4 3.8 0.1 2.1 0.6 1.3
Range 2.5 2.5 3.5 5.5 5.5 4.5
Minimum 0.5 0.5 0.5 0.5 0.5 0.5
Maximum 3.0 3.0 4.0 6.0 6.0 5.0
iii. Mode of Payment to the Suppliers
Mode of payments affects the liquidity of the firm and in turn the working
capital needs. There are three options available for the outlets: i. Payment on
delivery ii. Credit and iii. Advance payment.
The data shown in the Table 3.30-a reveal that half of the outlets made
credit payment and about a quarter of the outlets (25%) made both cash on
delivery and credit payment. Cash on delivery was the mode of payment for about
one-fifth (16%) of the outlets, one percent of the outlets made advance payment,
about 3% of the outlets used all the three options for payment. Further, regional
offices made the payment in the case of about 6% of the outlets. There was a wide
variation in the mode of payment of the outlets for the reason that in the case of
corporate retail chains, the payment was done by the regional offices or on credit
and in the case of standalone outlets, the payment was either cash on delivery or
on advance payment.
It could be seen from table 3.30-b that the credit payment period for half of
the outlets was 15 days and in the case of another 50% of the outlets, it was a
month. The credit period is usually decided between the outlet and a supplier at the
time of supplier contract agreement. This depended on the outlet’s purchase
96
quantity of the product, order frequency, product type, unit price and supplier and
outlet’s negotiation skills.
Table 3.30-a: Mode of Payment

Credit 75 50
Credit and Cash on Delivery 36 24
Cash on Delivery 24 16
Regional Office 9 6
Advance, Credit and cash on Delivery 4 3
Advance 2 1
Total 150 100
Table 3.30-b: Credit Period

<15 Days 72 51
15-30 Days 70 49
Total 142 100
From the above analysis, it is known that the outlets used the option of
buying on credit and sometimes they bought the merchandise on cash also.
iv. Number of Suppliers
Vendor management is an important activity in the procurement of

merchandise. Modern management practices emphasize on supplier integration
with the organisation. The number of suppliers of an outlet increases the flexibility
in procurement in terms of quantity and cost of purchase. At the same time, this
may result in complexity of managing many vendors. So the supply chain
management calls for optimum number of suppliers for each category of items.
Table 3.31-a, 31-b and 31-c show the number of vendors for different SKU
categories. The data show that the number of suppliers of food and staples
category was in the range of 6–15; for non-food the number of suppliers was in the
97
range of 6–20; for vegetables the number of suppliers was in the range of 1–10
and for beverages the number was in the range of 6-15.
The number of vendors was minimum for vegetables and maximum for food
and non-food items. The variation in the number of vendors for different product
categories may be attributed to the number of items, quantity, uncertainty in
demand and the cost involved.
Table 3.31-a: Number of Suppliers for Different SKU Categories

(Central Tendencies)

Mean 15.9 7.5 15.1 14.4 7.3 10.9
Median 12 7 11.5 10 6 10
Mode 10 5 10 10 5 10
Std.
10.8 3.8 12.4 13.0 6.0 4.8
Deviation
Skewness 2.0 1.4 3.2 3.6 4.4 1.8
Kurtosis 4.1 2.4 11.8 16.0 21.7 5.7
Range 57 19 76 87 38 33
Minimum 3 1 4 3 2 2
Maximum 60 20 80 90 40 35
Table 3.31-b: Number of Suppliers for Different SKU Categories – I
Food Non-Food Staples Others

No. of
Suppliers No. of Perce No. of Perce No. of Perce No. of Percen
Outlets ntage Outlets ntage Outlets ntage Outlets tage
1-5 5 3.3 8 5.3 13 9 12 8
6-10 50 33.3 64 42.7 77 52 91 64
11-15 63 42.0 44 29.3 27 18 24 17
16-20 8 5.3 15 10.0 10 7 12 8
21-25 3 2.0 4 2.7 5 3 1 1
26-30 5 3.3 7 4.7 9 6 1 1
31-35 4 2.7 - 0.0 1 1 1 1
36-40 7 4.7 1 0.7 1 1 - -
>40 5 3.3 7 4.7 5 3 - -
Total 150 100.0 150 100 148 100 142 100
98
Table 3.31-c: Number of Suppliers for Different
SKU Categories – II
Vegetables Beverages
No. of
Suppliers No. of No. of
Outlets Outlets
1-5 53 36.8 12 8.45
6-10 77 53.5 91 64.08
11-15 8 5.6 24 16.90
16-20 6 4.2 12 8.45
>20 - - 3 2.11
Total 144 100.0 142 100.0
Figure 3.8: Number of Suppliers
v. Vendor Rating / Supplier Assessment
Vendor Rating/Supplier Assessment is an integral part of sourcing in supply

chain management. The rating/assessment ensures that vendors supply the
merchandise at right time, right quantity and right quality. In the event of deviation,
it signals the measures to correct them. Table 3.32 shows the number of outlets
who have undertaken vendor rating.
99
The data show that only about 42% of the outlets assessed their vendors or
aware of vendor assessment as a valuable tool. Therefore, there is a need for
realisation and adoption of vendor rating periodically by many outlets. A thorough
understanding of the concept of vendor rating helps the outlets to properly manage
the relationship with the vendors.
Table 3.32: Vendor Rating Policy

Yes 63 42
No 87 58
Total 150 100
vi. Suppliers’ Replenishment Policy

The data (Table 3.33) show that the outlets are satisfied with the
replenishment policy of the suppliers.
Table 3.33: Satisfaction Level about the Suppliers’ Replenishment Policy

Satisfied 131 87
Neither Satisfied
7 5
Nor dissatisfied
Total 150 100
If there is a problem with the merchandise supplied by the vendors, the

outlets/DCs return the items to the suppliers. The merchandise return policy keeps
the vendors on toes and the supply of items as per the parameters (such as
quantity, quality etc) and in accordance with the terms of agreement/contract.
Table 3.34 depicts whether the outlets had documented merchandise policy
with the suppliers. The data show that about 64% of the outlets had documented
merchandise return policy and others do not.
100
Table 3.34: Merchandise Returning Policy (Suppliers)

Yes 96 64
No 54 36
Total 150 100
vii. Pricing Strategy
Pricing is one of the most important variables in retail trade. It is also the
easiest and quickest variable to change. Retailers need to make the correct
decisions related to the procurement price of the merchandise and services they
offer to the customers, as it lends competitive advantage to the outlet.
In a price conscious market, the customers always look at and compare the
product prices between different outlets. Therefore, if the stores gain price
advantage in procurement, the same could be passed on to the customers. In fact,
it is a tight rope walking. All said and done, in a developing nation, where markets
are evolving, price tends to be an important weapon in the hands of retail outlets.
Errors in judgement and failure in the price front would cost the outlet dearly!
From the customers’ perspective, price is a dominant factor which influences

the choice of the store, among others. Thus, price as a variable can make or mar
business. As too high price deters the customers while too low prices may connote
poor quality. More so, in product categories where in the absence of high product
knowledge, a strong association between price and quality is perceived by an
average customer. Therefore, it is essential for the retailer to know the implications
of its pricing decisions (Newman, 2007).83
There are many price strategies followed by the retailers. The most
important strategies adopted recently are Every Day Low Pricing (EDLP) and
High–Low Pricing.
83
op. cit.
101
Table 3.35-a and Table 3.35-b capture the pricing strategies adopted by the
outlets. The data shows that most of the outlets used EDLP (52%) and Hi-Low
Pricing (39%). It is evident that many outlets are adept in adopting right pricing
strategies.
Table 3.35-a: Pricing Strategy at the Outlets – I
Strategy No. of Outlets Percentage

EDLP 78 52
Hi-Low Pricing 58 39
Leader Pricing 9 6
Bait Pricing 7 5
Multiple Unit Pricing 5 3
Price Lining 1 1
Table 3.35-b: Pricing Strategy at the Outlets – II
Strategy No. of Outlets Percentage

EDLP 60 42.9
High-Low Pricing 46 32.9
EDLP and High-Low Pricing 8 5.7
Bait Pricing and EDLP 5 3.6
Leader Pricing 5 3.6
Multiple Unit Pricing 3 2.1
EDLP and Leader Pricing 2 1.4
High-Low Pricing and Other 1 0.7
Bait Pricing, EDLP and Leader Pricing 1 0.7
Bait Pricing and High-Low Pricing 1 0.7
EDLP, High-Low Pricing and Leader
1 0.7
Pricing
EDLP and Multiple Unit Pricing 1 0.7
High-Low Pricing and Multiple Unit
1 0.7
Pricing
Any Other 5 3.6
Total 140 100.0
102
An important incentive to attract the customers to the outlets of late is to
offer discount on the MRP of the items so that the customers buy more and visit
regularly to the outlets.
Table 3.36 depicts the price at which the outlets sell the products to the
customers. The data show that about 56% of the outlets did not give any discount
on MRP and the discount given by other retailers were also in the range of 2 – 5%.
From this, it appears that many a retail outlet does not believe in price discounts.
They seem to be more keen on explaining the non-price factors rather to draw the
customers.
Table 3.36: Selling Price of the SKUs

Same as MRP 84 56.0
2% Less than MRP 47 31.3
5% Less than MRP 17 11.3
Any other 2 1.3
Total 150 100.0
2. Information
Information is a key supply chain driver as it provides the glue that allows
the other supply chain drivers to work in tandem with the goal of creating an
integrated, coordinated supply chain. Information is critical to supply chain
performance because it provides the foundation on which supply chain processes,
execute transactions and manage decisions. In the absence of accurate and
reliable information, the store management may find it difficult to take right
decisions and formulate competitive strategies with respect to customers choice of
products, inventory levels, product mix, etc (Rajesh Ray, 2010).
i. Bar Coding of SKUs and PoS

Bar coding is a technology widely popular in retail industry. It helps in quick
and automatic data collection. Once the bar code is scanned while receiving at
store, inventory is automatically updated. When bar code is scanned at the time of
103
billing at PoS counter, store stock gets reduced and in some cases, it can
automatically trigger replenishment order (Rajesh Ray, 2010).
The data (Table 3.37) show that all the outlets had PoS terminals and all the
SKUs were bar-coded. Though in all the outlets, source data automation was
ensured, the inventory management software was interfaced with PoS which help
in automatic ordering of SKUs etc in only 71% of the outlets.
It was found in the personal interviews with the store managers that plans
are afoot to migrate from software such as JD Edwards to SAP SCM or Oracle
Apps with ERP integration. This automatically integrates all the processes including
the automatic indent.
Table 3.37: Outlets with PoS and Inventory Management

Software Interface

Yes 106 71
No 44 29
Total 150 100
ii. Major Application Areas of Computers
Computers/information systems can be employed in almost all areas of

retailing. The major application areas of computers in the outlets is shown in the
Table 3.38-a and Table 3.38-b. Accounting and inventory management are the
important areas where the computer applications are widely used. The other areas
include customer relationship management, merchandise purchases and order
management. It is heartening to note that close to two-third (63%) of the sample
outlets make intensive use of the computers and modern information management
systems (Table 3.39).
104
Table 3.38-a: Major Application Areas of Computers – I
Application Area No. of Outlets Percentage

Accounting 137 91
Inventory 128 85
Customer Relationship Mgt. 79 53
Merchandise Purchase 76 51
Order Mgt 73 49
Finance 47 31
Supplier Mgt 39 26
Other Applications 4 3
Table 3.38-b: Major Application Areas of Computers – II
No. of Percentage
Application Area
Outlets
Accounting, CRM, Finance, Inventory, Order Mgt,
18 12.0
Purchasing and Supplier Mgt
Accounting, Inventory and Purchasing 17 11.3
Accounting and Inventory 13 8.7
Accounting, CRM, Inventory and Order Mgt 12 8.0
Accounting, Finance, Inventory and Purchasing 9 6.0
Accounting, Inventory and Order Mgt 8 5.3
Accounting, CRM, Finance and Inventory 6 4.0
Accounting, CRM, Inventory, Order Mgt, Purchasing
6 4.0
and Supplier Mgt
Accounting, CRM, Inventory, Order Mgt and
5 3.3
Supplier Mgt
Accounting, CRM, Inventory and Purchasing 5 3.3
Accounting and Order Mgt 5 3.3
Accounting, CRM and Order Mgt 4 2.7
Accounting, CRM, Finance, Inventory and
3 2
Purchasing
Accounting, CRM and Inventory 3 2
Accounting and Purchasing 3 2
Inventory 3 2
Other Applications 30 20
Total 150 100
105
Table 3.39: Software Integration among Different Modules
Yes 95 63
No 55 37
Total 150 100
iii. Benefits of using Computers

Benefits that accrue to an outlet by using computers/information system are
manifold. The respondents were asked about the major benefits of using
computers in the outlets. The data analysis using weighted scores (Table 3.40 and
Figure 3.9) reveal that ‘timely availability of the information’ was the first major
benefit accrued followed by ‘reduced inventory’, ‘accurate costing’ and ‘reduced
lead time in procurement’ in that order.
It may be inferred from the data that the outlets benefited quite a lot by using
the computers and the outlets were satisfied with the usage of computers (Table
3.41). Furthermore, they agreed that there is more scope for improvement in the
software being used (Table 3.42).
Table 3.40: Benefits of Usage of Computers

S. Wt.
Benefits 1 2 3 4 5 6 7 8 Rank
No. Scores
Timely
1 Availability of 61 23 28 31 5 1 1 0 997 I
information
Reduced lead-
2 time in 4 45 23 37 34 5 2 0 825 IV
procurement
3 Cost saving 19 24 23 14 45 4 12 9 753 V
Reduced
4 29 15 43 19 35 7 2 0 855 II
inventory level
More accurate
5 29 27 22 33 13 14 8 3 831 III
costing
Increased
6 Coordination 5 4 6 12 4 90 22 7 501 VI
with suppliers
Increased
7 Coordination 3 8 5 3 12 11 96 12 410 VII
with customers
8 Increased Sales - 4 1 - - 19 7 119 224 VIII
106
Table 3.41: Satisfaction Level of the Software Used

Satisfied 129 86
Neither Satisfied
18 12
Nor Dissatisfied
Total 150 100
Figure 3.9: Benefits of the Usage of Computers
107
Table 3.42: Scope for Computer Software Improvement

Yes 123 82
No 27 18
Total 150 100
The emergence of supply chain management has broadened the scope for
effective decision making across the whole range of retail trade activities, from
optimising the performance across the divisions, to the enterprise, and to the entire
supply chain. This broadening of scope emphasizes the importance of including all
the processes along the supply chain when making decisions (Sunil Chopra,
2010).84
Form an enterprise’s perspective, all the processes within its supply chain
can be categorised into three areas namely Customer Relationship Management
(CRM), Internal Supply Chain Management (ISCM) and Supplier Relationship
Management (SRM). SRM as part of sourcing the merchandise has already been
examined in the earlier sections of this chapter, analysis pertaining to other two
processes namely CRM and ISCM are discussed in this section.
PROCESS – I
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
There are two kinds of customers, namely external customers and internal
customers in the retail trade. The external customers refer to the customers who
create business for the outlets and the internal customers are the employees on
whom the business depends to deliver the goods. For effective functioning of the
outlets, the needs and aspirations of both the customers have to be fulfilled.
84
op. cit.
108
i. External Customers
“The secret of successful retailing is to give the customers what they want.
And really, if retailer think about it, customers need everything: a wide assortment
of good quality merchandise; the lowest possible prices; guarantee knowledgeable
service; convenient hours; free parking; a pleasant shopping experience” – Sam
Walton, founder, Wal-Mart.85
Customer Relationship Management (CRM) is about building relationships

to turn customers into advocates, so that their decision to stay with a firm becomes
more ‘automatic’, they buy more and spend more, and they tell their friends and
colleagues about the firm’s products and services too (Knox, Simon, 2009).86 CRM
is the process of carefully managing detailed information about individual
customers and all customer ‘touch points’ to maximize customers loyalty. A
customer touch point is any occasion on which a customer encounters the brand
and product – from actual experience to personal or mass communications to
casual observation (Kotler et al., 2009).87
CRM has impacted several areas of retail trade like customer support,
campaign management, returns management, managing customers loyalty etc.
Successful customer relationship management contribute for better returns by
means of increased loyalty, increased customer awareness of products, better
word of mouth, increased customer to customer referrals, decrease in service costs
and better inventory management (Rajesh Ray, 2010).88
The data related to the external customers is presented in the following

pages.
85
Sam Walton with John Huey, Made in America My Story, Bantam Books, 1993.
86
Knox, Simon, et al., Customer Relationship Management Perspectives from the Market
Place, Butterworth-Heinemann, 2009, p51.
87
Kotler, Philip et al., “Marketing Management A South Asian Perspective”, Pearson
Education, 13th Edition, 2009.
88
op. cit.
109
Customer Profile
In order to serve the customers better, an outlet need to know the customers
in terms of their age, the time they spend in the outlets, whether they are regular or
occasional buyers and whether they come in group for shopping or alone. The
customer database if maintained properly provides lot of information about the
customers which could be used by the outlet. A strong database helps the outlet to
understand the customers better. This will have a direct impact on the sales of an
outlet.
a. Outlet-wise Customers
Table 3.43-a and Table 3.43-b depict the customer base of the outlets. The
data show that barring 3% of the outlets, customer base are varying in number,
that is, from 1,000 – 3,500. Further, close to half of the sample outlets (45%) have
a customer base of 1,500 to 2,000 and in the case of another one-quarter (25%) of
the outlets, the number of customers is 2,000 – 2,500. It could also be noted that
about 3% of the outlets in the sample have a huge customer base of more than
3,500.
Table 3.43-a: Number of Customers Table 3.43-b: Central Tendencies -

Number of Customers for Outlets
No. of Overall No. of
Percentage Overall number
Customers Outlets
of Customers
1,000 – 1,500 15 10 for an Outlet
1,500 – 2,000 68 45 Mean 1,940
2,000 – 2,500 38 25 Median 1,800
2,500 – 3,000 12 8 Mode 2,000
Std. Deviation 589
3,000 – 3,500 14 9
Range 4,000
3,500 – 4,000 1 1 Minimum 1,000
4,000 – 4,500 1 1 Maximum 5,000
4,500 – 5,000 0 0
5,000 – 5,500 1 1 Source: Field Survey.
Total 150 100
110
b. Number of Footfalls at an Outlet per Day
An organised outlet’s business depends on the number of footfalls per day.
It could be seen from the data (Table 3.44-a and Table 3.44-b) that an
overwhelming majority of the outlets (89%) registered 100-250 footfalls per day. In
other words, 100-250 customers visit the stores per day. In about 35% of the
outlets each, the footfalls were 100-150 and 150-200 respectively. Of course, there
were also outlets, though the number is small (about 11%), where more than 250
customers visited a day.
Table 3.44-a: Number of Footfalls per day Table 3.44-b: Footfalls per day –
Central Tendencies
No. of Footfalls No. of outlets Percent
101-150 53 35 Mean 184
151-200 52 35 Median 175
201-250 29 19 Mode 125
251-300 7 5 Std. Deviation 68
301-350 5 3 Range 425
351-400 1 1 Minimum 125
400-450 2 1 Maximum 550
500-600 1 1
Total 150 100 Source: Field Survey.
c. Age of the Customers
Customers across different age group come to outlets for their purchases.
Knowledge of age-wise distribution of customers helps the outlets in serving them
better, as common purchase behaviour is influenced by the age with respect to
many product categories.
Table 3.45-a, Table 3.45-b and Figure 3.10 show the data regarding the
age of customers of the retail outlets are spread across all age groups, varying
from 10 years to above 60 years of age. The data shows that there are customers
in the age group of 11-20 as well as above 60 years. As such, the outlets have the
stupendous task of meeting varied needs of the customers.
However, the customers in the age group of 21-40 constitute the major
proportion of the outlets. Customers in this age group are modern, well exposed,
111
like to spend, disparate and willing to experiment. The retail outlets need to induce
the customers in the age group, by offering wide variety of merchandise category
and a better shopping experience. At the same time, customers in the age group of
41-50 that constitute the next major group need also be targeted.
Table 3.45-a: Age Group of the Customers and the

Number of Outlets
Age No. of Outlets (Percentage of the customers in the Age Group)

Total
Group 1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45
Upto 10 74 3 - - - - - - - 77
11 – 20 16 63 29 19 13 10 - - - 150
21 – 30 - - 7 21 92 23 3 2 2 150
31 – 40 - - 2 17 52 62 14 2 1 150
41 – 50 - 9 18 14 84 23 - 1 - 149
51 – 60 15 26 13 20 69 5 - - - 148
> 60 37 31 24 46 2 - - - - 140
Table 3.45-b: Age Group of the Customers and the

Percentage of Outlets
Percentage of Outlets (Percentage of the customers in the

Age Age Group) Total
Group
1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45
Upto 10 49 2 - - - - - - - 51
11 – 20 11 42 19 13 9 7 - - - 100
21 – 30 - - 5 14 61 15 2 1 1 100
31 – 40 - - 1 11 35 41 9 1 1 100
41 – 50 - 6 12 9 56 15 - 1 - 99
51 – 60 10 17 9 13 46 3 - - - 99
> 60 25 21 16 31 1 - - - - 93
112
Figure 3.10: Customers in Different Age Group
d. Regular and Occasional Customers
Creating loyal customers is at the heart of retailing. Customer Perceived

Value (CPV) is the difference between the prospective customer’s evaluation of all
the benefits and all the costs of an offering and the perceived alternatives. Total
customer benefit is the perceived monetary value of the bundle of economic,
functional, and psychological benefits customers expect from a given market
offering because of the product, service, personnel, and image involved. Total
customer cost is the perceived bundle of cost customers expect to incur in
evaluating, obtaining, using, and disposing of the given market offering, including
monetary, time, energy and psychological costs (Kotler et al., 2009). 89
Thus, value is what the customer gets from the product (service, experience,
or idea) versus what he/she gives up. What customers typically give up is money.
However, there are situations where the customer also gives up time (searching for
products and/or waiting in line). The two key benefits of providing high customer
value are i. repeat sales and ii. favourable word of mouth. Hence, providing
customer value can lead to relationships that maximize returns to a company.
89
op. cit.
113
There are customers who come to the F&G outlets regularly for their
purchases. There are also customers who come to the outlets occasionally. An
outlet has to satisfy all kind of customers. While concentrating on the regular
customers who bring the business regularly, they cannot ignore the occasional
customers because there is a chance that they may become regular customers in
course of time based on the market information about the stores performance and
standing with respect to merchandise price, quality and service.
Table 3.46-a, Table 3.46-b and Figure 3.11 capture the percentage of
regular and occasional customers at the outlets. Table 3.46-c shows the central
tendencies of the regular and occasional customers. About 73% of the outlets had
regular customers in the range of 46 – 75% with a mean of 58%. Of which, nearly
60% of the outlets reported regular customers was in the range of 46 – 60% and in
another one-fifth (18%) of the outlets, regular customers was in the range of 61-
75%.
Regarding the occasional customers, about one-fourth of the outlets

reported that the customers were in the range of 11-15%. Further, it may be seen
that two-fifth of the outlets (36%) had occasional customers in the range of 31-45%
and another one-third (31%) of the outlets reported occasional customers in the
range of 46-60%.
Table 3.46-a: Regular Customers and Outlets
Customers in No. of
Percentage
Percentage Outlets
1-15 0 0
16-30 5 3
31-45 18 12
46-60 85 57
61-75 27 18
76-90 15 10
Total 150 100
114
Table 3.46-b: Occasional Customers and Outlets
Customers in No. of
Percentage
Percentage Outlets
1-15 2 1.33
16-30 39 26.00
31-45 54 36.00
46-60 47 31.33
61-75 8 5.33
Total 150 100.00
Table 3.46-c: Central Tendencies of Regular and

Occasional Buyers
Percentage of
Customers
Regular Occasional
Mean 58 42
Median 60 40
Mode 60 40
Std. Deviation 13 13
Range 65 65
Minimum 25 10
Maximum 90 75
The outlets have to focus on regular customers by giving discount,

personalised help/service and customer loyalty programmes to ensure more
business as well as they take steps to convert the occasional buyers to regular
buyers. This would help the outlets to do ‘repeat sales’ and also the customers
spread ‘favourable word of mouth’ to others.
115
Figure 3.11: Customer Types
ii. Buying Behaviour of Customers in Group
Shopping is an experience. When people are in group, they behave

differently. That is true in case of shopping also. Customers visit the stores for
shopping with family, friends or alone. The time spent and the purchases made
may depend on whether they come alone, with friends or with family. To
understand the inter-relationship, the data was gathered on these parameters.
Customers Visit with Family

It was found that the customers who visited with their families were in the
range of 31 – 60%, about 90% of the outlets reported. More so, about two-fifth
(40%) of the outlets reported that the group was in the range of 31-40% and in
about 30% of the outlets, the group was in the range of 41-50% and in the case of
another one-fifth (21%) of the outlets, the percentage was 51-60%.
The customers who visited with their families spent about 11-20 minutes in
about one-fourth (24%) of the outlets, and in another 30% of the outlets, the time
spent was 21-30 minutes. It could also be noted that in about one-third (34%) of
the outlets, the time spent by the group was 31-40 minutes.
116
In about one-half (47%) of the outlets, the customers who visited with their
families made purchases worth about Rs. 750-1,000 and in another one-fifth (18%)
of the outlets, the customers purchased merchandise worth Rs. 1,001 – 1,250.
Interestingly, in about 12% of the outlets, purchases made was more than Rs.
1,250/-. On an average, there were about 47% regular customers, spent about 45
minutes and made purchases worth Rs. 950. Naturally, when customers visit with
family, they spend more time and purchase more. Hence, the outlets need to
indulge them to buy more by offering better shopping experience and individual
attention. Table 3.47-a to 3.47-d show the data pertaining to the customers visit
with family.
Table 3.47-a: Profile of Customers Visit with Family
– Central Tendencies
Percentage of Purchases
Time Spent
total customers (in Rs.)
Mean 47 44 932
Median 45 45 900
Mode 40 53 1,000
Std.
10 15 344
Deviation
Range 55 100 1,800
Minimum 20 13 200
Maximum 75 113 2,000
Table 3.47-b: Percentage of Customers Visit with Family
Percentage of No. of Percentage

total customers Outlets
1-10 0 0.00
11-20 2 1.33
21-30 10 6.67
31-40 60 40.00
41-50 43 28.67
51-60 31 20.67
61-70 3 2.00
71-80 1 0.67
Total 150 100.00
117
Table 3.47-c: Time Spent by the Customers Visit with Family
Time (in No. of

Percentage
Minutes) Outlets
1-20 14 9
21-40 48 32
41-60 85 57
61-80 3 2
Total 150 100
Table 3.47-d: Purchases (in Rs.) Made by Customers Visit with Family
Purchases No. of Percentage

(in Rs.) Outlets
1 – 250 2 1
251 – 500 25 17
501 – 750 7 5
751 – 1,000 71 47
1,001 – 1,250 27 18
1,251 – 1,500 14 9
1,501 – 1,750 1 1
1,751 – 2,000 3 2
Total 150 100
Customers Visit with Friends

About one-half (49%) of the outlets reported that the customers who visited
the outlets with their friends were in the range of 11 – 20% and in another two-
fourth (40%) of the outlets, the customers were in the range was 21-30%.
Regarding the time spent by the customers, in about one-fourth (24%) of the
outlets, the customers spent about 11-20 minutes, in another 30% of the outlets,
the time spent was 21-30 minutes. Further, in the case of one-third (34%) of the
outlets, the time spent was 31-40 minutes.
118
The data about the purchases made by the customers who visited with their
friends reveal that in about 30% of the outlets they made purchases worth Rs. 251
– 500 and in another one-third of the outlets, the customers made purchases worth
Rs. 501 – 750. Further, in case of about 30% of the outlets the purchases made
wasa about 751-1,000. Table 3.48-a to 48-d depict the data pertaining to the
customers coming with friends. On an average there were about 25% customers
who visited with friends, spend about 30 minutes and purchased merchandise
worth Rs. 600/-. When customers visit with friends, they may buy not only for them,
but also for the family. So, there is a wide variation in the time they spend and
amount of purchases also vary.
Table 3.48-a: Profile of Customers Visit with Friends
Percentage of Time Spent Purchases

total customers (in Minutes) (in Rs.)
Mean 25 28 609
Median 20 30 638
Mode 20 30 800
Std. Deviation 8 10 227
Range 50 37 950
Minimum 10 8 150
Maximum 60 45 1100
Table 3.48-b: Percentage of Customers Visit with Friends
Percentage of total No. of

Percentage
customers Outlets
1-10 4 2.67
11-20 73 48.67
21-30 60 40.00
31-40 10 6.67
41-50 1 0.67
51-60 2 1.33
Total 150 100.00
119
Table 3.48-c: Time Spent by the Customers Visit with Friends
Time (in No. of

Percentage
Minutes) Outlets
1-10 12 8
11-20 36 24
21-30 43 29
31-40 51 34
41-50 8 5
Total 150 100
Table 3.48-d: Purchases (in Rs.) made by Customers Visit with Friends
Purchase No. of
Percentage
(in Rs.) Outlets
1 - 250 12 8.00
251 - 500 45 30.00
501 - 750 49 32.67
751 – 1,000 43 28.67
1,001 – 1,250 1 0.67
Total 150 100.00
Customers Visit Alone

About one-fourth (23%) of the outlets reported that the customers who
visited alone was in the range of 11-20% and in another two-fifth (43%) of the
outlets, the customers was 21-30%. Further, in about one-fourth (23%) of the
outlets, the group constituted 31-40%. They data about the time spent by the
customers show that in about 28% of the outlets, the customers spent about 11–20
minutes and in another two-fifth (39%) of the outlets, the customers spent about
21–30 minutes.
With respect to the purchases made by the customers who visited alone,
about one-third of the outlets reported that the customers bought merchandise for
120
less than Rs. 250/- and in another one-fourth (24%) of the outlets, the customers
made purchases in the range of Rs. 251–500. Further, in about one-third (33%) of
the outlets, the customers purchases was Rs. 501-750. Table 3.49-a to 49-d
present the data pertaining to the customers coming alone. On an average there
were about 30% customers who visited alone, spent about 20 minutes and
purchased merchandise worth Rs. 450. Figure 3.12 depicts the customers in group
visited the retail outlets.
The data further shows that the percentage of customers who visit alone or
who visit with his friends are less compared to customers who visit with family.
When customers visit with family, they spend more time and made more
purchases. As such the outlets need to have an irresistible ambience for the family
members to shop around. The outlet needs to provide a pleasant shopping
experience, which may trigger impulsive buying. An onlooker or passer by could be
made to step in the outlet, a window shopper could end up in buying and an
occasional visitor needs to be transformed into a regular customer. At the same
time, when a customer visits with friends or when he/she visits alone, he/she might
be buying for him/her or might be for his/her family. Hence the time spent and the
volume of purchases varies widely.
Table 3.49-a: Profile of Customers Visit Alone
Percentage of total Time Spent Purchase

customers (in Minutes) (in Rs.)
Mean 29 21 463
Median 30 23 500
Mode 30 30 200
Std. Deviation 10 9 239
Range 55 37 900
Minimum 5 3 100
Maximum 60 40 1000
121
Table 3.49-b: Percentage of Customers Visit Alone
Percentage of No. of
Percentage
total customers Outlets
1-10 11 7
11-20 34 23
21-30 65 43
31-40 34 23
41-50 4 3
51-60 2 1
Total 150 100
Table 3.49-c: Time Spent by the Customers Visit Alone
Time (in No. of

Percentage
Minutes) Outlets
1-10 31 21
11-20 42 28
21-30 59 39
31-40 18 12
Total 150 100
122
Table 3.49-d: Purchases (in Rs.) Made by Customers Visit Alone
Purchase No. of
Percentage
(in Rs.) Outlets
1 – 250 48 32
251 – 500 36 24
501 – 750 50 33
751 – 1,000 16 11
Total 150 100
Figure 3.12: Customers in Group
123
iii. Customer Contact
In the organised retail, it is important for the outlets to keep in contact with
the customers. This will help the outlets to keep the customers informed of the
seasonal offers, promotional initiatives and the new arrivals in order to induce them
visit the outlets.
Table 3.50-a to 50-e present the data pertaining to the customer contact. It
has been found that most of the outlets (91%) maintained a well structured
database of regular customers. About 60% of the outlets are found to have formal
methods to contact the customers at least once a month. The outlets use phone or
send SMS to keep in touch with the customers. Some outlets send seasonal
greetings on the occasion of festivals and New Year. Some even greet the
customers on the eve of their birthdays and wedding days. Most of the outlets take
feedback from the customers. About 58% of the outlets take the feedback monthly
once and another 35% of the outlets take the feedback from the customers
occasionally.
Even though outlets had the database about the regular customers, they
were not found to be serious enough about contacting them regularly. It is high
time they initiate right measures to keep the customers informed about new
arrivals, discount schemes and customer loyalty programmes periodically. This will
help them connect with the customers. They need to take the feedback regularly
and act on them. All these initiatives lead to the satisfaction of the customers and
retaining them eventually.
Table 3.50-a: Customer Database with the Outlets

Yes 136 91
No 14 9
Total 150 100
124
Table 3.50-b: Frequency of Contact with the Customers
Frequency No. of Outlets Percentage

Monthly Once 87 59.6
Very Rarely 48 32.9
Quarterly 5 3.4
Birthday Wishes 5 3.4
Half Yearly 1 0.7
Total 146 100.0
Table 3.50-c: Measures to Keep in Contact with the Customers
No. of Percentage No. of Percent

Outlets Outlets age
Phone Call 61 43.9
18 12.9 Phone Call 92 61
SMS and Phone Call
SMS 12 8.6 SMS 44 29
11 7.9 Seasonal 33 22
Direct Mailing
Greetings
Phone Call and Seasonal
10 7.2 Direct Mailing 14 9
Greetings
10 7.2 Birthday 4 3
Seasonal Greetings
Wishes
SMS and Seasonal
10 7.2
Greetings
Direct Mailing and Phone
2 1.4
Call
Birthday Wishes 2 1.4
SMS and Birthday
1 0.7
Wishes
Birthday Wishes and
1 0.7
Phone Call
Birthday Wishes and
1 0.7
Seasonal Greetings
Total 139 100.0
Table 3.50-d: Customer Feedback

Yes 144 96
No 6 4
Total 150 100
125
Table 3.50-e: Frequency of Feedback
Interval No. of Outlets Percentage

Monthly 84 58.3
Occasionally 50 34.7
Daily 4 2.8
Fortnight 2 1.4
Introducing 2 1.4
While Billing 1 0.7
Weekly 1 0.7
Total 144 100.0
iv. Customer Services and Benefits
As in the west, in India too, of late, the number of nuclear families is

increasing day by day. That apart, there has also been a dramatic change in the
attitudes, tastes and preferences of the customers. Indian customer is becoming
more quality conscious and less price sensitive. Nuclear family demands coupled
with peer group pressure, growing incomes, and westernisation influence the
Indian customer than ever before. All these changes invariably translate into
business volumes to the modern retail outlets. Further, in cities like Bangalore, both
the partners of a family go for work and come late in the evening to their homes.
They may not find time for shopping and they would like to deliver the provisions
they wish to buy at their homes. So the data was collected to find the different
services and benefits offered by the organised retail outlets. Table 3.51-a to 51-e
show the range of services and benefits offered by the outlets.
Almost all the outlets offered their customers the option of home delivery
service. Also, about 87% of the outlets provided their customers the option of using
the credit card to pay for the purchases.
126
Table 3.51-a: Home Delivery Service

Yes 148 99
No 2 1
Total 150 100
Table 3.51-b: Outlets Giving Credit Card Service Facility

Yes 125 83
No 25 17
Total 150 100
About 71% of the outlets gave price discount to their customers and about
42% of the outlets gave gifts on purchases exceeding certain amount. Most of the
outlets allowed customers to return/exchange the purchases made in case of any
problem or deficiency in quality. The time usually permitted to refund/exchange the
products was in the range of 5 – 14 days. Further, with one-quarter of the outlets
(22%) giving a maximum of one week and another one-quarter of the outlets (23%)
giving two weeks for the customers to return the merchandise if there were any
problems. The data reveal that most of the customers were satisfied with the
return/exchange policy of the retailers.
127
Table 3.51-c: Benefits to the Customers
No. of Percentage
No. of Percentage
Outlets
Outlets
Price Discount 52 35.4 Price
Gifts 18 12.2 Discount 107 71
Gifts and Price Discount 18 12.2 Gifts 63 42
Credit Points and Gifts 15 10.2 Credit
Credit Points and Price Points 45 30
Discount 13 8.8 Gift
Price Discount 8 5.4 Vouchers 8 5
Any Other, Credit Points Any Other 6 4
and Price Discount 3 2.0
Credit Points 3 2.0
Credit Points, Gifts and
Price Discount 3 2.0
Gift Vouchers and Price
Discount 3 2.0
Gifts and Price 3 2.0
Credit Points and Gift
Vouchers 2 1.4
Gift Vouchers 2 1.4
Other combinations 4 2.8
Total 147 100.0
Table 3.51-d: Days Allowed for Returning the Merchandise
Days No. of Outlets Percentage

No. of Days
1 1 0.7 Mean 9
2 11 7.5 Median 7
3 13 8.9 Mode 14
4 2 1.4 Std. Deviation 4.7
5 28 19.2 Skewness 0.2
7 32 21.9 Kurtosis -1.6
10 2 1.4 Range 14.0
12 7 4.8 Minimum 1.0
14 34 23.3 Maximum 15.0
15 16 11.0
Total 146 100
128
Table 3.51-e: Customer’s Satisfaction Level with Merchandise Return Policy
No. of
Satisfaction Level Percentage
Outlets
Satisfied 140 93
Neither Satisfied nor Dissatisfied 4 3
Total 150 100
The outlets offered a plethora of services and benefits such as home

delivery service, credit card remittance facility, price discounts, gifts, gift vouchers,
Loyalty Card Scheme, etc to enhance the sales. The measures could be
augmented and be focused on different customer segments which will lead to
higher sales realisation.
v. Internal Customers (Employees)

Employees are the front face of an organisation. They have a stake in
business. They represent the culture, ethos and value system of an organisation.
Any organisation is as good as its employees and the success of it depend on its
employees. Therefore, it is for the organisation to take care of the employees so
that they in turn contribute their best to the success of the organisation.
As part of the questionnaire, the data regarding the employees at different

levels, age, sex, qualification, leave benefits, uniforms and incentives are collected.
The data is presented below. Table 3.52-a to Table 3.52-n contain the data related
to the employees. Figure 3.13 presents the data on male and female employees
employed in the retail outlets.
The data show that the number of employees in 82% outlets was in the
range of 7–16. The number of male employees in about 90% of the outlets was in
the range of 5-10 while female employees was in the range of 3-6 in about 75% of
the outlets. The average number of male employees in an outlet was 7 and female
employees were 5.
129
Table 3.52-a: Distribution of Number of Employees in Outlets
No. of Employees No. of Outlets Percentage

<4 0 0
5-6 8 5
7-8 17 11
9-10 37 25
11-12 30 20
13-14 23 15
15-16 16 11
17-18 9 6
19-20 7 5
21-22 2 1
>22 1 1
Total 150 100.0
Table 3.52-b: Central Tendencies of Number of Employees
No. of Employees
Mean 12
Median 12
Mode 10.00
Std.
3.88
Deviation
Variance 15.045
Skewness .788
Kurtosis .606
Range 21.00
Minimum 5.00
Maximum 26.00
130
Table 3.52-c: Number of Male and Female Employees – I
Male Female
No. of Perce No. of Percen Employee
Outlets ntage Outlets tage
Male Female
- - 1 1
Mean 7 5
2 - - 9 6
Median 6.5 5
3 3 2 27 18
Mode 6 5
4 11 7 27 18
Std.
5 24 16 38 25 2.3 2.0
Deviation
6 37 25 22 15 Skewness 0.9 0.9
7 18 12 8 5 Kurtosis 1.5 0.9
8 20 13 11 7 Range 13 11
9 8 5 - - Minimum 3 1
10 25 17 6 4 Maximum 16 12
>10 4 3 1 1
Total 150 100 150 100
Table 3.52-d: Number of Male and Female Employees – II
Female
Male Total
1 2 3 4 5 6 7 8 10 12
3 - 1 2 - - - - - - - 3
4 - 4 5 - 1 1 - - - - 11
5 1 1 11 5 5 1 - - - - 23
6 - - 5 15 12 5 - - - - 37
7 - 2 3 - 8 3 1 1 - - 18
8 - - - 3 6 7 3 1 - - 20
9 - - - 3 1 2 2 - - - 8
10 - 1 1 1 5 2 1 8 6 - 25
12 - - - - - - - 1 - - 1
14 - - - - - - - - - 1 1
15 - - - - - - 1 - - - 1
16 - - - - - 1 - - - - 1
Total 1 9 27 27 38 22 8 11 6 1 150
131
Table 3.52-e: Male-Female Employees in the Outlets (Percentage)
Female
Male Total
1 2 3 4 5 6 7 8 10 12
3 - 0.67 1.33 - - - - - - - 2.00
4 - 2.67 3.33 - 0.67 0.67 - - - - 7.33
5 0.67 0.67 7.33 3.33 3.33 0.67 - - - - 15.33
6 - - 3.33 10.00 8.00 3.33 - - - - 24.67
7 - 1.33 2.00 - 5.33 2.00 0.67 0.67 - - 12.00
8 - - - 2.00 4.00 4.67 2.00 0.67 - - 13.33
9 - - - 2.00 0.67 1.33 1.33 - - - 5.33
10 - 0.67 0.67 0.67 3.33 1.33 0.67 5.33 4.00 - 16.67
12 - - - - - - - 0.67 - - 0.67
14 - - - - - - - - - 0.67 0.67
15 - - - - - - 0.67 - - - 0.67
16 - - - - - 0.67 - - - - 0.67
Total 0.67 6.00 18.00 18.00 25.33 14.67 5.33 7.33 4.00 0.67 100.00
Figure 3.13: Male - Female Employees
The employees in the supervisory cadre were about 20% of the total
employees; Customer Service Associates (CSAs) were about 47% and the
132
employees doing miscellaneous tasks constituted about 17% of the total
employees. Figure 3.14 presents the employees working in the outlets at different
levels.
As regards education, about 70% of the employees were either S S L C or H

Sc qualified and about 21% of the employees were graduates or post-graduates.
The managers were either graduates or post graduates. Figure 3.15 shows the
qualification of the employees in the outlets.
Table 3.52-f: Male and Female Employees at Different Levels
No. of Percentage to
Total Average
Outlets Total Employees
Male 1,060 150 7 59
Employees
Female 746 150 5 41
Number 150 149 1 8
Male
Age 4,312 148 29
Manager
Number 4 4 1 0.2
Female
Age 110 4 28
Number 76 64 1 4
Male
Sub- Age 1,708 64 27
Manager Number 54 50 1 3
Female
Age 1,247 50 25
Number 209 137 2 12
Male
Age 3,363 137 25
Supervisor
Number 137 99 1 8
Female
Age 2,223 98 23
Number 489 150 3 27
Male
Age 3,141 150 21
CSA
Number 357 143 2 20
Female
Age 2,989 143 21
Number 128 94 1 7
Male
Age 2,285 94 24
Others
Number 183 126 1 10
Female
Age 3,067 126 24
133
Figure 3.14: Employees at Different Levels (in Percentage)
Male
Table 3.52-g: Number of Customer Service Associates (CSA) at the Outlets
Male Female
No. of Outlets Percentage No. of Outlets Percentage
1 5 3.3 26 18.2
2 32 21.3 55 38.5
3 51 34.0 35 24.5
4 50 33.3 19 13.3
5 7 4.7 8 5.6
6 3 2.0 - -
7 2 1.3 - -
Total 150 100.0 143 100
Table 3.52-h: Qualification of Employees
Employee’s Qualification No. of Employees Percentage

Less than SSLC 149 8
SSLC 525 30
H. Sc./PUC 671 38
Diploma 54 3
Graduates 269 15
PG 111 6
Total 1,779 100
134
Figure 3.15: Qualification of Employees
On an average, an employee was entitled for 30 days leave a year. About

half of the outlets gave a month salary as bonus and another quarter of the outlets
offer bonus on the basis of the outlet’s performance.
Majority of the outlets have adopted a work schedule of two shifts a day and
had uniforms to all of their employees. An exclusive human resources department
was created in many organised retail chains to take care of the human resources
development activities.
The welfare and benefits given to the employees were fairly good.
Employees were looked after well by the managements. However, in a few cases,
it was learnt that the leave was not granted when it was required and also some of
the managers were found to be highly stressed due to the job related pressures to
meet the targets in sales and shrinkage of merchandise. Cases of penalisation of
employees who failed to measure up to the expectations and meet the target set
were also brought to the notice of the researcher. At the store manager level,
employee turnover was also high. Therefore, the management of the outlets need
to take measures to de-stress the managers and give training on motivation and
stress management and focus on measures to retain the employees.
135
Table 3.52-i: Benefits to Employees – Leave for the
Employees (in Days)
Casual Earned Medical Other

Total
Leave Leave Leave Leave
Mean 13.9 10.1 10.5 6.6 32.3
Mode 12 10 7 5 32
Median 12 10 7 5 32
Std.
3.9 2.6 6.0 4.7 10.2
Deviation
Skewness 3.3 -0.8 2.3 0.5 0.7
Kurtosis 11.3 4.4 5.1 -0.5 1.6
Range 20 20 25 15 50
Minimum 10 0 5 0 10
Maximum 30 20 30 15 60
Table 3.52-j: Bonus to the Employees
No. of Days No. of Outlets Percentage

30 70 48
Performance
36 25
Related
4.16% 10 7
10 9 6
20 9 6
15-30 7 5
15 5 3
Total 146 100
Table 3.52-k: Other Benefits to the Employees

Festival Offer 1 0.67
Incentives 19 12.67
None 130 86.67
Total 150 100.00
136
Table 3.52-l: Number of Shifts

No Shift 29 19
2 Shifts 121 81
Total 150 100
Table 3.52-m: Uniform to the Employees

No Uniform 5 3.3
CSA and Below 26 17.3
ALL 119 79.3
Total 150 100.0
Table 3.52-n: Existence of Human Resources Department

Yes 119 79
No 31 21
Total 150 100
Process – II
Internal Supply Chain Management (ISCM)
i. Demand Forecasting
Retailers need to forecast the future demand for the merchandise for
effective scheduling of the deliveries and forecasting helps capacity building and
budgeting. Some retailers take a simple approach for forecasting – they take last
year’s data as the base and multiply it by a growth percentage (as intelligent
guess) to arrive at the next year’s forecast. However, these days, most of the
retailers prefer to follow scientific approach to forecasting.
137
The data (Table 3.53-a and Table 3.53-b) show that time series method is
the most preferred method of demand forecasting (43%), followed by customised
technique (20%) and another 15% of the outlets adopted qualitative technique. As
such, wide range of practices found to be adopted by the sample outlets as per
their requirements and resources.
Table 3.53-a: Demand Forecasting at the Outlets

Yes 137 91
No 13 9
Total 150 100
Table 3.53-b: Forecasting Techniques Adopted by the Outlets
Forecasting Technique No. of Outlets Percentage

Time Series Method 64 42.7
Qualitative Technique 23 15.3
Qualitative Technique & Time Series
Method 11 7.3
Qualitative Method & Other 5 3.3
Time Series & Other 2 1.3
Causal Method 2 1.3
Causal Method & Time Series Method 1 0.7
Any Other (Customised) 29 19.3
No Technique 13 8.7
Total 150 100.0
ii. Measures to Meet the Excess Demand
Based on the experience, and the forecasts, the outlets initiate the
procurement process of the merchandise ensuring there are no shortfalls in the
supply. However, sometimes, the actual demand may exceed the forecasted
demand and the outlets running into stock-out. In order to tide over the situations,
the retailers resort to different measures to avoid the stock-out. They include,
138
holding safety stock, procurement on emergency basis (rush orders or emergency
orders), using substitute products, requesting the customers to wait for some time
etc.
Table 3.54-a and 54-b show data pertaining to the measures taken by the
retailers to meet the excess demand. It could be seen from the data that 63% of
the outlets held excess inventory called safety inventory to meet the contingencies
related to excess demand. The other alternatives used were emergency call to the
suppliers (29% of the outlets) and using the substitute products (23% of the
outlets).
Table 3.54-a: Measures to Meet the Excess Demand – I
Measures No. of Outlets Percentage
Holding Inventory 94 63
Emergency Call 43 29
Substitute Products 35 23
Customers to Wait 4 3
Loss of Sales 2 1
Table 3.54-b: Measures to Meet the Excess Demand – II
Measures No. of Outlets Percentage

Holding Inventory 76 51
Emergency Call 29 19
Holding Inventory and Substitute Products 14 9
Substitute Products 11 7
Emergency Call and Substitute Products 10 7
Customers to Wait 4 3
Emergency Call and Holding Inventory 4 3
Loss of Sales 2 1
Total 150 100
Holding safety inventory, emergency call to suppliers and using substitute

products were the major measures adopted by the outlets to meet the excess
demand. These measures help the retailers to alleviate the problem to a minimum
139
extent. Therefore, it is imperative that better techniques need to be adopted by the
outlets to forecast the demand accurately.
iii. Reverse Supply Chain Management
Supply chain management has two components – forward, when products

or services move from the origin to its destination; and reverse, when a product or
service moves in the opposite direction i.e. from the customer back to its origin.
The reverse movement of merchandise is largely due to the supply of

defects, shelf-life expiry, warranty, overstock, discontinued line, etc. Reverse
supply chain is defined as all activities associated with a product or a service after
it is sold (CII, July 2010).90
Further, it may be caused by delivery of wrong items, leak or pilferage, etc.

Though it is an important element of customer service to enhance the store image
and goodwill, every retailer tries to minimise the number of return because of the
costs involved.
The data reveal that wrong merchandise, pilferage and expired merchandise
put together was in the range of 2.5% to 3.8% across different merchandise
categories. Also, it has been found that about 83% of the outlets had well
documented merchandise returning policy for the customers. Table 3.55-a to
Table 3.55-c show the data related to the rate of returned SKUs in different
categories and Table 3.56 shows the documented returning policy with the
retailers.
It may be appreciated that the return rate of merchandise was well within the
Indian industry standards of return rate, that is between three and five percent.
90
http://newsletter.ciilogistics.com/july2010/4w/nlfull.htm#@mail/rd4
140
Table 3.55-a: Return Rate of Food and Vegetable SKUs
Food Vegetable
Expired
Wrong Expired Wrong
Pilferage Pilferage Merchand
Merchandise Merchandise Merchandise
ise
Mean 1.4 1.1 1.3 0.2 0.3 2.0
Median 1.0 1.0 1.0 0 0 1.0
Mode 1.0 1.0 1.0 0 0 0
Std. Dev. 0.8 0.7 0.8 0.6 0.9 2.2
Skewness 2.5 1.7 1.3 2.9 3.1 1.1
Kurtosis 7.2 5.9 3.6 7.9 8.9 0.4
Range 5.0 4.0 5.0 3.0 4.0 10.0
Minimum 0.0 0.0 0.0 0.0 0.0 0.0
Maximum 5.0 4.0 5.0 3.0 4.0 10.0
Table 3.55-b: Return Rate of Non-Food and Staple Items
Non-Food Staples
Wrong Expired Wrong Expired
Pilferage Pilferage
Merchandise Merchandise Merchandise Merchandise
Mean 1.1 1.0 1.0 1.3 2.1 1.0
Median 1.0 1.0 1.0 1.0 2.0 1.0
Mode 1.0 1.0 0.0 1.0 2.0 1.0
Std. Dev. 0.7 0.7 1.1 0.8 0.9 1.1
Skewness 0.6 0.8 2.4 2.3 1.0 1.5
Kurtosis 1.3 2.7 11.2 7.8 1.1 3.1
Range 4.0 4.0 8.0 5.0 4.0 6.0
Minimum 0.0 0.0 0.0 0.0 1.0 0.0
Maximum 4.0 4.0 8.0 5.0 5.0 6.0
141
Table 3.55-c: Return Rate of Beverages and Other Items
Beverage Others
Wrong Expired Wrong Expired
Pilfer- Pilfer-
Merchan- Merchan- Merchan- Merchan-
age age
dise dise dise dise
Mean 0.2 1.1 1.4 0.9 1.0 1.1
Median 0 1 1 1 1 1
Mode 0 1 1 1 1 1
Std.
0.7 0.5 1.0 0.5 0.6 0.6
Deviation
Skewness 3.8 0.9 1.4 -0.1 0.0 0.1
Kurtosis 15.7 3.3 2.6 0.5 -0.2 0.1
Range 4 3 5 2 2 3
Minimum 0 0 0 0 0 0
Maximum 4 3 5 2 2 3
Table 3.56: Merchandise Return Policy Documentation

Yes 125 83
No 25 17
Total 150 100
iv. Security Mechanisms for the Upkeep Safety of Merchandise
Considering the loss due to shrinkage of the merchandise due to reasons

presented in the earlier sections, it is high time that foolproof mechanisms are
installed for the upkeep and safety of the merchandise in the outlet, go-downs and
the physical assets of the outlets. Outlets have to ensure the security of the
physical assets. It may be noted that India has the highest shrinkage rate. The theft
of the merchandise by the outlet’s own employees is one of the major concerns
faced by the retail outlets along with the theft or stealing by the customers.
In order to overcome the problem, retail outlets adopt different methods to

secure the merchandise. They include tightening security by assigning security
guards at all the vantage points of the outlets; customer service associates (CSAs)
142
moving around inside the outlet; closed circuit TVs with hidden cameras that
monitor and record the movements and indulgences of the people – both
employees and customers.
It was found that about 76% of the outlets used security at the entrance;
about 37% of the outlets used CSAs and about 29% of the outlets used close
circuit TVs to secure the physical assets including the merchandise (Table 3.57-a
and 57-b). The data show that the outlets used multiple mechanisms to ensure
safety of the assets.
Security at the entrance, CSAs moving around in the outlets and close
circuit TVs were the most popular mechanisms used by the outlets to secure the
assets. These measures would help the retailers to curb the stealing or theft of the
SKUs by the customers to a larger extent. At the same time, employees could also
be educated or trained about the ills of the shrinkage so that they will refrain from
this menace. Employees’ orientation in values and ethics play a significant role
here.
Table 3.57-a and 57-b: Security Mechanisms at the Outlets – I & II
No. of Perce No. of

Mechanism Mechanism Percentage
Outlets ntage Outlets
Security at the Entrance 59 40
Security at
CSAs and Security at the the 114 76
30 20
Entrance Entrance
Close Circuit TV 18 12 CSAs 56 37
Close Circuit TV and Close
17 11 44 29
Security at the Entrance Circuit TV
CSAs 10 7 No
4 3
Close Circuit TV, Helpers Mechanism
4 3
and Security at the Entrance
No Mechanism 4 3
Close Circuit TV and Helpers 3 2
Close Circuit TV and Helpers 2 1
Helpers and Security at the
2 1
Entrance
Total 149 100
143
v. Sales over a Month
It is important for an outlet to know the pattern of sales or sales trends. This
will help the outlets in planning and managing merchandise and also finance. With
this in view, data was collected about the sales trends of the outlets.
Table 3.58-a, Table 3.58-b and Figure 3.16 present the data about the
sales of the outlets over a month. As could be noted, sales in the first ten days was
in the range of 31-40% in about half of the outlets, 41-50% in about one-third of the
outlets and 51-60% in about 13% of the outlets. Further, the sales was in the range
of 11-20% in about one-third of the outlets, 21-30% in about one-half of the outlets
and 31-40% in about 15% of the outlets during 11th – 20th and 21st – 30th of every
month. As such, it is obvious that many a retail outlet registered substantial portion
of the sales in the first 10 days of the month. This is true in the case of urban areas
where most of the customers are from the salaried class.
Table 3.58-a: Sales over a Month
1-10 11-20 21-30

Percentage
of Sales No. of No. of No. of
1 - 10 0 0 2 1.33 12 8
11 - 20 0 0 53 35.33 45 30
21 - 30 6 4 74 49.33 69 46
31 - 40 68 45 20 13.33 24 16
41 - 50 51 34 1 0.67 - -
51 - 60 20 13 - 0 - -
61 - 70 4 3 - 0 - -
71 - 80 1 1 - 0 - -
Total 150 100 150 100 150 100
It could be inferred from the data that the sales during the first ten days was
higher and the sales was almost equal during the second and last ten days of a
month. So the retail outlets need to take necessary steps to ensure that there is
enough stock during the first ten days to maximise their sales. At the same time,
they might not neglect the sales over the remaining period also. Wherever
144
possible, the outlets need to adopt an approach to balance or even out the sales
throughout the months for optimum utilisation of the resources.
Figure 3.16: Sales over a Month
Table 3.58-b: Sales over a Month (Central Tendencies)
1-10 Days 11-20 Days 21-30 Days

Mean 46.5 27 27
Median 47 30 30
Mode 40 30 30
Std. Deviation 8.6 7.2 8.2
Skewness 0.6 0.4 -0.3
Kurtosis 0.1 -0.1 -0.5
Range 45 40 30
vi. Sales through Alternate Ways
Organised retail outlets are exploring new avenues to reach the customers.
It is also true that the customers are becoming more demanding and individualised
than ever before. Therefore, retail outlets need to be more innovative in reaching
out and serving the customers. Taking orders on phone and through the internet
145
and delivery of merchandise seem to be better options which in turn would save lot
of time and effort of the customers. More so, a great relief for the urban customers
in place like Bangalore where traffic congestion and jams have, of late, become the
order of the day.
Table 3.59-a to Table 3.59-e present the sales through phone and the
Internet are gaining higher acceptance. The data show that almost all the outlets
took the orders through phone. But only one-third of the outlets took the orders
through the internet. The percentage of total business through phone and the
internet for the outlets overwhelmingly at 92% was in the range of 5 – 15%. The
outlets (80%) took anywhere between 30 minutes to 90 minutes to execute the
orders made through the phone. But it took five hours to one day to fulfil the order
made through the internet which could be reduced. Figure 3.17 and Figure 3.18
show the time between order and delivery made through phone and internet.
Orders through the internet are yet to reach the critical mass. Only a few
outlets are adequately equipped with the technology to attend to the online sales.
As there is huge growth potential to further expand the sales by exploiting the new
formats of order taking and delivery, retail outlets need to exploit this fully. Fulfilling
orders through internet took almost one day which is a bit discomforting to the
customers.
Table 3.59-a: Sales through Phone and Internet

0 2 1.3
<5% 6 4.0
5-10% 112 74.7
10-15% 26 17.3
15-20% 2 1.3
>25% 2 1.3
Total 150 100
146
Table 3.59-b: Central Tendencies of Percentage of Sales through
Phone and Internet
Sales through
Phone and the
Internet
Mean 8.5
Median 7.5
Mode 7.5
Std. Deviation 3.4
Skewness 2.4
Kurtosis 11.8
Range 27.5
Minimum 0
Maximum 27.5
Table 3.59-c: Central Tendencies of Time between Order and

Delivery through Phone and Internet
Phone Internet
(in Minutes) (in Hours)
Mean 77 14
Median 60 12
Mode 60 23
Std. Deviation 53.4 8
Skewness 3.5 0.0
Kurtosis 16.1 -1.8
Range 360 24
Maximum 360 24
Table 3.59-d and 59-e: Time between Order and Delivery
Through Phone Through Internet

Time to Deliver No. of Time to Deliver (in
Percentage No. of Outlets Percentage
(in Minutes) Outlets Hours)
< 30 11 8 5 3 13.0
31-60 76 52 6 4 17.4
61-90 42 29 7 2 8.7
91-120 9 6 12 3 13.0
>120 8 5 20 4 17.4
Total 146 100 24 7 30.4
Total 23 100.0
147
Figure 3.17: Time between Order and Figure 3.18: Time between Order and
Delivery through Phone (in minutes) Delivery through Internet (in hours)
Source: Field Survey. Source: Field Survey.
PROCESS – III
SUPPLIER RELATIONSHIP MANAGEMENT (SRM)
Supplier Relationship Management (SRM) processes include all those

initiatives that focus on upstream interaction between the enterprise and its
suppliers which have already been presented in the earlier section of this chapter.
III Competition, Future Growth and Business Satisfaction
i. Competition
Today’s businesses have become extremely complex. The interplay of the

three Cs, namely, consumers, competition and convergence, has thrown open new
challenges for organizations all over the world. Organised retail industry is not an
exception. With many corporate houses establishing their own retail chain,
international retail chains such as Wal-Mart, Carrefour, Tesco and others waiting
on the wings, the competition is going to be more intensive and fiercer.
In order to assess the degree of competition in the retail trade, data was
collected and presented in Tables 3.60-a to 3.60-g. Figure 3.19 and Figure 3.20
148
show the number of kirana stores and organised retail outlets in one sq. km. and
Figure 3.21 depicts percentage of sales affected by competition.
The data reveal that there is adequate awareness among the retailers about
the existing competition in the trade. About 61% of the outlets faced competition
from organised and unorganised food and grocery. About 25% of the outlets faced
competition from organised outlets only and about 12% of the outlets faced
competition from kirana stores only.
About 95% of the outlets were of the opinion that there were about 6 – 15
kirana stores and 2 – 4 organised retail outlets within one square kilometre.
Further, about 70% of the outlets reported that there were 11-15 kirana stores
within one square kilometre and 60% of the outlets noted that there were 2
organised retail outlets within one square kilometre. The sales affected was in the
range of 1 – 15% with a mean of 10%.
Table 3.60-a: Competition from Others

Yes 147 98
No 3 2
Total 150 100
Table 3.60-b: Outlets Facing Competition
From No. of Outlets Percentage

Both 92 61
Organised Retail 37 25
Kirana Shops 18 12
No Competition 3 2
Total 150 100
It can be concluded that as of now many of the sample outlets do not face
tough competition. But with every increase in number of the outlets within the
149
catchment area and international retail majors waiting on the wings, tomorrow’s
scenario may be different. So it is desirable that retail outlets understand the
impending scenario and equip themselves to manage the future.
Table 3.60-c and 60-d: Distribution of Number of Outlets in 1 Sq. Km.
Organised Outlets Kirana Stores
Number No. of Outlets Percentage Number No. of Outlets Percentage

1-5 1 1
1 5 3.3
6-10 41 27
2 86 57.3 11-15 104 69
3 50 33.3 16-20 3 2
4 8 5.3 21 - 25 1 1
Total 150 100
6 1 0.7
Table 3.60-e: Number of Outlets in One Square Kilometre-Central Tendencies
Kirana Shops Organised Outlets

Mean 12.1 2.4
Median 12 2
Mode 10 2
Std. Deviation 2.3 0.7
Skewness 1.5 1.2
Kurtosis 8.3 3.6
Range 21 5
Minimum 4 1
Maximum 25 6
Figure 3.19&3.20: No. of kirana Stores and Organised Outlets in 1 Sq. Km.
Source: Field Survey Source: Field Survey
150
Table 3.60-f: Distribution of Number of Outlets in One Square Kilometre
Sales Affected No. of Outlets Percentage
Nil 3 2
<5% 20 13
5-10% 66 44
10-15% 39 26
15-20% 12 8
20-25% 3 2
>25% 7 5
Total 150 100
Table 3.60-g: Sales Affected by Competition
Sales Affected
Mean 10.0
Median 7.5
Mode 7.5
Std.
6.0
Deviation
Skewness 1.1
Kurtosis 1.6
Range 27.5
Minimum 0
Maximum 27.5
Figure 3.21: Sales Affected by Competition
151
ii. Future Plans of the Outlets and Satisfaction of the Business
Table 3.61-a and Table 3.61-b exhibit the retailer’s orientation to future. The
data show that retailers wished to increase the SKUs followed by the expansion of
the outlets. This shows that the retailers were more optimistic about the future of
the business and its growth. Also, the data (Table 3.62) show that almost all the
retailers were satisfied with the F&G business.
Table 3.61-a: Future Plans of the Outlets - I
Future Plan No. of Outlets Percentage

SKU Increase 110 73
Outlet Expansion 92 61
New Outlet 21 14
Sales Increase 15 10
Table 3.61-b: Future Plans of the Outlets - II
No. of
Future Plan Percentage
Outlets
Outlet Expansion and SKU Increase 49 33
SKU Increase 39 26
Outlet Expansion 27 18
New Outlet, Outlet Expansion and SKU Increase 11 7
Increasing Sales 6 4
New Outlet 5 3
Increasing Sales and SKU Increase 5 3
New Outlet and SKU Increase 3 2
Increasing Sales, Outlet Expansion and SKU Increase 2 1
New Outlet, Increasing Sales, Outlet Expansion and SKU
1 1
Increase
New Outlet and Outlet Expansion 1 1
Increasing Sales and Outlet Expansion 1 1
Total 150 100
152
Table 3.62: Overall Business Satisfaction

Highly Satisfied 3 2.0
Satisfied 144 96.0
Neither Satisfied Nor Dissatisfied 2 1.3
Strongly Dissatisfied 1 0.7
Total 150 100.0
Performance Metrics of Organised Outlets

Retailers monitor a wide variety of SC cost and service metrics. SCM
executives applied traditional logistics and transportation measures related to order
cycle time, accuracy, product availability, costs, and productivity. Some retailers
create SC scorecards and calculate perfect order metrics, though few have
reported that they are actively involved in performance benchmarking activities.91
i. Operating Expenses and Operating Profit

The major expenses for an organised retail outlet are rent, electricity,
employees’ salary and cost on SKUs. The other expenses include transportation,
warehousing, advertising, CRM, information system and other expenses.
Operating profit is sometimes called Profit before depreciation, interest and

taxes (PBDIT). This number is a reflection of firm’s performance based on
transaction with customers.92
Table 3.63-a to Table 3.63-g show the detailed analysis of the operating
expenses on different overheads. The data show that the expenditure on SKU was
in the range of 16- 25% (for about 90% of the outlets); employee salary was in the
range of 11-20% (for about 90% of the outlets) and the rent was in the range of 7
– 12% (for about 98% of the outlets). Further, the expenses on transportation was
91
Gibson B J, Deffe C C and Randall W W, “The State of The Retail Supply Chain -
Results and Findings of the 2009 Study”, Auburn University College of Business and Retail
Industry Leaders Association (RILA) , 2009.
92
Curry, Joy and Curry, Adam, The Customer Marketing Method, The Free Press, New
York, 2000, p113.
153
4-7%, the warehousing expense was 4-6%, advertisement was 2-5%, CRM
expense was 2-5% and on IT, the expense was 4-6% of the monthly sales.
Figure 3.22 shows the two important expenses namely SKUs and employee
expenses and Figure 3.23 depicts the expenditure on various overheads of the
outlets
Table 3.63-a: Distribution of Expenditure on SKU and Employee Salary as

Percentage of Sales
Percentage SKU Employee Salary

of Sales No. of Outlets Percentage No. of Outlets Percentage
0-5 0 0.00 0 0
6 - 10 1 0.67 14 9
11 - 15 9 6.00 58 39
16 - 20 114 76.00 78 52
21 - 25 22 14.67 - -
26 - 30 4 2.67 - -
Total 150 100 150 100
Table 3.63-b: Expenditure on SKU and Employee Salary as

Percentage of Sales
Percentage SKU Percentage Employee Salary

of Sales No. of Percentage of Sales No. of Percentage
Outlets of Outlets Outlets of Outlets
10 1 0.67 6 1 0.67
15 9 6.00 8 1 0.67
16 9 6.00 9 3 2.00
17 16 10.67 10 9 6.00
18 29 19.33 12 9 6.00
19 2 1.33 13 4 2.67
20 58 38.67 14 3 2.00
21 1 0.67 15 42 28.00
22 3 2.00 16 15 10.00
24 1 0.67 17 21 14.00
25 17 11.33 18 13 8.67
30 4 2.67 19 3 2.00
20 26 17.33
Total 150 100.00 Total 150 100.00
Source: Field Survey. Source: Field Survey.

154
Table 3.63-c: Expenditure on Rent, Transportation, Warehousing
and Advertisement as Percentage of Sales
Percent Rent Transportation Warehousing Advertisement

age of No. of Percen No. of Percen No. of Percen No. of Percen
Sales Outlets tage Outlets tage Outlets tage Outlets tage
1 - - - - - - 2 1.33
2 - - - - 3 2.00 12 8.00
3 - - 2 1.33 1 0.67 28 18.67
4 - - 16 10.67 24 16.00 62 41.33
5 1 0.67 76 50.67 92 61.33 39 26.00
6 2 1.33 36 24.00 18 12.00 4 2.67
7 9 6.00 13 8.67 6 4.00 2 1.33
8 21 14.00 3 2.00 1 0.67 - -
9 25 16.67 2 1.33 - 0.00 - -
10 68 45.33 2 1.33 5 3.33 1 0.67
11 14 9.33 - - - - - -
12 10 6.67 - - - - - -
Total 150 100.00 150 100.00 150 100.00 150 100.00
Table 3.63-d: Distribution of Expenditure on Rent, Transportation,

Warehousing and Advertisement as Percentage of Sales
Percent Rent Transportation Warehousing Advertisement

age of No. of Percen No. of Perce No. of Percen No. of Percent
Sales Outlets tage Outlets ntage Outlets tage Outlets age
1-2 - - - - 3 2 14 9
3-4 - - 18 12.0 25 17 90 60
5-6 3 2 112 74.7 110 73 43 29
7-8 30 20 16 10.7 7 5 2 1
9-10 93 62 4 2.7 5 3 1 1
11-12 24 16 - - - - - -
Total 150 100 150 100 150 100 150 100
155
Table 3.63-e: Expenditure on CRM, IS and Others as Percentage of Sales
Percent CRM IS Miscellaneous Others

age of No. of Percent No. of Percent No. of Percen No. of Percent
Sales Outlets age Outlets age Outlets tage Outlets age
1 1 0.67 - - 1 0.67 1 0.72
2 15 10.00 9 6.00 9 6.00 24 17.27
3 48 32.00 5 3.33 42 28.00 78 56.12
4 60 40.00 14 9.33 74 49.33 22 15.83
5 24 16.00 93 62.00 20 13.33 14 10.07
6 1 0.67 25 16.67 - - - -
7 - - 2 1.33 - - - -
8 - - 1 0.67 - - - -
9 - - - - - - - -
10 1 0.67 1 0.67 4 2.67 - -
11 - - - - - - - -
12 - - - - - - - -
Total 150 100.0 150 100.00 150 100.00 139 100.00
Table 3.63-f: Distribution of Expenditure on CRM, IS and

Other Expenses as Percentage of Sales
Percenta CRM IS Miscellaneous Others

ge of No. of Percent No. of Percen No. of Perce No. of Percen
Sales Outlets age Outlets tage Outlets ntage Outlets tage
1-2 16 10.7 9 6.0 10 7 25 17.99
3-4 108 72.0 19 12.7 116 77 100 71.94
5-6 25 16.7 118 78.7 20 13 14 10.07
7-8 - - 3 2.0 - - - -
9-10 1 0.7 1 0.7 4 3 - -
11-12 - - - - - - - -
Total 150 100.0 150 100.0 150 100 139 100
156
Table 3.63-g: Central Tendency of Distribution of Various SKUs as
Percentage of Sales
Trans Wareho Emplo Total

Advt Info. Miscella-
Rent SKU portat using/ CRM -yee Other Expen
. Sys. neous
ion DC Salary diture
Mean 10 20 5 5 4 4 5 16 4 3 75
Median 10 20 5 5 4 4 5 16 4 3 75
Mode 10 20 5 5 4 4 5 15 4 3 75
S. D. 1 3 1 1 1 1 1 4 1 1 7
Range 7 20 7 8 9 9 8 39 9 5 37
Minimum 5 10 3 2 1 1 2 6 1 0 52
Maximum 12 30 10 10 10 10 10 45 10 5 89
Skewness -0.54 0.97 1.38 1.80 0.70 1.28 -0.27 2.47 2.64 -0.54 -1.05
Kurtosis 0.56 1.86 3.50 6.72 4.27 7.68 4.33 20.42 11.68 1.49 1.86
Figure 3.22: Expenditure on SKU and Employee Salary
157
Figure 3.23: Expenditure on Various Overheads
Table 3.63-h presents the total operating expenses. In majority of the

outlets (81%), the operating expenses were in the range of 71 – 85% of sales. At
the same time, in the case of about 3% of the outlets, the operating expenses were
greater than 85%. Further, it could be seen that the operating expenses was less
than 70% in about 16% of the outlets.
Table 3.63-h: Total Expenditure to Sales
Expenditure in No. of
Percentage
Percentage Outlets
50 - 55 4 3
56 - 60 2 1
61 - 65 7 5
66 - 70 11 7
71 - 75 53 35
76 - 80 47 31
81 - 85 22 15
86 - 90 4 3
Total 150 100
158
The calculation of PBDIT (Table 3.63-i) shows that the figure was in the
range of 20-25% in two-fifth (39%) of the outlets. Further, in the case of about one-
fourth (24%) of the outlets, PBDIT was in the range of 25-30% and in another one-
fifth (17%) of the outlets, PBDIT was 15-20%. Interestingly, in about 15% of the
outlets, PBDIT was more than 30%.
It has been found that the expenses on SKU, employee salary and rent
constituted a major portion of the total expenses of the sales. Continuous efforts
need to be made to reduce these expenses. It could help the outlets to be cost
efficient and at the same time enable them to devise innovative strategies to serve
the customers better.
On the whole, the total operating expenses and the operating profit are
found to be satisfactory (KPMG Report, 2009).93
Table 3.63-i: PBDIT Percentage
PBDIT (in No. of

Percentage
Percentage) Outlets
<10 0 0
10 – 15 8 5
15 – 20 25 17
20 – 25 59 39
25 – 30 36 24
30 – 35 9 6
35 – 40 7 5
40 – 45 3 2
45 -50 3 2
Total 150 100
ii. Monthly Sales (Rs. in Lakhs)
The monthly sales was determined using the following formula
Monthly Sales = 30 days x footfall per day x
Where pi = Percentage of customers coming with family, with friends and alone
qi = Amount purchased by customers coming with family, with
friends and alone
93
KPMG, “Indian Retail: Time to change lines”, KPMG Report, 2009.
159
Table 3.64 shows the distribution of the monthly sales at the outlets using
the above formula. The monthly sales of about 13% of the organised retail outlets
were less than Rs. 5 lakhs. The monthly sales was in the range of Rs. 5 – 20 lakhs
for about 70% of the outlets. Further, in about 30% of the outlets the sales was in
the range of Rs. 10-15 lakhs and in another one-quarter (27%) of the outlets, the
sales was in the range of Rs. 15-20 lakhs. Interestingly, in about 17% of the outlets
the sales was above Rs. 20 lakhs.
Table 3.64: Monthly Sales of the Outlets
Sales (Rs. in Lakhs) No. Of Outlets Percentage

<5 19 12.7
5-10 23 15.3
10-15 43 28.7
15-20 40 26.7
20-25 6 4.0
25-30 9 6.0
30-35 6 4.0
35-40 3 2.0
>40 1 0.7
Total 150 100
Sales per Square Foot (in Rs.) per Month
Sales per square foot shows how effectively one retailer is using its
store units to generate increased sales dollars. This is also a measure of
sales efficiency and productivity. This comparison has to be benchmarked
against a company's direct retail competitors.
Variances in sales per square foot could be due to differences in

promotional/sales activity, store layout, location, demographics, regional
differences, merchandise selection, or other pecuniary differences such as
better service. Wide variances in sales per square foot need to be
investigated by management and corrective action need to be taken. Sales
160
per square foot can differ tremendously between retailers due to the types of
merchandise and their rate of inventory turnover.94
Table 3.65 shows the sales per square foot per month of the outlets
surveyed. It may be seen that it was less than Rs. 250 for about 11% of the outlets.
Further, in one-fifth (20%) of the outlets, the sales per sq. ft. was Rs. 500-750 and
in another 32% of the outlets, it was Rs. 750 – 1,000. It could also be noted that in
about one-quarter (22%) of the outlets, it was more than Rs. 1,000. Figure 3.24
shows the monthly sales and sales per sq. foot of the outlets.
Table 3.65: Sales per Square Foot/Month
Sales/Sq. ft. (Rs.) No. Of Outlets Percentage

<250 17 11.3
250 – 500 22 14.7
500 – 750 30 20.0
750 – 1,000 48 32.0
1,000 – 1,250 22 14.7
1,250 – 1,500 7 4.7
1,500 – 1,750 2 1.3
1,750 – 2,000 1 0.7
>2,000 1 0.7
Total 150 100.0
In 2008, the Wal-Mart’s and K-Mart’s sales per square foot was about $422
and $235 which is equivalent to Rs. 1,760 and Rs. 980 per month respectively.95
The survey result shows that the mean sales per square foot is Rs. 760 which is
lower than that of the market leaders. So the retail outlets need to bridge the
variance by better merchandise selection, services and promotional activities.
94
http://activemedia-guide.com/retailstats.htm
95
Laudon and Laudon, Management Information System, Prentice Hall India (PHI) Ltd,
2010.
161
Figure 3.24: Monthly Sales Vs Sales per Sq. foot
iii. PBDIT/Month (Rs. in Lakhs)
The PBDIT explains the store’s margins per month. Table 3.66 presents the
PBDIT/month for the outlets surveyed. The data indicates that the margin was
less than Rs. 1,00,000 in about 10% of the outlets. For about 70% of the outlets
the margin was about Rs. 1,00,000 - 5,00,000.
Table 3.66: PBDIT/Month (Rs. in Lakhs)

Amount (Rs.) No. of Outlets Percentage
<1 15 10.0
1-2 20 13.3
2-3 23 15.3
3-4 29 19.3
4-5 35 23.3
5-6 12 8.0
6-7 9 6.0
7-8 3 2.0
8-9 1 0.7
9-10 1 0.7
>10 2 1.3
Total 150 100.0
162
Further, for about one-fifth (19%) of the outlets, the ratio was Rs. 3-4 lakhs
and for another one-quarter (23%) of the outlets the measure was in the range of
Rs. 4-5 lakhs. It could also be noted that the PBDIT/month was more than Rs. 5
lakhs for one-fifth (18%) of the outlets.
iv. PBDIT/Sq. foot per month
The ratio PBDIT/Sq. foot gives the performance of the outlets in terms of the
margin generated per square foot. Table 3.67 shows the PBDIT/Sq. ft. per month
calculated for the outlets surveyed. It has been found that the margin was less than
Rs. 50 per sq. foot for about 9% of the outlets. For about 16% of the outlets the
ratio was in the range of Rs. 150-200. Further, in the case of about one-quarter
(24%) of the outlets PBDIT/Sq. foot was Rs. 200-250 and in another 17% of the
outlets, the ratio was Rs. 250-300. More so, for about 10% of the outlets,
PBDIT/Sq. ft. was more than Rs. 300. Figure 3.25 depicts PBDIT and PBDIT/Sq.
foot per month of the outlets.
Table 3.67: PBDIT/Sq. Foot

<50 13 8.7
50 – 100 24 16.0
100 – 150 13 8.7
150 – 200 24 16.0
200 – 250 36 24.0
250 – 300 25 16.7
300 – 350 7 4.7
350 – 400 5 3.3
400 – 450 3 2.0
Total 150 100.0
163
Figure 3.25: PBDIT Vs PBDIT / sq. foot per month
v. Sales/Employee per month (Rs. in Lakhs)
Sales per employee is another important measure to find how much an

employee is able to generate the revenue. Table 3.68 shows the sales per
employee per month of the outlets surveyed. The ratio was found to be less than
Rs. 60,000 in about 14% of the outlets. Further, in one-quarter (21%) of the outlets
it was in the range of Rs. 60,000 - Rs. 90,000 and in another one-quarter (24%) of
the outlets the ratio was Rs. 120,000 - Rs. 1,50,000 Thus, the amount was in the
range of Rs. 30,000 - 1,80,000 for majority of the outlets (87%). Interestingly, in
about 8% of the outlets the ratio was more than Rs. 1.8 lakhs. As such, in India, no
benchmark is available to compare this metric. Figure 3.26 depicts the number of
employees and sales per employee of the outlets.
164
Table 3.68: PBDIT/Sq. foot per month (Rs. in Lakhs)

<0.3 3 2.0
0.3 - 0.6 18 12.0
0.6 - 0.9 32 21.0
0.9 - 1.2 21 14.0
1.2 - 1.5 36 24.0
1.5 - 1.8 24 16.0
1.8 -2.1 6 4.0
2.1 - 2.4 2 1.0
2.4 - 2.7 0 0.0
2.7 - 3.0 4 3.0
3.0 - 3.3 1 1.0
3.3 - 3.6 1 1.0
> 3.6 2 1.0
Total 150 100.0
Figure 3.26: No. of Employees and Sales per Employee
165
Table 3.69: Central Tendencies of the Various Metrics
Sales per Sales/Employee

Month Sales PBDIT PBDIT /Month PBDIT/Sq. (Rs.)
Sq. ft..
(Rs.) (%) (Rs.) ft. (Rs.)
(Rs.)
Mean 14,77,700 758.81 25.0667 3,63,184.97 190.5867 1,24,298.765
Median 13,73,000 780.00 25.0000 3,61,630.00 203.0000 1,21,243.590
Mode 1700000 240.00 25.00 4,25,250 173.00 1,20,000.000
Std. Deviation 893519 363.55 6.68030 2.09E5 97.75 68,654.32
132165.
Variance 7.98E11 44.626 4.365E10 9555.71 4.713E9
821
Skewness 1.897 0.499 1.046 1.153 .199 1.936
Kurtosis 7.549 1.150 1.864 3.135 -.418 6.517
Range 6,48,000 2,115.00 37.00 12,97,687 424.00 4,59,230.769
Minimum 2,70,000 135.00 11.00 52,313.00 26.00 20,769.231
Maximum 6,75,000 2,250.00 48.00 13,50,000 450.00 4,80,000
166
The questionnaire for kirana stores was administered on 230 stores. After
data cleansing and checking for consistency, the number of questionnaires was
pruned to 200. The data thus collected from 200 kirana stores is presented in this
section.
PROFILE OF THE KIRANA STORES
The year of establishment helps to know the longevity of the stores. Table
3.70 and Figure 3.27 show the year of establishment of the kirana stores. From
the table, it may be seen that about 91% of the kirana stores were in operation
ranging from 1999 – 2009. In other words, most of the stores are 10 year old. They
were largely started by the younger generation or the stores would have been
shifted from a different place to the place of new existence.
Table 3.70: Year of Establishment (kirana Stores)
Year of Establishment No. of Stores Percentage of Stores

Before 1990 5 2.5%
1990-1995 7 3.5%
1996-2000 46 23.0%
2001-2005 110 55.0%
2006-2009 32 16.0%
Total 200 100.0%
Figure 3.27: Year of Establishment of kirana Stores
167
The analysis on logistics drivers and cross-functional drivers for kirana
stores is as follows.
LOGISTICS DRIVERS
i. Location of Stores
The location of a store determines the accessibility to consumers

convenience to them and the cost of operation. According to Sunil Chopra (2010)
96
decisions regarding the role, location, capacity, and flexibility of facilities have a
significant impact on supply chain’s performance.
The location details of the kirana stores (Table 3.71) shows that the stores
were more or less equally distributed throughout the prominent geographical areas
of Bangalore city. All the stores invariably are located at vantage points of the main
road or bylanes. Almost all the stores were located on the main road, or street
corners or important junction points.
Table 3.71: Location of kirana Stores
Location No. of Stores Percentage

Main Road 78 39%
Junction Points 74 37%
Street Corner 48 24%
Total 200 100%
ii. Size of the Stores
The store size is an important factor in drawing the customers’

attention. Table 3.72 shows the size of the stores surveyed. Kirana stores
are typically small in size as they are located in the residential area zones.
The size of the stores revealed that about half of the stores were less than
200 sq. feet. Some of them were relatively bigger.
96
op. cit.
168
Table 3.72: Size of the Stores (Sq. feet)
Size No. of Stores Percentage

1-100 21 10.5
101-200 89 44.5
201-300 18 9
301-400 16 8
401-500 15 7.5
501-600 19 9.5
601-700 3 1.5
701-800 19 9.5
Total 200 100
iii. Inventory
a. SKU Category Management
Merchandising is a key factor in attracting the customer and encouraging
repeat business (Newman, 2007).97 Table 3.73 to Table 3.75 and Figure 3.28
show the number of SKUs in different categories at the kirana stores.
Table 3.73: Stores Selling Different SKUs
Other No. of % of
Food Vegetables Non-Food Staples Beverages
Items Stores Stores
67 33.5
151 75.5
158 79
162 81
164 82
188 94
191 95.5
With respect to the SKU categories maintained by the stores, majority of the
stores stored food items in the range of 11- 60 items and some stores stored about
91-100 food items. The stores stored vegetables in the range of 1-20, non-food in
97
op. cit.
169
the range of 11-50, staples in the range of 1-50 and beverages in the range of 11-
20. Food, non-food and staples were the major category of items stored by all the
kirana stores. The total SKUs were in the range of 125 – 150.
Table 3.74: Number of SKUs in kirana Stores
No. of kirana Stores

No. of SKUs
1-10 13 71 12 19 4 9
11-20 42 87 85 86 52 31
21-30 52 5 29 41 - 22
31-40 24 1 23 15 - 9
41-50 16 - 26 27 - 8
51-60 23 - 8 2 - -
61-70 3 - 2 0 - -
71-80 7 - 6 1 - -
81-90 0 - 0 0 - -
91-100 20 - 6 0 - -
Total 200 164 197 191 56 79
Table 3.75: Percentage of SKUs in kirana Stores
No. of Percentage of Kirana Stores

Items Food Vegetables Non-Food Staples Beverages Others
1-10 7 43 6 10 7 11
11-20 21 53 43 45 93 39
21-30 26 3 15 21 - 28
31-40 12 1 12 8 - 11
41-50 8 - 13 14 - 10
51-60 12 - 4 1 - -
61-70 2 - 1 - - -
71-80 4 - 3 1 - -
81-90 - - - - - -
91-100 10 - 3 - - -
Total 100 100 100 100 100 100
170
Figure 3.28: Category Management of SKUs
b. Number of Days Inventory Carried
Tables 3.76, 3.77 and Figure 3.29 show the number of days, different SKU
categories was carried in stores. It may be noted that the food items were carried
for about 1-7 days. Vegetables were carried for 1-4 days. The ‘non-food’ items
were carried for 4-7 days. The staple items were carried for 4-9 days. The
‘beverages’ was carried for 4-13 days.
On an average, the stores held the stock of food items for about 4 days,
vegetables for 2 days, non-food, staples and beverages for about a week. From
the data, it is evident that the inventory turnover is high enabling stores to manage
the working capital effectively.
171
Table 3.76: Stock Held (in days)
No. of Food Vegetables Non-Food Staples Beverages Other SKUs

Days
No. of No. of No. of No. of No. of No. of
% % % % % %
Stores Stores Stores Stores Stores Stores
1-2 52 26 125 75.8 2 1.0 2 1.1 - - - -
3-4 67 33.5 37 22.4 15 7.7 5 2.6 4 2.3 2 2.7
4-5 44 22 2 1.2 59 30.3 44 23.2 23 13.1 21 28.4
6-7 22 11 - - 82 42.1 58 30.5 60 34.3 38 51.4
8-9 2 1 - - 19 9.7 20 10.5 25 14.3 9 12.2
10-11 5 2.5 - - 11 5.6 45 23.7 26 14.9 1 1.4
12-13 - - - - 2 1.0 8 4.2 23 13.1 2 2.7
14-15 8 4 1 0.6 5 2.6 8 4.2 14 8.0 1 1.4
Total 200 100 165 100 195 100 190 100 175 100 74 100
Figure 3.29: Stock Held (in days)
172
Table 3.77: Central Tendencies of Stock Held (in days)

Mean 4 2 6 7 7 2
Median 3.5 1.5 6.5 6.5 6.5 0
Mode 3.5 1.5 6.5 6.5 6.5 0
Std. Deviation 3 1 3 3 4 3
Range 13 14.5 14.5 14.5 14.5 14.5
Table 3.78, Table 3.79 and Figure 3.30 show the analysis of stock-out and
percentage of stock-out of the kirana stores. About a quarter of the kirana stores
were not having a stock-out and about 70% of the kirana stores had a stock-out in
the range of 1-10. The analysis showed that the fill rate or the service rate of the
kirana stores was good. At the same time, it may also be noted that the customers
visit kirana stores for immediate purchases, ‘fill-in’ and hence kirana stores cannot
afford to have stock-out.
Table 3.78: Stock-Out
No. of Stores Percentage

Yes 147 73.5%
No 53 26.5%
Total 200 100%
Table 3.79: Percentage of Stock-out
Percentage of Stock-out
stock-out (Percentage)
No Stock-out 53 26.50%
Mean 3.88
1-5 100 50.00%
6-10 36 18.00% Median 3.00
11-15 6 3.00% Mode 3.00
16-20 2 1.00% S.D. 4.31
21-25 2 1.00% Range 28.00
>25% 1 0.50% Minimum 0.00
Total 200 100%
Maximum 28.00
173
Figure 3.30: Stock-out
CROSS-FUNCTIONAL DRIVERS
i. Sourcing
Sourcing is an important activity in retailing. The retailers source their

merchandise from many sources based on convenience, special offers and
discounts, credit facility, variety and quality of the merchandise, the price, order
and on-site delivery services etc.
Tables 3.80-a and 3.80-b show that the kirana stores used more than one
source namely wholesalers, dealers and salespersons to source their
merchandise. Among them, procurement of merchandise by calling through phone
to the wholesalers was the most popular (62%) one followed by placing orders with
the salespersons who visit the stores (36%) at regular intervals.
174
Table 3.80-a: Sourcing SKUs – I
Through phone to
55 27.5
the dealers
Through phone to
123 61.5
the wholesalers
Visit by
72 36
salesperson
Personal visit 47 23.5
Total 297
Table 3.80-b: Sourcing SKUs – II

Through phone to the wholesalers 71 35.50%
Visit by salesperson 22 11.00%
Personal visit 18 9.00%
Phone to W/S and Salesperson 16 8.00%
Phone to Dealers and Phone to W/S 15 7.50%
Phone to Dealers and Salesperson 13 6.50%
Through phone to the dealers 11 5.50%
Personal Visit and Phone to W/S 7 3.50%
Personal Visit and Phone to Dealers 6 3.00%
Personal Visit, Phone to W/S and
6 3.00%
Salesperson
Personal Visit and Salesperson Visit 5 2.50%
Phone to Dealers, Phone to W/S and
5 2.50%
Salesperson
Personal Visit, Phone to Dealers,
3 1.50%
Phone to W/S and Salesperson
Personal Visit, Phone to Dealers and
2 1.00%
Salesperson
Total 200 100.00%
ii. Benefits/Incentives on Purchases

As regards procurement of merchandise, kirana stores usually are showered
with numerous incentives/benefits by the suppliers based on the order size, store
relationship and image. Most of the kirana stores got the quantity discount and
sometimes gift vouchers as well. Tables 3.81-a and 3.81-b show the
benefits/incentives received by the kirana stores in the procurement of
175
merchandise. The data show that most of the stores received quantity discount on
purchases and about 11% of the stores got gift vouchers also.
Table 3.81-a: Benefits on Purchases – I

Quantity Discount 190 95.00%
Gift Vouchers 22 11.00%
Freebie 15 7.50%
Gift 12 6.00%
No Benefits 03 1.50%
Any other 01 0.50%
Table 3.81-b: Benefits on Purchases – II

Quantity Discount 148 74.00%
Gift and Quantity Discount 20 10.00%
Freebie and Quantity Discount 11 5.50%
Gift Vouchers and Quantity Discount 9 4.50%
No benefits 4 2.00%
Gift Vouchers 2 1.00%
Gift 1 0.50%
Freebie 1 0.50%
Year-end tours 1 0.50%
Freebie, Gift and Quantity Discount 1 0.50%
Freebie, Gift and Quantity Discount 1 0.50%
Any other 1 0.50%
Total 200 100.00%
iii. Mode of Payment and Credit Period
Table 3.82 and Figure 3.31 present the details about the mode of payment
and Table 3.83 contains the period of credit to the kirana stores. The data show
that the kirana stores most often used the option of buying on cash as well as
through credit (54%). About 38% of the kirana stores paid the cash whenever they
bought the merchandise. Usually, cash purchases go with some benefits/incentives
176
as compared to credit purchases. Kirana stores most often got a maximum of 2
weeks credit from the suppliers.
Table 3.82: Mode of Payment

Cash 76 38%
Credit 16 8%
Both 108 54%
Total 200 100%
Figure 3.31: Mode of Payment
Cash Credit
54%
Table 3.83: Period of Credit
Week(s) No. of Stores Percentage Mean 10.99

One 36 29 Median 10.00
Two 83 67 Mode 10.00
More than two 5 4
Std. Deviation 4.47
Total 124 100
Range 24.00
177
iv. Pricing
Price Discount is an important benefit offered to the customers by the
retailers. The data show that majority of the kirana stores offer discount to their
customers (Table 3.84-a to Table 3.84-c). Of the stores who had given discounts,
three-fourths of the stores (79%) offered discount on total purchases and about
10% of the stores had given discount on the individual items purchased. It is
common in the retail trade to offer discount on the maximum retail price (MRP) or
list price.
Table 3.84-a: Price Discount on MRP

No 28 14%
Yes 172 86%
Total 200 100%
Table 3.84-b: Price Discount on Purchases

Individual Items 19 11.05%
Total Purchase 136 79.07%
Individual Items and Total
15 8.72%
Purchase
Others and Total
2 1.16%
Purchase
Total 172 100.00%
Table 3.84-c: Discount on Purchases
Percentage of Percentage Mean 5

No. of Stores
Discount
0 28 14.0% Median 5
1 1 0.5% Mode 5
2 62 31.0% Std. Deviation 3
5 74 37.0% Range 9
10 34 17.0%
Minimum 1
Otherwise 1 0.5%
Total 200 100% Maximum 10
178
v. Application of Computers
Computer has become the integral part of modern life. Application of
computers, therefore, has become essential for any business because of several
advantages.
Tables 3.85-a to 3.85-c show the application areas of computers in kirana

stores. It may be understood that computers have not been used in kirana stores
extensively. Less than quarter of the kirana stores (23%) have only used the
computers in management of the stores. Of which, 41% of the kirana stores used
computers for managing inventory and 50% of the stores used for accounting
applications. It is obvious that many of the kirana stores are not taking full
advantage of the computer applications, more so with regard to customer
database.
Table 3.85-a: Computer Usage

Yes 46 23%
No 154 77%
Total 200 100%
Table 3.85-b: Area of Computer Application – I
Application Area No. of Stores Percentage

Accounting 37 50%
Inventory 30 41%
Purchasing 5 7%
Finance 1 1%
Customer Management 1 1%
Total 74 100%
179
Table 3.85-c: Area of Computer Application – II
Application Area No. of Stores Percentage
Inventory 6 13.04%
Purchasing 1 2.17%
Accounting 12 26.09%
Finance 0 0.00%
Customer Management 1 2.17%
Accounting and Inventory Mgt. 21 45.65%
Accounting and Finance 1 2.17%
Accounting, Inventory and Purchasing 2 4.35%
Accounting and Purchasing 1 2.17%
Inventory and Purchasing 1 2.17%
Total 46 100.00%

Process – I
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

i. Customer Base
Customers are critical for any business. It is they who enable the firms to
exist and survive. Any business stays as long as it enjoys customer patronage.
Kirana stores are not an exception. Customers for a kirana stores come from
nearer areas. Tables 3.86-a and 3.86-b depict the customer base of kirana stores
surveyed. Customer base of a kirana store ranged from 101 – 300 (about 80% of
the kirana stores). Further, about two-fifth of the stores (44%) were having a
customer base of 101-200 and another two-fifth (39%) of the stores were having a
customer base of 201-300. Interestingly, in the case of about 11% of the stores,
the customer base was more than 300.
Table 3.86-a: Total Number of Customers
Size No. of Stores Percentage

1-100 12 6.0
101-200 88 44.0
201-300 77 38.5
301-400 15 7.5
401-500 7 3.5
501-600 1 0.5
Total 200 100.0
180
Table 3.86-b: Central Tendencies of Number of Customers
Central Size of the No. of

Tendency Stores Customers
Mean 331 248
Median 200 210
Mode 200 300
ii. Footfalls, Sales per Customer and Sales per day
The sustenance of a store depends on the sale it generates. The sales

volume depends on the number of customers per day (footfalls) and the sales per
customer.
Daily Sales = Number of Customers/Day x Average Sales per customer
Table 3.87-a to Table 3.87-d and Figure 3.32 give the footfalls and sales.
The customers per day was in the range of 26-100 for a majority of a kirana store
(about 85%). Further, for about two-fifth (40%) of the stores, the footfall per day
was in range of 51-75. Also, the customers visited were more than 100 customers
in the case of about 11% of the stores.
The sales per customer was in the range of Rs. 1-100 with a mean of Rs.
69. Further, the sales per customer was in the range of Rs. 50-75 in about one-
fourth (25%) of the stores and another two-fifth (37%) of the stores reported that
the sales was Rs. 75-100 per customer. Interestingly, about 10% of the stores sold
merchandise worth more than Rs. 100 per customer.
In about 10% of the kirana stores, the sales per day was less than Rs.
1,000. Further, in the case of about 10% of the stores each, sales per day was Rs.
1,000 – 2,000 and Rs. 2,000 – 3,000 respectively and in another one-quarter
(24%) of the stores, the sales was in the range of Rs. 5,000 – 6,000 per day. It may
also be noted that about 10% of the stores touched a sales of more than Rs. 9,000
per day.
181
The data show that the customer base, the number of customers and sales
per day were varying widely. The variation may be for the reasons such as the
density of population in the neighbourhood area, merchandise the store offer,
relationship with the store etc.
Table 3.87-a: Average Number of Customers per day

No. of
Customers
1-25 6 3.00
26-50 44 22.00
51-75 79 39.50
75-100 47 23.50
101-125 15 7.50
>125 9 4.50
Total 200 100.00
Table 3.87-b: Sales/Customer per Visit

Sales (Rs.) No. of Stores Percentage
1-25 27 13.50
26-50 29 14.50
51-75 50 25.00
75-100 74 37.00
101-125 14 7.00
>125 06 3.00
Total 200 100.00
Table 3.87-c: Sales / Day of kirana Stores

Daily Sales (Rs.) Number of Stores Percentage
<1000 21 10.5
1,001-2,000 19 9.5
2,001-3,000 20 10.0
3,001-4,000 37 18.5
4,001-5,000 0 0
5,001-6,000 48 24.0
6,001-7,000 0 0
7,001-8,000 32 16.0
8,001-9,000 3 1.5
9,001-10,000 15 7.5
>10,000 5 2.5
Total 200 100
182
Figure 3.32: Number of Customers per day and Sales per Customer/Visit
Table 3.87-d: Central Tendencies - No. of Customers, Sales per

Customer and Sales per day
No. of
Customers/ Sales/Customer (Rs.) Avg. Sales/ Day (Rs.)
Day
Mean 69 68 4,895
Median 63 63 5,244
Mode 63 88 5,544
S.D. 28 31 3,086
Range 125 125 15,425
Minimum 13 13 169
Maximum 138 138 15,594
iii. Time Spent by Customers in kirana Stores
More the time a customer spends in a store, larger the purchases he makes
and it is good for a store. However, because of the small space of the store and as
much of the business is transacted across the counter, any customer regardless of
his wish, cannot usually spend longer time in the store. Further, many of the kirana
183
stores do not have the pleasant ambience, or sufficient parking facility. But in a
kirana store, usually a customer spends less time.
The data show (Table 3.88 and Figure 3.33) that a customer spent a time
in the range of 1-15 minutes with a mean of about 8 minutes. It may also be seen
that about a half of the stores (52%) reported that the customers spend about 6-10
minutes for the purchases in a store. More so, in case of about 31% of the stores,
the customers spend less than 5% for buying the requirements.
Table 3.88: Time Spent by a Customer in a Store
Time Spent Time Spent by a

No. of Stores Percentage customer (min.)
(in Minutes)
1-5 61 30.50% Mean 7.63
6-10 103 51.50% Median 8
11-15 27 13.50% Mode 8
16-20 8 4.00% S.D. 4
21-25 1 0.50% Range 20
Total 200 100% Minimum 3.
Maximum 23
Figure 3.33: Time Spent by a Customer (in Minutes)
184
iv. Nature of Customers
Customers of kirana store may be classified under categories, viz.,
customers who buy their purchases always on cash, customers who buy on credit
for a month and customers who buy on credit occasionally. This is one
characteristic of the kirana store that distinguishes it from the organised large retail
formats. As a kirana store evolves into an integral part of the neighbourhood and
by virtue of its small size and limited number of customers largely from the
immediate neighbourhood, the store owner is familiar with the customers and even
knows the finer details of the customers. Thus there exists a close bond between
the store and the customers as a result of which extending credit to the customers
at times is not very uncommon.
As could be seen from the data in Table 3.89-a to Table 3.89-c and
Figure 3.34, about 80% of the stores had the customers in the range of 41–100%
who bought their purchases on cash with an average of 77%. More so, about two-
fifths of the stores each have regular customers in the range of 61-80% and
81-100% respectively. The customers who bought on credit were in the range of
1-25% and the customers who bought on credit occasionally were in the range of
1-10%. About two-fifths (38%) of the stores each have customers who buy on
credit for a month and buy on credit occasionally in the range of 6-10%.
The data show that about three quarters (77%) of the customers have made
purchases on cash and another quarter of the customers bought on credit.
Table 3.89-a: Percentage of Customers buy on ‘Cash’
Percentage of
Percentage of
No. of Stores Percentage Customers buy
Customers on cash
1-20 - -
21-40 8 4.0 Mean 77.0
41-60 18 9.0 Median 71.0
61-80 80 40.0 Mode 91.0
81-100 94 47.0 S.D. 16.0
Total 200 100.0
Range 60.0
Source: Field Survey. Minimum 30.5
Maximum 90.5
185
Table 3.89-b: Customers Buy on ‘Monthly Account’ and
on ‘Credit Occasionally’
Percentage of On Monthly Account On Credit Occasionally
Customers No. of Stores Percentage No. of Stores Percentage
0 18 9.00% 12 6.00%
1-5 30 15.00% 62 31.00%
6-10 76 38.00% 75 37.50%
11-15 23 11.50% 17 8.50%
16-20 21 10.50% 13 6.50%
21-25 22 11.00% 13 6.50%
26-30 10 5.00% 08 4.00%
Total 200 100% 200 100%
Table 3.89-c: Central Tendencies of Customers Buy on ‘Monthly Account’

and on ‘Credit Occasionally’
Percentage of Percentage of Customers

Customers buy on credit buy on credit occasionally
Mean 11 9
Median 8 8
Mode 8 8
S.D. 8 7
Range 28 28
Minimum 0 0
Maximum 28 28
Figure 3.34: Percentage of Customers buy on Monthly Account and

on Credit Occasionally
186
v. Personal Rapport with the Customers
Another important feature of kirana store is the familiarity of the customers

to the kirana store owners. Traditionally, the kirana store’s owner knows the
customers and their families very well and kirana store owner is invited for any
occasion or function in the customer’s family and vice-versa. Such is the
relationship between the kirana store and the customers.
The data (Table 3.90 and Figure 3.35) show that the owner of a kirana
store knows closely 30% of the customers. It appears that the number of
customers closely known to the store owner is relatively less in spite of the
proximity of the store to the customers. It could be largely due to the urban context
where the customers are busy with their tight home schedule and in more cases
they may prefer privacy and may not be willing to share personal information with
the store owner.
Table 3.90: Customers Known ‘Personally’
Percentage of Percentage of
Customers Customers known
-- 2 1.00% personally
1-5 20 10.00% Mean 14
6-10 77 38.50% Median 13
11-15 27 13.50% Mode 8
16-20 26 13.00% S.D. 8
21-25 26 13.00% Range 30
26-30 22 11.00% Minimum 0
Total 200 100.00% Maximum 30
187
Figure 3.35: Customers Known Personally
vi. Backordering
Traditionally, the customers of a kirana stores don’t go to another store to
buy the items even if some of the items are not available in the preferred store that
they are used to purchase from. They would even wait for the store to procure and
supply them. This may be attributed to the trust and bond that exists between the
store and its customers.
Tables 3.91-a and 3.91-b present the data about customers willingness to
wait. The data show that less than 20% of the customers were willing to wait and
majority of them were not willing to wait. It is obvious that the attitude of the
customers is fast changing. As modern customer do not have the time to wait and
they have huge choices around. In other words, modern customer is impatient to
wait. Therefore, it is essential that the store makes the various SKUs available to
customers as and when they visit the store. Hence a modern kirana store owner
needs to be adept in modern merchandise management, lest he might loose a
customer.
188
This is one of the reasons that the kirana stores were trying to ensure that
the product availability/fill rate is high and they do not afford to have stock-out.
Table 3.91-a: Customers Willingness to Wait,

if Stock not Available (Backordering)

No customer is
104 52.00%
willing to wait
Some are willing to
77 38.50%
wait
All the customers
19 9.50%
are willing to wait
Total 200 100.00%
Table 3.91-b: Willingness of the Customers to Wait
Percentage of Percentage
Mean 12
customers willing No. of Store
to wait Median 10
1-5 16 20.78 Mode 10
6-10 36 46.75 Std. Deviation 7
11-15 15 19.48
Range 38
16-20 4 5.19
21-25 3 3.90
26-30 2 2.60
31-35 1 1.30
35-40 0 0.00
Total 77 100.00
EMPLOYEES IN KIRANA STORES
i. Staff-Relatives
Traditionally, the kirana stores are managed by family members. The store
is largely family centric for which there are several historical reasons. Native
wisdom and expertise in managing the kirana stores are specific to some
communities and families. The art of managing kirana store is so deeply ingrained
in these families. For purposes of confidentiality, trust and control, the participation
189
of family members is quite high in a kirana store format of the retail trade. It may
also be noted that a kirana store does not require too many people to work in.
Table 3.92-a, Table 3.92-b and Figure 3.36 show the composition of
employees in the kirana store. The data show the kirana stores (about 80%)
employed 1–3 employees. Interestingly, it was found that at least one of them was
a close relative to the owner, the others are employed. This may be because of the
non-availability of the relatives or their unwillingness to come to a city like
Bangalore to work in a small store. Of late, the trend is also changing. As many of
the present generation younger siblings of the store owners by virtue of their
educational attainment prefer to many other jobs, the number of family members
participating in the traditional family business has come down. In other words,
hiring outsiders has become more pronounced in the recent times.
Table 3.92-a: Number of Staff and Percentage of Stores
Staff No. of Stores Percentage

0 4 2%
1 24 12%
2 66 33%
3 68 34%
4 23 12%
5 10 5%
6 5 3%
Total 200 100%
Table 3.92-b: Staff-Relatives Matrix
Relatives Percentage of
0 1 2 3 kirana Stores
0 2 0 0 0 2
1 4.5 7.5 0 0 12
Staff
2 4.5 9.5 19 0 33
3 1 11 19.5 2.5 34
4 0 5.5 5.5 0.5 11.5
5 0 0.5 3 1.5 5
6 0 1.5 1 0 2.5
Percentage of
12 35.5 48 4.5 100
kirana Stores

190
Figure 3.36: Relatives among the Staff
Process – II
INTERNAL SUPPLY CHAIN MANAGEMENT (ISCM)
i. Sales during Different Spells of a Month

It is understood that the sales of kirana stores not only vary from season to
season but from one week to another in the course of a month. To know the
extent by which sales vary over a month, the month was divided into 3 periods
of 10 days each and data was collected. The data shown in Table 3.93-a and
Table 3.93-b reveal that the sales during the first 10 days was higher (45%)
than the other two periods of 10 days each (about 28%). Figure 3.37 also
illustrates the same.
191
Table 3.93-a: Sales Spread in the Month
1-10 days 11-20 days 21-30 or 31 days

Percentage of
No. of No. of No. of
Sales % % %
Stores Stores Stores
1-10 - - 4 2.0 10 5.0
11-20 - - 61 30.5 53 26.5
21-30 23 11.5 101 50.5 105 52.5
31-40 88 44.0 34 17.0 30 15.0
41-50 59 29.5 - - 2 1.0
51-60 21 10.5 - - - -
61-70 6 3.0 - - - -
71-80 2 1.0 - - - -
81-90 1 0.5 - - - -
91-100 - - - - - -
Total 200 100 200 100 200 100
Table 3.93-b: Sales during a Month over Different

Spells – Central Tendencies
Sales during Sales during Sales during

first 10 days next 10 days last 10 days
Mean 44.85 28.10 27.20
Median 40.00 30.00 30.00
Mode 40.00 30.00 30.00
S.D. 10.32 7.66 7.69
Range 65.00 45.00 45.00
Minimum 25.00 5.00 5.00
Maximum 90.00 50.00 50.00
192
Figure 3.37: Sales during Different Spells of a Month
ii. Customer Services

Businesses attract customers by offering different benefits and services.
One of the major reasons for the customer migration from traditional kirana stores
to organised retail formats in big cities/towns is the array of benefits and services
offered by the latter. However, kirana stores are lacking behind and some of the
large kirana stores are competing head on with the large super
bazars/departmental stores with respect to offering some of the add-on services to
the customers. Kirana stores in the study were found to be offering a bouquet of
benefits and services which were the domain of the organised retail outlets in order
to attract and retain the customers. The services included ordering through phone
and home delivery.
a. Phone Orders and Home Delivery
Ordering through phone and home delivery services were the services being
offered by the kirana stores, of late, to facilitate the shopping requirements of
working people, more particularly the grocery requirements.
Kirana stores these days offer services in different combinations. Tables

3.94-a and 3.94-b show the spread of these services. For instance, home delivery
193
service was offered by 7% of the sample stores; some took the order through the
phone (23%) but did not deliver to the home; some offered both the services (28%)
and other stores did not offer either of the services (43%).
On the whole, about half of the kirana stores offered phone order services
and about 35% of the kirana stores offered the home delivery services. The Venn
diagram in Figure 3.38, depicts these combinations. Whenever, home delivery as
a service was offered, the stores ensured that the purchases were delivered within
one hour (Table 3.95-a, Table 3.95-b and Figure 3.39).
Table 3.94-a: Phone Order and Home Delivery – I
Ordering through Phone Home Delivery

No. of
No. of Stores Percentage Percentage
Stores
No 99 49.50% 131 65.50%
Yes 101 50.50% 69 34.50%
Total 200 100.00% 200 100.00%
Table 3.94-b: Phone Order and Home Delivery – II
No. of Kirana Percentage

Stores
Both Phone Orders and Home Delivery 55 27.50%
Neither Phone Orders nor Home Delivery 85 42.50%
Phone Orders but no Home Delivery 46 23.00%
No Phone Orders but Home Delivery 14 7.00%
Total 200 100.00%
194
Figure 3.38: Venn Diagram Depicting the kirana Stores Offering
Home Delivery and Phone Order Services
42.5% Home Delivery
27.5%
Phone Orders
Table 3.95-a: Time to Home Delivery Distribution (in Minutes)
Time Required No. of Stores Percentage
1-10 1 1
11-20 4 6
21-30 16 23
31-40 2 3
41-50 16 23
51-60 24 35
>60 6 9
Total 69 100
Table 3.95-b: Time to Home Delivery
Time Taken to deliver No. of Stores Percentage

Within One Hour 63 91%
More than one Hour 6 9%
Total 69 100%
195
Figure 3.39: Home Delivery (in Minutes)
iii. Wrong Merchandise
As there is always a possibility of human error, the pleasure of shopping at

times is marred by occasional omissions and commissions of the store staff in
terms of supplying obsolete and outdated merchandise contrary to the customer
specifications. In order to find out how often the kirana stores supplied the wrong
items to the customers, a question was asked and the related data presented in
Table 3.96 shows that less than 2% of the customers had returned their
merchandise. However, in the case of about 3% of the kirana stores, the customers
who returned their merchandise was more than 2%.
Though the percentage of customers with such grievances was relatively

less, it is obligatory on the part of the stores to bring it down to zero.
196
Table 3.96: Wrong Merchandise
Percentage of Mean 0.79

customers Median 0.50
Never 45 22.5%
Mode 0.50
<1 82 41.0%
1-2 67 33.5% Std. Deviation 0.70
2-3 5 2.5% Range 4.50
3-4 - Minimum 0.00
4-5 1 0.5% Maximum 4.50
>5 -
Total 200 100%
iv. Customer Migration and Addition of New Customers in the Last one year
In a dynamic and competitive environment, it is common for the customers

to migrate from one shop to another or from one format to another. Among the
factors that prompt the customers to switch over the loyalty, among others, are
dissatisfaction with the quality of the merchandise, high price, poor service, etc. As
it is well established that retaining an existing customer is less costly than acquiring
a new customer, kirana stores need to go all out to arrest customer migration. If the
trend persists, it may endanger the very survival of the stores.
In order to find out the degree of customer migration, an attempt has been
made to collect the data on customer migration. Table 3.97-a, Table 3.97-b and
Figure 3.40 present the trend related to customer migration and addition of new
customers of a kirana store in the last one year. The data show that in the last one
year, 1 – 15% with a mean value of about 6% of customers have shifted from one
shop to another. Further, there had been addition of new customers during the
same year largely due to expanding new neighbourhoods, shifting of customers of
the other kirana stores etc. As could be seen in the data, 1 - 15% of the customers
had been added to the stores with a mean of about 9%.
Thus, on the whole, it is evident that the addition of new customers slightly
exceeds the number of customers migrating to other stores. This could be due to
197
the growth of the urban places, and Bangalore city, in particular, has registered a
phenomenal increase in the population due to the heavy influx of people from other
parts, thanks to the growing economic opportunity in the new economy.
Table 3.97-a: Switch over of Customers and Addition of New Customers
Percentage of Customers Switched Over Customers Added

customers No. of Stores Percentage No. of Stores Percentage
1-3 58 29.0 22 11.0
4-6 57 28.5 46 23.0
7-9 20 10.0 67 33.5
9-12 27 13.5 19 9.5
13-15 31 15.5 20 10.0
16-18 5 2.5 9 4.5
>18 0 0.0 13 6.5
Can’t Say 2 1.0 4 2.0
Total 200 100 200 100%
Table 3.97-b: Central Tendencies of Percentage of Customers

Switched over and Added in the last one year
Percentage of Percentage of
Customers left Customers Added
Mean 6.32 9.30
Median 5.00 8.00
Mode 2.00 8.00
Std. Deviation 4.63 6.92
Range 15.00 43.00
Minimum 2.00 1.00
Maximum 17.00 44.00
198
Figure 3.40: Customers Left and New Customers Added
in the Last One Year
v. Sources of Finance
Most of the kirana stores are proprietary concerns and generating funds for
setting up the store and its expansion depends on the proprietor’s ability to raise
funds. This involves not only the capital to be invested in getting a location for
starting the store (capital) but also running the store (working capital), i.e. the
finance required for procuring the merchandise, employee related expenses,
electricity charges, rent and others.
Table 3.98-a and Table 3.98-b show the data with respect to financing of
the stores. The data show that about three-quarter (73%) of the owners did not get
any finance from outside and they managed the finance on their own. Others got
the finance from banks, relatives and friends.
Table 3.98-a: Stores Financed

No 146 73%
Yes 54 27%
Total 200 100%
199
As the business is family centric and the unlimited liability on the part of the
owners, a natural disadvantage of proprietorship concern as compared to company
firm.
Table 3.98-b: Source of Financing

Bank 32 59.26%
Relatives 10 18.52%
Friends 6 11.11%
Money Lender 2 3.70%
NBFC 2 3.70%
Friends and
1 1.85%
Relatives
Bank, Friends and
1 1.85%
Relatives
Total 54 100.00%
COMPETITION
i. Density of Food and Grocery Stores
The primary objective of supply chain management is to maximise the
supply chain surplus. The economics obtained by plugging the wastages and
optimising the supply chain processes translate into creating supply chain surplus,
which in other words adds to the profits. The profitability, of course, depends
largely on sales. In a competitive environment, the store’s competition depends on
density of the number of stores per square kilometre and offerings (SKUs).
As such, data was gathered to find the number of stores within a square
kilometre and the kind of competition among the organised and unorganised retail
outlets.
The data (Table 3.99-a to Table 3.99-c) show that there were about 4-15
kirana stores within one square kilometre. Further, about 30% of the owners
reported that there were about 10-12 kirana stores within one square kilometre and
another one-third (31%) of the owners opined that there were about 5-7 stores. On
an average there were about 10 kirana stores in one square kilometre. With regard
to organised retail outlets, about one-half (56%) of the stores reported that there
was one outlet within one square kilometre and about two-fifth (36%) opined that
there were 2 outlets within one square kilometre. Thus, it is evident that kirana
200
stores and organised retail outlets compete severely for the customers’ pie. Both
the retail formats coexist in the given area.
Table 3.99-a & 3.99-b: No. of kirana Stores and Organised

Retail Outlets within one Square Kilometre
No. of kirana No. of No. of

Percentage No. of
stores outlets retail Percentage
outlets
1-3 1 0.50 outlets
4-6 43 21.50 1 91 56
7-9 62 31.00 2 59 36
10-12 59 29.50 3 9 6
13-15 27 13.50 4 3 2
16-18 0 0.00 Total 162 100
19-21 6 3.00
21-24 0 0.00
25-27 2 1.00
Total 200 100.00
Table 3.99-c: Central Tendencies of Number of kirana Stores and

Organised Retail Outlets within one Sq. Kilometre
kirana Organised Retail

Stores Outlets
Mean 9.5 1.5
Median 9 1
Mode 8 1
S.D. 3.81 .69
Range 23 3
Minimum 2 1
Maximum 25 4
ii. Intensity of Competition
Table 3.100-a to Table 3.100-c and Figure 3.41 & Figure 3.42 show the
intensity of competition. The data reveal that about half of the kirana stores faced
competition from kirana stores (47%) only and another half of the stores (50%)
faced competition from both the kirana stores and also organised retail outlets.
201
The competition from the kirana stores affected the average sales of about
9% and the competition from the organised retail outlets affected the average sales
of about 4%.
From the data, it could be inferred that the competition as of now is not
affecting the sales much. But at the same time, this scenario may change with the
new retail majors from the European and American continent entering the business
and also more number of organised retail outlets being setup.
Table 3.100-a: Existence of Competition

No Competition 4 2%
From other Kirana Stores 94 47%
From Organised Retail Outlets 2 1%
Both 100 50%
Total 200 100%
Figure 3.41: Venn Diagram Showing the Competition from kirana

Stores and Organised Outlets
50%
202
Table 3.100-b: Sales Affected by Competition from kirana Stores
and Organised Retail Outlets
Affected by Organised
Percentage of Affected by Kirana Stores
Retail Outlets
Sales
No. of Stores Percentage No. of Stores Percentage
Not at all 5 2.50% 85 42.50%
<5 47 23.50% 43 21.50%
5-10 94 47.00% 60 30.00%
10-15 27 13.50% 5 2.50%
15-20 15 7.50% 4 2.00%
20-25 9 4.50% 1 0.50%
>25 3 1.50% 2 1.00%
Total 200 100.00% 200 100.00%
Table 3.100-c: Central Tendencies - Percentage of Sales Affected

by Competition from kirana Stores and Organised Retail
Outlets in one Square Kilometre
kirana Stores Organised Retail Outlets
Mean 8.54 3.84
Median 7.5 2.5
Mode 7.50 0
S.D. 5.78 4.87
Range 27.50 27.50
Figure 3.42: Impact of Competition on Sales
203
iii. Problems Faced by the kirana Stores
Table 3.101-a, Table 3.101-b and Figure 3.43 present the problems faced
by the kirana stores. The major problem confronting the kirana stores was the
declining sales margins. This may be because of the decline or stagnation in sales
and the growing competition around. Eventually, all these impact profit margin of
the stores. As the kirana stores are relatively small in size, their weak bargaining
power with the vendors is another factor for unimpressive margins.
Another major problem was the limited space available in a kirana store. On
one side, the kirana stores prefer to stock more SKUs in the stores in order to offer
a wide range of SKUs to the customers and at the same time, the limited space in
the stores is a constraint. As such, many stores face this conflict and it appears it is
a tight rope walking for many a store.
The third major problem faced by many stores relates to the working capital
needs of business. Kirana stores want to offer more merchandise but crippled by
shortage of funds.
Figure 3.44 depicts the problems faced by the kirana stores and the ranks
determined on the basis of the weighted scores.
Table 3.101-a: Problems Faced by kirana Stores
Competition
Competition
Credit from Less Space in the
from Kirana Sales Margin Financing Less Sales
Facility Organised Customers Shop
Stores
Outlets
Freq % Freq % Freq % Freq % Freq % Freq % Freq % Freq %
1 2 2.7 8 11 13 16 17 20.5 7 8.4 12 16.4 18 21.7 7 9.0
2 8 11 11 15 12 15 14 16.9 19 22.9 11 15.1 5 6.0 2 2.6
3 15 20 7 9.5 10 12 14 16.9 13 15.7 5 6.8 11 13.3 5 6.4
4 9 12 4 5.4 19 23 6 7.2 16 19.3 7 9.6 13 15.7 8 10.3
5 8 11 10 14 12 15 16 19.3 7 8.4 9 12.3 6 7.2 10 12.8
6 8 11 14 19 3 3.7 8 9.6 14 16.9 11 15.1 7 8.4 9 11.5
7 8 11 12 16 8 9.8 3 3.6 4 4.8 13 17.8 15 18.1 6 7.7
8 12 16 5 6.8 4 4.9 5 6.0 1 1.2 3 4.1 6 7.2 31 39.7
9 4 5.4 3 4.1 1 1.2 - - 2 2.4 2 2.7 2 2.4 - -
Total 74 100 74 100 82 100 83 100 83 100 73 100 100 78 100

83
204
Table 3.101-b: Weighted Scores of the Problems Faced
Rank Wt. Rank

Problem Total
1 2 3 4 5 6 7 8 9 Score
Credit Facility 2 8 15 9 8 8 8 12 4 74 365 VII

Competition from Kirana Stores 8 11 7 4 10 14 12 5 3 74 605 V
Competition from Organised
Outlets
13 12 10 19 12 3 8 4 1 82 318 VIII
Sales Margin 17 14 14 6 16 8 3 5 83 903 I
Less Customers 7 19 13 16 7 14 4 1 2 83 745 IV

Financing 12 11 5 7 9 11 13 3 2 73 756 III
Space in the Store 18 5 11 13 6 7 15 6 2 83 782 II
Less Sales 7 2 5 8 10 9 6 31 78 547 VI
Figure 3.43: Problems Faced by kirana Stores
205
iii. Future Plans of the kirana Stores and Customer Satisfaction
Table 3.102-a and Table 3.102-b explain the future plans of the kirana
stores. The data show that the store operators wished to increase the SKUs and
expand their stores. Also, some of them wished to go for computerisation.
Table 3.102-a: Future Plans – I

No Plan 16 8.00%
Increasing the SKUs 120 60.00%
Expanding the store 126 63.00%
Opening a new store 18 9.00%
Computerisation 32 16.00%
Taking orders through
13 6.50%
the Internet
Others 1 0.50%
Table 3.102-b: Future Plans – II

No. of
Percentage
Stores
No Plan 16 8.00%
Increasing the SKUs 29 14.50%
Expanding the store 33 16.50%
Expansion and Increasing the SKUs 65 32.50%
Opening a new store 10 5.00%
Computerisation 4 2.00%
Computerisation and Expansion 8 4.00%
Computerisation, Expansion and Increasing SKUs 9 4.50%
Computerisation, Expansion, Increasing SKUs and Ordering
2 1.00%
through the Internet
Computerisation, Expansion and Ordering through the
1 0.50%
Internet
Computerisation and Increasing SKUs 4 2.00%
Computerisation, Increasing SKUs and Opening New Store 1 0.50%
Computerisation, Increasing SKUs and Ordering through
1 0.50%
the Internet
Computerisation and Ordering through the Internet 2 1.00%
Expansion, Increasing the SKUs and Opening a New Store 1 0.50%
Expansion, Increasing the SKUs and Ordering through the
2 1.00%
Internet
Expansion, Increasing SKUs and Opening a New Store 3 1.50%
Expansion and Ordering through the Internet 2 1.00%
Increasing SKUs and Opening a New Store 3 1.50%
Increasing SKUs and Ordering through the Internet 3 1.50%
Others 1 0.50%
Total 200 100.00%
206
Tables 3.103-a, 3.103-b and Figure 3.44 show that the customers were
satisfied with the SKUs and different services offered by the kirana stores.
Similarly, as could be seen from data in Table 103-c, kirana store operators too
were satisfied with their business as of now. But it may be noted that given the fast
changing retail business environment, there is no room for complacency. The
kirana store need to gear up and identify the niche areas where they could cash on
for long time survival.
Table 3.103-a: Customer Satisfaction with SKUs

Highly Satisfied 8 4.0%
Satisfied 190 95.0%
Neither Satisfied nor dissatisfied 2 1.0%
Dissatisfied 0 0.0%
Highly dissatisfied 0 0.0%
Total 200 100%
Table 3.103-b: Customer Satisfaction with Services

Satisfied 186 93.0%
Dissatisfied 2 1.0%
Highly dissatisfied 0 0.0%
Total 200 100.0%
Table 3.103-c: Satisfaction Level of kirana Store Owners

Satisfied 184 92.00%
Dissatisfied 4 2.00%
Highly Dissatisfied 1 0.50%
Total 200 100%
207
Figure 3.44: Customer Satisfaction with SKUs and Services
PERFORMANCE METRICS FOR KIRANA STORES
i. Monthly Sales
Some of the important measures to determine the performance and

efficiency of F&G are monthly sales, sales per square foot and sales per employee.
As such, there are no earlier studies on different metrics of kirana stores available
to compare with the present study.
Monthly sales is calculated using the formula

Daily Sales = Number of Customers/Day x Average Sales per customer
Monthly
Table 3.104 Salesthe
shows = Daily Salessales
monthly x No.ofof the
Days/Month
kirana stores. The monthly sales
varied widely from Rs. 25,000 - Rs. 3,00,000. There was no pattern in the monthly
sales among the kirana stores. In about 30% of the kirana stores, monthly sales
was less than Rs. 75,000 per month. About another 40% of the kirana stores had
monthly sales in the range of Rs. 1,00,000 - Rs. 1,75,000. Interestingly, in about
one-quarter (28%) of the stores, the monthly sales was more than Rs. 2,00,000.
The sales per month of the stores varied widely for the reason that it is a
function of the footfalls per day, number of households in the area, income of the
households, the buying power, competition from the other stores etc.
208
Table 3.104: Monthly Sales (Rs. in Lakhs)
Sales (Rs.) No. of Outlets Percentage

<0.25 21 10.5
0.25 - 0.50 14 7.0
0.50 - 0.75 25 12.5
0.75 - 1.0 0 0.0
1.0 - 1.25 37 18.5
1.25 - 1.50 0 0.0
1.50 - 1.75 48 24.0
1.75 - 2.0 0 0.0
2.0 - 2.25 7 3.5
2.25 - 2.50 25 12.5
2.50 -2.75 3 1.5
2.75 - 3.0 15 7.5
>3.0 5 2.5
Total 200 100.0
ii. Sales per Square foot

All over the world, it is customary in the Food and Grocery business that the
sales per square foot is determined to know the performance of a store. In the
context of kirana stores, the researcher could not find any benchmark to compare
this index.
Table 3.105 shows the sales per square foot (in Rs.) of the sample kirana
stores. In about 35% of the kirana stores, sales per square foot was less than Rs.
250 and another 18% of the kirana stores reported having sales per square foot in
the range of Rs. 250 – 500. More so, the sales per square foot was Rs. 500 – 750
for about 11% of the stores. Interestingly, in the case of about 30% of the stores
the sales per square foot was more than Rs. 1,000. The average of the sales per
square foot of kirana stores was Rs. 670. Figure 3.45 depicts the monthly sales
vis-a-vis the sales per square foot.
209
Table 3.105: Sales per Square Foot (Rs.)
Sales (Rs.) No. of Outlets Percentage

<250 69 34.5
250 – 500 35 17.5
500 – 750 22 11.0
750 – 1,000 15 7.5
1,000 – 1,250 28 14.0
1,250 – 1,500 16 8.0
1,500 – 1,750 5 2.5
1,750 – 2,000 6 3.0
>2,000 4 2.0
Total 200 100.0
Figure 3.45: Monthly Sales Vs. Sales per Sq.foot
210
iii. Sales per Employee
Sales per employee is another important measure to find whether the stores
are able to generate the cash flow and employee productivity.
As per the data presented in Table 3.106-a, the sales per employee was
less than Rs. 10,000 in about 11% of the kirana stores. In half of the stores (51%),
the sales per employee was in the range of Rs. 10,000-50,000. Further, in a
quarter (24%) of the kirana stores, the sales per employee was in the range of Rs.
50,000-60,000. It could also be seen that about 2% of the stores were having the
sales of more than Rs. 1,00,000 per employee.
Figure 3.46 compares the monthly sales with the sales per employee and
Table 106-b shows the central tendencies of the monthly sales, sales per square
foot and sales per employee.
Table 3.106-a: Sales per Employee (Rs.)
No. of Percentage
Sales (Rs.)
Outlets
<10,000 21 10.5
10,000 – 20,000 30 15.0
20,000 – 30,000 30 15.0
30,000 – 40,000 22 11.0
40,000 – 50,000 20 10.0
50,000 – 60,000 47 23.5
60,000 – 70,000 0 0.0
70,000 – 80,000 22 11.0
80,000 – 90,000 2 1.0
90,000 – 1,00,000 2 1.0
>1,00,000 4 2.0
Total 200 100.0
211
Figure 3.46: Monthly Sales Vs Sales per Employee
Table 3.106-b: Central Tendencies of Monthly Sales,

Sales per Sq. foot and Sales per Employee
Monthly Sales Sales per Sq. ft. Sales per Employee

(Rs.) (Rs.) (Rs.)
Mean 1,46,839 664 58,303

Median 1,57,320 457 55,440
Mode 1,66,320 1,040 83,160
Std. Deviation 92,592 599 40,359
Variance 8.573E9 3,59,171 1.629E9
Skewness 0.62 1.51 1.43
Kurtosis 0.41 3.70 5.55

212
CHAPTER – 4
TESTING OF HYPOTHESIS AND MODEL BUILDING
TESTING OF HYPOTHESIS – ORGANISED RETAIL OUTLETS
Testing of Hypothesis: 98
Inferential statistics is concerned with estimating the true value of population

parameters using sample statistics. A statistical hypothesis is a claim (assertion,
statements, belief or assumption) about an unknown population parameter value.
On the basis of sample findings, the hypothesized value of the population
parameter is either accepted or rejected. The process that enables a decision
maker to test the validity (or significance) of his claim by analysing the difference
between the value of sample statistic and the corresponding hypothesised
parameter value is called testing of hypothesis.
Hypothesis 1
One-Way ANOVA
There are three different groups of customers namely customers visit with
family, friends or alone (independent variable) to an outlet.
1. The time spent by the groups (dependent variable – continuous variable)
2. The purchase made by the groups (dependent variable – continuous
variable)
Null Hypotheses
1. Mean time spent by different groups of customers in the organised outlets

was same.
2. Mean amount of purchase made by different groups of customers in the
organised outlets was same
98
Sharma, J.K., Business Statistics, Pearson Education, Second Edition, 2007, pp327-
329.
213
Table 4.1: Descriptive Statistics (Time Spent)
95% Confidence
Std. Std. Interval for Mean
N Mean Minimum Maximum
Deviation Error Lower Upper
Bound Bound
Family 150 43.8667 15.02734 1.22698 41.4421 46.2912 13.00 113.00
Friends 150 28.1000 10.17086 .83045 26.4590 29.7410 8.00 45.00

Gr_tim
Alone 150 21.4133 9.27448 .75726 19.9170 22.9097 3.00 40.00
Total 450 31.1267 15.05371 .70964 29.7320 32.5213 3.00 113.00
Family 150 931.50 343.741 28.066 876.04 986.96 200 2000
Friends 150 609.00 227.425 18.569 572.31 645.69 150 1100

Gr_purc
Alone 150 462.83 238.577 19.480 424.34 501.33 100 1000
Total 450 667.78 337.170 15.894 636.54 699.01 100 2000
Table 4.2: Test of Homogeneity of Variances (Time Spent – Levene Statistics)
Levene Statistic df1 df2 Sig.

gr_tim 15.555 2 447 .000
gr_purc 4.903 2 447 .008
The significance value of 0.000 in the case of time spent by the groups and
0.008 in the case of purchases made by the groups indicate that the variances of
time spent and the purchases made by the groups do indeed differ significantly
(Table 4.1 and Table 4.2).
The ANOVA table also shows the significance value of 0.000 in both the
cases namely time spent by the groups and purchases made by the groups. This
shows that the mean time spent and the mean amount of purchases made by the
groups differ significantly (Table 4.3).
214
Table 4.3: ANOVA (Time Spent)
Sum of
df Mean Square F Sig.
Squares
Between
39872.573 2 19936.287 144.019
Groups
gr_tim 0.000
Within Groups 61877.207 447 138.428
Total 101749.780 449
Between
1.725E7 2 8625484.722 114.094
Groups
gr_purc 0.000
Within Groups 3.379E7 447 75599.683
Total 5.104E7 449
Table 4.4: Contrast Coefficients (Time Spent) – I
gr_name
Contrast
Family Friends Alone
1 0 1 -1
2 1 0 -1
Table 4.5: Contrast Tests (Time Spent) – II
Value of Sig. (2-

Contrast Std. Error t df
Contrast tailed)
Assume equal 1 6.6867 1.35857 4.922 447 .000
variances 2 22.4533 1.35857 16.527 447 .000
gr_tim
Does not assume 1 6.6867 1.12387 5.950 295.499 .000
equal variances 2 22.4533 1.44184 15.573 248.127 .000
Assume equal 1 146.17 31.749 4.604 447 .000
variances 2 468.67 31.749 14.762 447 .000
Gr_purc
Does not assume 1 146.17 26.912 5.431 297.320 .000
equal variances 2 468.67 34.164 13.718 265.515 .000
The contrast tests show that the time spent and purchases made by the
groups namely customers visiting alone and customers visiting with friends were
significantly different (with their means) under both the conditions namely
215
‘assuming equal variances’ and ‘not assuming equal variances’. As shown by the
Levene’s test, ‘variances are different’ are considered (Table 4.4 to Table 4.6).
The contrast tests show that the time spent and purchases made by the
groups namely customers visiting alone and customers visiting with family were
significantly different (with their means) under both the conditions namely
‘assuming equal variances’ and ‘not assuming equal variances’. But as shown by
the Levene’s test, ‘the variances are different’ are considered in the context (Table
4.4 to Table 4.6).
Table 4.6: Multiple Comparisons – Least Significant Difference (LSD)

Method (Time Spent)
Depende 95% Confidence Interval

(I) (J) Mean
nt Std. Error Sig.
gr_name gr_name Difference (I-J) Lower Bound Upper Bound
Variable
*
Friends 15.76667 1.35857 .000 13.0967 18.4366
Family *
Alone 22.45333 1.35857 .000 19.7834 25.1233
*
Family -15.76667 1.35857 .000 -18.4366 -13.0967
gr_tim Friends *
Alone 6.68667 1.35857 .000 4.0167 9.3566
*
Family -22.45333 1.35857 .000 -25.1233 -19.7834
Alone
*
Friends -6.68667 1.35857 .000 -9.3566 -4.0167
*
Friends 322.500 31.749 .000 260.10 384.90
Family *
Alone 468.667 31.749 .000 406.27 531.06
*
Family -322.500 31.749 .000 -384.90 -260.10
gr_purc Friends *
Alone 146.167 31.749 .000 83.77 208.56
*
Family -468.667 31.749 .000 -531.06 -406.27
Alone
*
Friends -146.167 31.749 .000 -208.56 -83.77
*. The mean difference is significant at the 0.05 level.
– In the above table 4.6, the asterisks marked variables show that the mean
of the given two pairs differ significantly.
– This shows that the mean time spent in the outlets by different groups
namely
216
family vis-a-vis friends and alone
friends vis-a-vis family and alone
alone vis-a-vis family and friends
are significantly different.
– Similarly, from the above table, it may be inferred that the mean amount of
purchases made by different groups namely
family vis-a-vis friends and alone
friends vis-a-vis family and alone
alone vis-a-vis family and friends
are significantly different.
Hypothesis 2
One-Way ANOVA
H0: Mean of the percentage of sales over different period of a month

(namely 1-10, 11-20 and 21-30 days) are same.
H1: Mean of the percentage of sales over different period of a month

(namely 1-10, 11-20 and 21-30 days) are not same.
Table 4.7: Descriptives (Percentage of Sales)
95% Confidence
Std. Std. Interval for Mean
Days N Mean Min Max
Deviation Error Lower Upper
Bound Bound
1-10 150 46.53 8.608 .703 45.14 47.92 30 75
11-20 150 27.22 7.175 .586 26.06 28.38 10 50
21-30 150 26.52 8.216 .671 25.19 27.85 10 40
Total 450 33.42 12.256 .578 32.29 34.56 10 75
Table 4.8: Test of Homogeneity of Variances (Percentage of Sales)
Levin
df1 df2 Sig.
Statistic
3.708 2 447 .025
217
Levin Statistics shows the significance value of 0.025. This shows that the
variances of percentage of sales over different period of a month do differ
significantly (Table 4.7 and Table 4.8).
Table 4.9: ANOVA (Percentage of Sales)
Sum of Squares df Mean Square F Sig.

Between Groups 38675.204 2 19337.602 300.464
Within Groups 28768.573 447 64.359 - .000
Total 67443.778 449 - -
The ANOVA table also shows the significance value of 0.000. This shows
that the mean of the percentage of sales over different period of a month differ
significantly (Table 4.9).
Table 4.10: Contrast Coefficients (Percentage of Sales)
Days of a Month
Contrast
1-10 11-20 21-30
1 1 0 -1
2 0 -1 1
3 -1 1 0
Table 4.11: Contrast Tests (Percentage of Sales)
Con- Value of Std. Sig.

Percentage of Sales t df
trast Contrast Error (2-tailed)
1 20.01 .926 21.597 447 .000
Assume equal
2 -.70 .926 -.756 447 .450
variances
3 -19.31 .926 -20.842 447 .000
1 20.01 .972 20.591 297.353 .000
Does not assume
2 -.70 .891 -.786 292.690 .433
equal variances
3 -19.31 .915 -21.101 288.628 .000
Under both the conditions namely ‘assuming equal variances’ and ‘not
assuming equal variances’ (which is applicable in the present context), the contrast
218
tests show that the mean of the percentage of sales over the first ten days (1st -
10th) differ significantly with next ten days (11th-20th) and also last ten days (21st-
30th) of a month (Table 4.10 to Table 4.12).
Under both the conditions namely ‘assuming equal variances’ and ‘not
assuming equal variances’ (which is applicable in the present context), the contrast
tests show that the mean of the percentage of sales over 11th – 20th does not differ
significantly with the last ten days 21st– 30th of a month (Table 4.10 to Table 4.12).
Table 4.12: Post Hoc Tests – Multiple Comparisons (Percentage of

Sales) Least Significant Difference (LSD) Method
(I) (J) Mean 95% Confidence Interval

Day_ Day_ Difference Std. Error Sig. Lower Upper
Mon Mon (I-J) Bound Bound
11-20 19.307* .926 .000 17.49 21.13
1-10
21-30 20.007* .926 .000 18.19 21.83
1-10 -19.307* .926 .000 -21.13 -17.49
11-20
21-30 .700 .926 .450 -1.12 2.52
1-10 -20.007* .926 .000 -21.83 -18.19
21-30
11-20 -.700 .926 .450 -2.52 1.12
*. The mean difference is significant at the 0.05 level.
In the above table 4.12, the asterisks show that the mean of the given two
pairs differ significantly. It could be inferred from the table that
The mean of percentage of sales over the first ten days (1st – 10th) differ
significantly with 11th – 20th and also 21st – 30th of a month.
The mean of percentage of sales over the second ten days (11th – 20th)
differ significantly with 1st – 10th but not with the 21st – 30th of a month.
The mean of percentage of sales over the last ten days (21st – 30th) differ
significantly with 1st – 10th but not with 11th – 20th of a month.
219
CROSS-TABULATION AND CHI-SQUARE ANALYSIS
Hypothesis 3
H0: Footfalls at an organised retail outlet is independent of the

location of the outlet.
H1: Footfalls at an organised retail outlet is not independent of the

location of the outlet.
Table 4.13: Case Processing Summary (Independence of Location)
Cases
Valid Missing Total
N Percent N Percent N Percent
Location *
126 100.0% 0 .0% 126 100.0%
Footfalls
Table 4.14: Location * Footfalls Cross-Tabulation
Footfalls
Location
101-150 151-200 201-250 Total
Count 26 27 14 67
Main Road Expected Count 27.1 25.5 14.4 67.0
Residual -1.1 1.5 -.4
Count 19 9 8 36
Middle of the
Expected Count 14.6 13.7 7.7 36.0
Street
Residual 4.4 -4.7 .3
Count 6 12 5 23
Shopping
Expected Count 9.3 8.8 4.9 23.0
Complex
Residual -3.3 3.2 .1
Count 51 48 27 126
Total
Expected Count 51.0 48.0 27.0 126.0
220
Table 4.15: Chi-Square Tests (Location)
Asymp. Sig.
Value df
(2-sided)
Pearson Chi-
5.492a 4 .240
Square
Likelihood Ratio 5.644 4 .227
N of Valid Cases 126
a. 1 cells (11.1%) have expected count less than 5. The

minimum expected count is 4.93.
Table 4.16: Symmetric Measures (Location)
Value Approx. Sig.

Phi .209 .240
Nominal by Cramer's V .148 .240
Nominal N of Valid
126
Cases
Inference: The Chi-square analysis of the hypothesis is given in the table

4.13 to table 4.15. The table show χ20.05,4 value as 0.240. i.e. the footfalls at an
organised retail outlet is independent of the location of the outlet. The phi and
Cramer’s V measures of association (Table 4.16) are also small and do not
approach significance.
The test conducted showed that the footfall is not dependent on location
alone. There may be other influencing factors that affect the footfalls.
Hypothesis 4
H0: Number of customers is independent of the size of the organised retail

outlets.
H1: Number of customers is not independent of the size of the organised

retail outlets.
221
Table 4.17: Case Processing Summary (Size)
Cases
Valid Missing Total
FD_Area *
147 100.0% 0 .0% 147 100.0%
FD_NCust
Table 4.18: FD_Area * FD_NCust Cross-Tabulation
FD_NCust
FD_Area
1000 – 1500 1501 – 2000 2001 – 2500 2501 – 3000 Total
Count 45 0 0 0 45
1000 – 1500 Expected Count 13.8 22.0 4.0 5.2 45.0
Residual 31.2 -22.0 -4.0 -5.2
Count 0 72 0 0 72
1501 – 2000 Expected Count 22.0 35.3 6.4 8.3 72.0
Residual -22.0 36.7 -6.4 -8.3
Count 0 0 13 0 13
2001 – 2500 Expected Count 4.0 6.4 1.1 1.5 13.0
Residual -4.0 -6.4 11.9 -1.5
Count 0 0 0 17 17
2501 – 3000 Expected Count 5.2 8.3 1.5 2.0 17.0
Residual -5.2 -8.3 -1.5 15.0
Count 45 72 13 17 147
Total
Expected Count 45.0 72.0 13.0 17.0 147.0
Table 4.19: Chi-Square Tests (Size)
Value df Asymp. Sig. (2-sided)

Pearson Chi-Square 4.410E2 9 .000
a. 6 cells (37.5%) have expected count less than 5. The minimum

expected count is 1.15.
222
Table 4.20: Symmetric Measures (Size)
Value Approx. Sig.

Phi 1.732 .000
Nominal by
Cramer's V 1.000 .000
Nominal
Inference: The Chi-square analysis (Table 4.17 to Table 4.19) shows that
the χ20.05,9 value is .000, i.e. null hypothesis could not be accepted. It may be
concluded that the number of customers for an organised retail outlet is not
independent of the size of the outlet. Also, the phi and Cramer’s V measures of
association (Table 4.20) show that the number of customers and size of the
organised outlets are strongly associated.
Hypothesis 5
H0: Number of footfalls at an organised retail outlet is independent of the size of the
outlet.
H1: Number of footfalls at an organised retail outlet is not independent of the size of
the outlet.
Table 4.21: Case Processing Summary (Footfalls)
Cases
Valid Missing Total
FD_Area *
132 100.0% 0 .0% 132 100.0%
Footfalls
223
Table 4.22: FD_Area * Footfalls Cross tabulation (Footfalls)
Footfalls
FD Area
101-150 151-200 201-250 Total
Count 22 14 7 43
1000 – 1500 Expected Count 17.3 16.9 8.8 43.0
Residual 4.7 -2.9 -1.8
Count 29 31 7 67
1501 – 2000 Expected Count 26.9 26.4 13.7 67.0
Residual 2.1 4.6 -6.7
Count 1 6 4 11
2001 – 2500 Expected Count 4.4 4.3 2.2 11.0
Residual -3.4 1.7 1.8
Count 1 1 9 11
2501 – 3000 Expected Count 4.4 4.3 2.2 11.0
Residual -3.4 -3.3 6.8
Count 53 52 27 132
Total
Expected Count 53.0 52.0 27.0 132.0
Table 4.23: Chi-Square Tests (Footfalls)
Asymp. Sig.
Value df
(2-sided)
Pearson Chi-Square 36.525a 6 .000
a. 6 cells (50.0%) have expected count less than 5. The
minimum expected count is 2.25.
Table 4.24: Symmetric Measures (Footfalls)
Value Approx. Sig.

Phi .526 .000
Cramer's V .372 .000
Nominal by Nominal
N of Valid
132
Cases
224
Inference: The Chi-square analysis (Table 4.21 to Table 4.23) shows that
the χ20.05,6 value is 0.000, i.e. null hypothesis could not be accepted. It is concluded
that the number of footfalls at an organised retail outlet is not independent of the
size of the outlet. Also, the phi and Cramer’s V measures of association
(Table 4.24) confirm the same.
CORRELATION ANALYSIS
Hypothesis 6
H0: Total Number of Customers depends on Catchment area of an organised retail

outlet.
H1: Total Number of Customers does not depend on Catchment area of an

organised retail outlet.
Table 4.25: Correlations (Catchment Area and No. of Customers) – I
Catch_Area No_of_Customers
Pearson Correlation 1 .179*
Catch_Area Sig. (2-tailed) .028
N 150 150
Pearson Correlation .179* 1
No_of_Customers Sig. (2-tailed) .028
N 150 150
*. Correlation is significant at the 0.05 level (2-tailed).
Table 4.26: Correlations (Catchment Area and No. of Customers) - II
Spearman's rho Catch_Area No_of_Customers

Correlation Coefficient 1.000 .160
Catch_Area Sig. (2-tailed) . .051
N 150 150
Correlation Coefficient .160 1.000
No of Customers Sig. (2-tailed) .051 .
N 150 150
225
Inference: Both the Pearson’s and Spearman’s tests (Table 4.25 and Table
4.26) show that the number of customers for an outlet and catchment area are
correlated.
Hypothesis 7
H0: Footfalls per day depend on Catchment area of an organised retail outlet
H1: Footfalls per day do not depend on Catchment area of an organised retail
outlet.
Table 4.27: Correlations (Footfalls Vs Catchment Area) – I
foot_fall_mid Catch_Area
Pearson Correlation 1 .240**
Sig. (2-tailed) .003
Sum of Squares and
Foot_fall_mid Cross-products 681420.833 1625.667
Covariance 4573.294 10.911

N 150 150
Pearson Correlation .240** 1
Sig. (2-tailed) .003
Sum of Squares and
Catch_Area 1625.667 67.173
Cross-products
Covariance 10.911 .451
N 150 150
**. Correlation is significant at the 0.01 level (2-tailed).
Table 4.28: Correlations (Footfalls Vs Catchment Area) – II
foot_fall_mid Catch_Area
Correlation
1.000 .306**
Coefficient
foot_fall_mid
Sig. (2-tailed) . .000
N 150 150
Spearman's rho
Correlation
.306** 1.000
Coefficient
Catch_Area
Sig. (2-tailed) .000 .
N 150 150
226
Inference: Both the Pearson’s and Spearman’s tests show (Table 4.27 and
Table 4.28) that the footfalls at an outlet and catchment area are correlated.
Hypothesis 8
H0: The sales of the outlets affected by the competition is not more than 10%
H1: The sales of the outlets affected by the competition is more than 10%
One-sample t-test is used to test the hypothesis. The result is shown in

Table 4.29 and table 4.30. The p-value (p > .05) is not significant. i.e., statistically
the null hypothesis cannot be rejected. It can be inferred that the competition for
the retail outlets has affected the sales not more than 10%
Table 4.29: One-Sample Statistics (Competition)
Std. Std. Error

N Mean
Deviation Mean
Compet_Sal_Mid 150 10.0167 6.00263 .49011
Table 4.30: One-Sample Test (Competition)
Test Value = 10
95% Confidence Interval
Sig. (2- Mean
T Df of the Difference
tailed) Difference
Lower Upper
Compet_Sal_Mid .034 149 .973 .01667 -.9518 .9851
TESTING OF HYPOTHESIS –KIRANA STORES
Hypothesis 9
Correlation Analysis of Store Size and Number of Customers
To know whether there exists a relationship between the store size and
number of customers, correlation analysis was undertaken. The result is as follows.
227
H0: The number of customers of a store is dependent on size of the store
H1: The number of customers of a store is not dependent on size of the store
Table 4.31: Correlation Between the Size and

the Number of Customers (kirana Stores)
Size NumCust
Pearson Correlation 1.000 .407**
Size Sig. (2-tailed) .000
N 200.000 200
Pearson Correlation .407** 1.000
NumCust Sig. (2-tailed) .000
N 200 200.000
**Correlation is significant at the 0.01 level (2-tailed).
Inference: The correlation analysis (Table 4.31) shows that there exists a
strong positive relationship between the size of a store and the number of
customers. The Pearson Correlation is r=0.407, p<0.01 (Two-tailed).
Hypothesis 10
Ho: Number of relatives is independent of number of staff working in a kirana store.
H1: Number of relatives depends on number of staff working in a kirana store.
Table 4.32: Correlations (Relatives Vs No. of Staff)
Spearman's rho
and Pearson's
Staff Relatives
Correlation
1.000 .380**
Coefficient
Staff
Sig. (2-tailed) . .000
N 200 200
Correlation
.380** 1.000
Coefficient
Relatives
Sig. (2-tailed) .000 .
N 200 200
228
The testing of hypothesis shows the p value <0.05 (Table 4.32). Therefore,
statistically null hypothesis, that the number of relatives is independent of number
of staff working in a kirana store could not be accepted. That is, the number of
relatives working in a kirana store depends on the number of staff. i.e. more the
number of staff, more the number of relatives working in a store.
Hypothesis 11
Multiple Correlation
H0: Average sales is dependent on size of the store, number of customers of a

store, number of footfalls per day, average time spent by a customer.
H1: Average sales is not dependent on size of the store, number of customers of a
store, number of footfalls per day, average time spent by a customer.
The analysis (Table 4.33 to Table 4.35) show that the average sales is
dependent on number of footfalls per day, average sales per day and the time
spent by a customer.
Table 4.33: Variables Entered / Removedb (Multiple Correlation)
Model Variables Entered Variables Removed Method

Avg_time_spent, Aver_cust,
1 . Enter
Avg_sales, Size, NumCusta
a. All requested variables entered.
b. Dependent Variable: Avg_sale_store.
Table 4.34: Coefficientsa (Multiple Correlation)
Unstandardized Standardized 95% Confidence

Coefficients Coefficients Interval for B
Model t Sig.
Std. Lower Upper
B Beta
Error Bound Bound
(Constant) -3596.498 238.631 -15.071 .000 -4067.142 -3125.853
Size -.287 .360 -.023 -.798 .426 -.996 .422
NumCust .401 .987 .012 .406 .685 -1.546 2.347
1 Aver_cust 48.262 3.057 .433 15.789 .000 42.233 54.290
Avg_sales 70.632 2.343 .719 30.142 .000 66.010 75.253
Avg_time_s
49.916 21.550 .065 2.316 .022 7.414 92.418
pent
a. Dependent Variable: Avg_sale_store

229
Table 4.35: Coefficient Correlationsa (Multiple Correlation)
Avg_time_ Num
Model Aver_cust Avg_sales Size
spent Cust
Avg_time_spent 1.000 -.073 -.095 -.534 -.027
Aver_cust -.073 1.000 -.100 .207 -.532
Correlations Avg_sales -.095 -.100 1.000 .027 -.192
Size -.534 .207 .027 1.000 -.345
NumCust -.027 -.532 -.192 -.345 1.000
1
Avg_time_spent 464.397 -4.824 -4.801 -4.135 -.581
Aver_cust -4.824 9.344 -.716 .228 -1.605
Covariances Avg_sales -4.801 -.716 5.491 .023 -.445
Size -4.135 .228 .023 .129 -.123
NumCust -.581 -1.605 -.445 -.123 .974
a. Dependent Variable: Avg_sale_store
Comparison of traditional kirana stores and modern organised retail outlets
When sample data do not meet the basic assumptions that underlie the
parametric procedure (e.g. normality or homogeneity of variance), nonparametric
methods are used. Kolomogorov-Smirnov test is used to find whether the given
distribution is normally distributed or not. Wilcoxon- Mann-Whitney independent
two sample test is used to find the independence of the two populations.99
i. Comparison of Sales per Sq. foot (Rs.)
The investigator was interested in comparing the sales per square foot of
organised retail outlets and unorganised kirana stores. Table 4.36 and Figure 4.1
show the information regarding sales per square foot. Further, non-parametric test
was used to test the difference. The result is as follows.
99
Carver, Robert H. and Nash, Jane G, “Data Analysis with SPSS”, Cengage Learning,
India Edition, 2009
230
Table 4.36: Comparison of Sales per Square foot
Kirana Stores Organised Outlets

Sales (Rs.)
No. of Outlets Percentage No. Of Outlets Percentage
<250 69 34.5 17 11.3
250 – 500 35 17.5 22 14.7
500 – 750 22 11.0 30 20.0
750 – 1000 15 7.5 48 32.0
1,000 – 1,250 28 14.0 22 14.7
1,250 – 1,500 16 8.0 7 4.7
1,500 – 1,750 5 2.5 2 1.3
1,750 – 2,000 6 3.0 1 0.7
>2,000 4 2.0 1 0.7
Total 200 100.0 150 100.0
Figure 4.1: Sales per Sq. foot (in Rs.)
231
Hypothesis 12
One sample Kolomogorov-Smirnov test shows that the metric sales per
square foot of kirana stores were not normally distributed (p < 0.05). But the sales
per square foot of organised retail outlets were normally distributed (p > .05)
(Table 4.37).
Table 4.37: One-Sample Kolmogorov-Smirnov Test

(Sales per Square Foot)
Sales per Sq. foot

Kirana Stores Organised Retail Outlets
N 200 150
Mean 663.9800 758.8117
Normal Parametersa
Std. Deviation 599.30898 363.54617
Absolute .157 .062
Most Extreme
Positive .157 .062
Differences
Negative -.143 -.050
Kolmogorov-Smirnov Z 2.221 .755
Asymp. Sig. (2-tailed) 0.000 0.620
a. Test distribution is Normal.
Wilcoxon-Mann-Whitney independent two sample test is used to find the

independence of the two populations.
Table 4.38: Mann-Whitney Test (Sales per Square foot)
Ranks
Mean Sum of
Kira_or_Organ N
Rank Ranks
Organised Retail
150 196.97 29545.50
Outlets
Sales_Sq_ft.
Kirana Stores 200 159.40 31879.50
Total 350
232
Table 4.39: Test Statistics (Sales per Square Foot)
Test Statisticsa
Sales_Sq_Mt
Mann-Whitney U 11779.500
Wilcoxon W 31879.500
Z -3.438
Asymp. Sig. (2-tailed) 0.001
a. Grouping Variable: Kira_or_Organ
The result (Table 4.38 and Table 4.39) suggests that there exists
statistically significant difference between the underlying distributions of the sales
per square foot of organised retail outlets and the kirana stores (z = -3.438, p <
0.05). Mann-Whitney Test is more conservative than the parametric test such as
t-test. The sales per square foot of an organised retail outlets is greater than that of
kirana store.
The two sample independent t-test (Table 4.40 and Table 4.41) does
suggest that the sales per square foot is not statistically different (t=1.833, p>0.05).
Table 4.40: Independent Two-Sample T-test (Sales per Square foot)
Group Statistics
Kira_or_Organ N Mean Std. Deviation Std. Error Mean
Organised Retail
150 758.8117 363.54617 29.68342
Outlets
Kirana Stores 200 663.9800 599.30898 42.37754
233
Table 4.41: Equality of Variances (Sales per Square foot)
Levene's Test for Equality of

t-test for Equality of Means
Variances
Std. 95% Confidence

Sig. Mean Interval of the
Error
Sales_Sq_ft F Sig. t Df (2- Differen Difference
Differen
tailed) ce
ce Lower Upper
Equal
0.00
variances 36.66 1.715 348 0.087 94.832 55.285 -13.902 203.566
0
assumed
Equal
variances
1.833 334.60 0.068 94.832 51.739 -6.9437 196.607
not
assumed
ii. Comparison of Sales per Employee (Rs. in Lakhs)
Comparison of the sales per employee of organised retail outlets and

unorganised kirana stores was done. Table 4.42 and Figure 4.2 show the
information regarding sales per employee. Also, non-parametric test was used to
compare the same. The result is as follows.
Table 4.42: Comparison of Sales per Employee (Rs. in Lakhs)
Organises Retail Outlets Kirana Stores

Amount No. of Amount No. of
(Rs.) Outlets (Rs.) Outlets
<0.3 3 2 <0.1 21 10.5
0.3 - 0.6 18 12 0.1 – 0.2 30 15
0.6 - 0.9 32 21 0.2 – 0.3 30 15
0.9 - 1.2 21 14 0.3 – 0.4 22 11
1.2 - 1.5 36 24 0.4 – 0.5 20 10
1.5 - 1.8 24 16 0.5 – 0.6 47 23.5
1.8 -2.1 6 4 0.6 – 0.7 0 0
2.1 - 2.4 2 1 0.7 – 0.8 22 11
2.4 - 2.7 0 0 0.8 – 0.9 2 1
2.7 - 3.0 4 3 0.9 – 1.0 2 1
3.0 - 3.3 1 1 >1.0 4 2
3.3 - 3.6 1 1 Total 200 100
> 3.6 2 1
234
Figure 4.2: Sales per Employee (Rs. in Lakhs)
Hypothesis 13
One sample Kolomogorov-smirnov test shows that the metric, sales per
employee of kirana stores (p<0.04) and organised retail outlets (p<0.03) were not
normally distributed (Table 4.43).
Table 4.43: One-Sample Kolmogorov-Smirnov Test (Sales per Employee)
Sales per Employee

Kirana Stores Organised Retail Outlets
N 200 150
Normal Mean 58303 124299
Parametersa Std.
Deviation 40358 68654
Most Absolute 0.099 0.118
Extreme Positive 0.099 0.118
Differences
Negative -0.075 -0.076
Kolmogorov-Smirnov Z 1.4 1.448
Asymp. Sig. (2-tailed) 0.04 0.03

235
So, Wilcoxon-Mann-Whitney independent two sample test is used to find the
independence of the two populations.
Table 4.44: Mann-Whitney Test (Sales per Employee)
Kira_or_Organ N Mean Rank Sum of Ranks

Organised Retail Outlets 150 240.89 36134.00
Sales_Emp Kirana Stores 200 126.46 25291.00
Total 350
Table 4.45: Test Statisticsa (Sales per Employee)
Sales_Emp
Z -10.474
Asymp. Sig. (2-tailed) .000
a. Grouping Variable: Kira_or_Organ.
The result (Table 4.44 and Table 4.45) suggests that there is a
statistically significant difference between the underlying distributions of sales
per employee of organised retail outlets and the kirana stores (z = -10.474, p
< 0.05). The two sample independent t-test also confirms the same (t =
10.492, p<0.05) (Table 4.46 and Table 4.47).
Table 4.46: Group Statistics (Sales per Employee)
Group Statistics
Std. Std. Error
Kira_or_Organ N Mean
Deviation Mean
Organised Retail
150 124298.7654 68654.31821 5605.60161
Sales_Emp Outlets
Kirana Stores 200 58303.0200 40358.49528 2853.77657
236
Table 4.47: Equality of Means (Sales per Employee)
Levene's Test for Equality

t-test for Equality of Means
of Variances
95% Confidence
Sig. Interval of the
Sales_ Mean Std. Error Difference
F Sig. t df (2-
Emp Difference Difference
tailed)
Lower Upper
Equal
variances 16.45 0.00 11.25 348 0.000 65995.75 5866.09 54458.29 77533.2
assumed
Equal
variances
10.492 224.93 0.00 65995.75 6290.22 53600.46 78391.03
not
assumed
iii. Comparison of Monthly Sales (Rs. in Lakhs)
Comparison of monthly sales of organised retail outlets and unorganised

kirana stores was done. Table 4.48 and Figure 4.3 show the information regarding
monthly sales. Also, non-parametric test was used to compare the same. The
result is as follows.
Table 4.48: Comparison of Monthly Sales (Rs. in Lakhs)
Organises Retail Outlets Kirana Stores

Amount No. of Amount No. of Percen-
Percentage
(Rs.) Outlets (Rs.) Outlets tage
<5 19 12.7 <0.25 21 10.5
5-10 23 15.3 0.25 - 0.50 14 7.0
10-15 43 28.7 0.50 - 0.75 25 12.5
15-20 40 26.7 0.75 - 1.0 0 0.0
20-25 6 4 1.0 - 1.25 37 18.5
25-30 9 6 1.25 - 1.50 0 0.0
30-35 6 4 1.50 - 1.75 48 24.0
35-40 3 2 1.75 - 2.0 0 0.0
>40 1 0.7 2.0 - 2.25 7 3.5
Total 150 100 2.25 - 2.50 25 12.5
Source: Field Survey. 2.5 -2.75 3 1.5
2.75 - 3.0 15 7.5
>3.0 5 2.5
Total 200 100.0
237
Figure 4.3 : Monthly Sales (Rs. in Lakhs)
Hypothesis 14
One sample Kolomogorov-smirnov test shows that the metric monthly sales
of organised retail outlets and the kirana stores were not normally distributed
(Table 4.49).
Table 4.49: One-Sample Kolmogorov-Smirnov Test (Monthly Sales)
Monthly Sales
Organised
Retail Outlets kirana Stores
N 150 200
Normal Parametersa Mean 1.4777E6 146838.7500
Std.
8.93519E5 92592.35827
Deviation
Most Extreme Absolute .146 .142
Differences Positive .146 .142
Negative -.088 -.078
Kolmogorov-Smirnov Z 1.786 2.004
Asymp. Sig. (2-tailed) .003 .001
238
The Wilcoxon-Mann-Whitney test is used to test the hypothesis
H0: The two samples come from same populations
H1: The two samples come from different populations
Table 4.50: Mann-Whitney Test (Monthly Sales)

Ranks
Mean Sum of
Kira_or_Organ N
Rank Ranks
Organised Retail
150 275.09 41263.00
Outlets
Month_Sales
Kirana Stores 200 100.81 20162.00
Total 350
Table 4.51: Test Statistics (Monthly Sales)
Test Statisticsa
Month_Sales
Z -15.972
Asymp. Sig. (2-tailed) .000
a. Grouping Variable: Kira_or_Organ
The result (Table 4.50 and Table 4.51) suggests that there is statistically
significant difference between the underlying distributions of the monthly sales of
organised retail outlets and the kirana stores (z = -15.972, p < 0.05).
The two sample independent t-test also proves the same (t = 18.17, p<0.05)
(Table 4.52 and Table 4.53).
239
Table 4.52: Independent t-Test (Monthly Sales)
Group Statistics
Std. Std. Error
Kira_or_Organ N Mean
Deviation Mean
Organised Retail
150 1.4777E6 8.93519E5 72955.54046
Month_Sales Outlets
Kirana Stores 200 146838.7500 92592.35827 6547.26844
Table 4.53: Test for Equality of Means (Monthly Sales)
Levene's Test
for Equality of t-test for Equality of Means
Variances
Monthly_ 95% Confidence
Sales Sig. Interval of the
Mean Std. Error Difference
F Sig. t df (2-
Difference Difference
tailed)
Lower Upper
Equal
variances 147.387 0.000 20.925 348 0.000 1.33E+06 63602.33 1.21E+06 1.46E+06
assumed
Equal
variances
18.17 151.402 0.00 1.33E+06 73248.74 1.19E+06 1.48E+06
not
assumed
CLUSTER ANALYSIS
Cluster analysis100 is a collection of statistical methods, which identifies

groups of samples that behave similarly or show similar characteristics. In
common parlance it is also called look-a-like groups. The simplest mechanism is
to partition the samples using measurements that capture similarity or distance
between samples. In this way, clusters and groups are interchangeable words.
Often in market research studies, cluster analysis is also referred to as a
segmentation method.
100
George, Darren and Mallery, Paul, “SPSS for Windows – Step by Step”, Pearson
240
Analysis 1: An attempt is made to segment the organised outlets on the
basis of select parameters such as area (sq. ft.), number of customers, footfalls,
catchment area (sq. kms), monthly sales, expenditure and PBDIT. The cluster
analysis resulted in 3 distinct clusters. The first cluster of outlets is of small
category, the second one is of medium category and the third cluster of outlets is of
large category. The percentage of outlets in each cluster is 16%, 33% and 51%
respectively. They are as follows (Table 4.54).
Table 4.54: Clusters based on performance
Cluster 1 2 3
Area (Sq. ft.) 1,000-1,500 1,500-2,500 2,000-3,000

No. of Customers 1,000-2,000 1,000-2,000 1,500-3,000
Footfalls 100-200 100-300 200-400
Catchment Area (Sq. Kms) 2-3 2-4 2-4
Monthly Sales (Rs. in

1-15 5-20 5-40
Lakhs)
Expenditure as percentage
51-80 70-90 61-90
of Sales
PBDIT (in Rs.) Upto 3 lakhs Upto 4 Lakh 2 – 7 lakhs

No. of SKUs 1,500-3,000 2,000-3,000 2,000-5,000
No. of Outlets 24 49 77
Percentage 16 33 51
Analysis 2: Cluster analysis is used to segment the outlets on the basis of

time spent and amount purchased by customer groups. The analysis resulted in 3
clusters and they are as follows (Table 4.55). The first cluster consisted of outlets
where the customers in different groups spent less time and made less purchases.
This group constituted about one-fifth (19%) of the outlets surveyed. The second
cluster, a major cluster, constituted about half (50%) of the outlets. In this kind of
outlets, the customers spent more time and made more purchase. In the third kind
of outlets, the time spent and purchases made was maximum among the clusters.
241
Table 4.55: Clusters Based on Customer Groups
Customers visit with Customers visit with

Customers visit Alone Outlets
Family Friends
Cluster
Time Amt Time Amt Time Amt Percent
Number
Spent Purchased Spent Purchased Spent Purchased age
1 21-30 500-1,000 11-20 250-500 <10 <250 29 19
2 31-40 750-1,500 21-30 500-750 11-20 250-500 77 51
3 41-50 1,000-1,500 31-40 500-1,000 21-30 500-1,000 44 29
Total 150 100
MATHEMATICAL MODELLING
A mathematical model is the set of equations which describe the behaviour

of the system. The majority of interacting systems in the real world are far too
complicated to model in their entirety. But even if a model describes just a part of
the reality it can be very useful for analysis and design — if it describes the
dominating dynamic properties of the system.101 Hence the first level of
compromise is to identify the most important parts of the system. These will be
included in the model, the rest will be excluded.
The second level of compromise concerns the amount of mathematical

manipulation which is worthwhile. Although mathematics has the potential to prove
general results, these results depend critically on the form of equations used. Small
changes in the structure of equations may require enormous changes in the
mathematical methods. Using computers to handle the model equations may never
lead to elegant results, but it is much more robust against alterations.102
101
Bender, E.A., An introduction to mathematical modelling. Wiley, 1978.
102
Cross, M. and Moscardini, A.O., Learning the art of mathematical modelling, Ellis
Horwood Ltd. Chichester, 1985.
242
ORGANISED RETAIL OUTLETS – REGRESSION MODELS
Model 1 – Multiple Regression for Determining the Monthly Sales.
Monthly Sales of an organised retail outlet depends on number of

customers, footfalls and catchment area.
Table 4.56: Correlations (Number of Customers,

Footfalls and Catchment Area)
Area_ Catch_ foot_fall_ SKU_ Mon_ No_of_

Sqm Area mid NUMBER Sales Customers
Area_Sqm
Pearson
1 .199* .367** .398** .508** .577**
Correlation
Sig. (2-tailed) 0.014 0 0 0 0
N 150 150 150 150 150 150
Catch_Area
Pearson
.199* 1 .240** .254** .264** .179*
Correlation
Sig. (2-tailed) 0.014 0.003 0.002 0.001 0.028
N 150 150 150 150 150 150
foot_fall_mid
Pearson
.367** .240** 1 .509** .395** .579**
Correlation
Sig. (2-tailed) 0 0.003 0 0 0
N 150 150 150 150 150 150
SKU_NUMBER
Pearson
.398** .254** .509** 1 .475** .593**
Correlation
Sig. (2-tailed) 0 0.002 0 0 0
N 150 150 150 150 150 150
Mon_Sales
Pearson
.508** .264** .395** .475** 1 .834**
Correlation
Sig. (2-tailed) 0 0.001 0 0 0
N 150 150 150 150 150 150
No_of_Customers
Pearson
.577** .179* .579** .593** .834** 1
Correlation
Sig. (2-tailed) 0 0.028 0 0 0
N 150 150 150 150 150 150

243
Table 4.57: Correlations - Spearman's rho (Number of Customers,
Area_ Catch_ foot_fall_ SKU_ Mon_ No_of_

Sqm Area mid NUMBER Sales Customers
Area_Sqm
Correlation
1 .285** .408** .377** .290** .405**
Coefficient
Sig. (2-tailed) . 0 0 0 0 0
N 150 150 150 150 150 150
Catch_Area
Correlation
.285** 1 .306** .262** .182* 0.16
Coefficient
Sig. (2-tailed) 0 . 0 0.001 0.026 0.051
N 150 150 150 150 150 150
foot_fall_mid
Correlation
.408** .306** 1 .434** .242** .453**
Coefficient
Sig. (2-tailed) 0 0 . 0 0.003 0
N 150 150 150 150 150 150
SKU_NUMBER
Correlation
.377** .262** .434** 1 .342** .375**
Coefficient
Sig. (2-tailed) 0 0.001 0 . 0 0
N 150 150 150 150 150 150
Mon_Sales
Correlation
.290** .182* .242** .342** 1 .812**
Coefficient
Sig. (2-tailed) 0 0.026 0.003 0 . 0
N 150 150 150 150 150 150
No_of_Customers
Correlation
.405** 0.16 .453** .375** .812** 1
Coefficient
Sig. (2-tailed) 0 0.051 0 0 0 .
N 150 150 150 150 150 150

244
Table 4.58: Model 1 (Number of Customers, Footfalls and
Catchment Area) Model Summaryd
Adjusted Std. Error

R
Model R R of the
Square
Square Estimate
1 .834a 0.696 0.693 4.95E+05
2 .842b 0.709 0.705 4.85E+05
3 .852c 0.726 0.72 4.73E+05
a. Predictors: (Constant), No_of_Customers

b. Predictors: (Constant), No_of_Customers, Catch_Area
c. Predictors: (Constant), No_of_Customers, Catch_Area, foot_fall_mid
d. Dependent Variable: Mon_Sales
Table 4.59: Coefficientsa (Number of Customers,

Unstandardized Standardized
Coefficients Std. Coefficients
Model t Sig.
Error
B Beta
1
(Constant) -974328.6 139334 -6.993 0
No_of_Customers 1264.218 68.752 0.834 18.388 0
2
(Constant) -1.31E+06 188232 -6.973 0
No_of_Customers 1232.133 68.546 0.813 17.975 0
Catch_Area 157249.67 60176 0.118 2.613 0.01
3
(Constant) -1.26E+06 184218 -6.844 0
No_of_Customers 1366.941 80.696 0.902 16.939 0
Catch_Area 187397.37 59498 0.141 3.15 0.002
foot_fall_mid -2121.63 712.88 -0.161 -2.976 0.003
a. Dependent Variable: Mon_Sales
245
Table 4.60: Excluded Variablesd (Number of Customers,
Partial Collinearity
Model Beta In T Sig.
Correlation Statistics
1 Tolerance
Area_Sqm .041a .736 .463 .061 .667
Catch_Area .118a 2.613 .010 .211 .968
foot_fall_mid -.132a -2.404 .017 -.195 .665
SKU_NUMBER -.030a -.540 .590 -.044 .648
2
Area_Sqm .024b .442 .659 .037 .658
foot_fall_mid -.161b -2.976 .003 -.239 .645
SKU_NUMBER -.060b -1.060 .291 -.087 .626
3
Area_Sqm .029c .540 .590 .045 .657
SKU_NUMBER -.024c -.420 .675 -.035 .593
a. Predictors in the Model: (Constant), No_of_Customers

b. Predictors in the Model: (Constant), No_of_Customers, Catch_Area
c. Predictors in the Model: (Constant), No_of_Customers, Catch_Area, foot_fall_mid
d. Dependent Variable: Mon_Sales
The regression analysis using ‘forward entry’ method shows that the sales of
an outlet depend on number of customers, footfalls and catchment area (Table
4.56 to Table 4.60).
The model was able to explain 72% of the variance in ‘monthly sales’ with
the three independent variables namely number of customers, footfalls and
catchment area.
Monthly Sales = 1377 x (Number of customers) + 1,87,397 x (Catchment Area) –

2,122 x (footfalls) -12,61,000
246
Model 2 – Determining PBDIT using multiple regression
PBDIT for an organised outlet is estimated using multiple linear regression

and the model is as follows.
Table 4.61: Correlation (Estimation of PBDIT)
Sales Per_Exp PBDIT

Sales
Pearson Correlation 1 0.122 .918**
Sig. (2-tailed) 0.137 0
N 150 150 150
Per_Exp
Pearson Correlation 0.122 1 -.237**
Sig. (2-tailed) 0.137 0.003
N 150 150 150
PBDIT
Pearson Correlation .918** -.237** 1
Sig. (2-tailed) 0 0.003
N 150 150 150
Table 4.62: Model Summaryc (Estimation of PBDIT)
Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .918 .842 .841 83208.489
b
2 .983 .966 .966 38573.059
a. Predictors: (Constant), Sales,

b. Predictors: (Constant), Sales, Per_Exp
c. Dependent Variable: PBDIT.
247
Table 4.63: ANOVAc (Estimation of PBDIT)
Model Sum of Squares Df Mean Square F Sig.

Regression 5.479E12 1 5.479E12 791.349 .000a
1 Residual 1.025E12 148 6.924E9
Total 6.504E12 149
Regression 6.285E12 2 3.143E12 2.112E3 .000b
2 Residual 2.187E11 147 1.488E9
Total 6.504E12 149
a. Predictors: (Constant), Sales, b. Predictors: (Constant), Sales, Per_Exp,

c. Dependent Variable: PBDIT.
Table 4.64: Coefficientsa (Estimation of PBDIT)
Unstandardized Standardized
Model Coefficients Coefficients t Sig.
B Std. Error Beta
(Constant) 46042.109 13162.698 3.498 .001
1
Sales .215 .008 .918 28.131 .000
862288.39
(Constant) 35597.418 24.223 .000
5
2
Sales .225 .004 .961 63.070 .000
Per_Exp -11092.597 476.601 -.355 -23.274 .000
a. Dependent Variable: PBDIT.
In this model, 97% of the variance in PBDIT is explained by monthly sales

and operating expenses in percentage (Table 4.61 to Table 4.64).
The model is
PBDIT = 0.225 (Sales) – 11,093 (Percentage Expenditure) + 8,62,288
248
Model 3 – Multiple linear regression estimation for determining the sales of a
kirana store.
The analysis showed that the averages sales for a kirana store is dependent
on number of footfalls per day, average sales per day and the time spent by a
customer.
To confirm this proposition, the regression analysis using stepwise and

backward regression methods were used. The analysis corroborates the earlier
conclusion that the average sales of a kirana store is dependent on number of
footfalls per day, average sales per day and the time spent by a customer (Table
4.65 to Table 4.69).
The multiple linear regression equation for determining the average sales of
a kirana store is
Averages Sales = 48.976 x Aver_cust + 70.746 x Avg_sales + 41.416 x

Avg_time_spent -3584.657
Table 4.65: Variables Entered/Removedb

(Average Sales of a kirana Store)
Model Variables Entered Variables Removed Method

1 Avg_time_spent, Aver_cust,
. Enter
Avg_sales, Size, NumCusta
a. All requested variables entered.

Table 4.66: Model Summary (Average Sales of a kirana Store)
R Adjusted R Std. Error of

Model R
Square Square the Estimate
1 .951a .904 .901 969.928
a. Predictors: (Constant), Avg_time_spent, Aver_cust, Avg_sales, Size, NumCust
249
Table 4.67: ANOVAb (Average Sales of a kirana Store)
Model Sum of Squares df Mean Square F Sig.
Regression 1.713E9 5 3.426E8 364.207 .000a
1 Residual 1.825E8 194 940759.419
Total 1.896E9 199
a. Predictors: (Constant), Avg_time_spent, Aver_cust, Avg_sales, Size, NumCust

Table 4.68: Coefficientsa (Average Sales of a kirana Store)

Stand-
Unstandardized 95% Confidence
ardized
Coefficients Interval for B
Model Coefficients t Sig.
Std. Lower Upper
B Beta
Error Bound Bound
(Constant) -3596.498 238.631 -15.071 .000 -4067.142 -3125.853
Size -.287 .360 -.023 -.798 .426 -.996 .422
NumCust .401 .987 .012 .406 .685 -1.546 2.347
1 Aver_cust 48.262 3.057 .433 15.789 .000 42.233 54.290
Avg_sales 70.632 2.343 .719 30.142 .000 66.010 75.253
Avg_time_spe
49.916 21.550 .065 2.316 .022 7.414 92.418
nt
a. Dependent Variable: Avg_sale_store.
Table 4.69: Coefficient Correlationsa (Average Sales of a kirana Store)

Avg_time_ Aver_ Avg_
Model Size NumCust
spent cust sales
Avg_time_spent 1.000 -.073 -.095 -.534 -.027
Aver_cust -.073 1.000 -.100 .207 -.532
Correlations Avg_sales -.095 -.100 1.000 .027 -.192
Size -.534 .207 .027 1.000 -.345
NumCust -.027 -.532 -.192 -.345 1.000
1
Avg_time_spent 464.397 -4.824 -4.801 -4.135 -.581
Aver_cust -4.824 9.344 -.716 .228 -1.605
Covariances Avg_sales -4.801 -.716 5.491 .023 -.445
Size -4.135 .228 .023 .129 -.123
NumCust -.581 -1.605 -.445 -.123 .974
a. Dependent Variable: Avg_sale_store .
In this model 90% of the variance in average sale/day of a kirana store is

explained by footfalls per day, number of customers and average time spent by a
customer.

250
CHAPTER – 5
SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS
5.1 ORGANISED RETAIL OUTLETS
5.11 LOGISTICS DRIVERS
5.111 Location, Size and Layout

5.111.1 The organised retail outlets have spread all over the Bangalore City.
They were not specific to a location, though about half of the
organised outlets were located at prime places on the main roads. In
a metropolitan city like Bangalore where the density of population is
high, it is also true that the place where a large mall/outlet is located
might be an indistinguished one at the time of starting the outlet, but
in course of time, there are cases where these malls/outlets have
become the landmarks and triggered the growth of an upscale
neighbourhood.
5.111.2 The outlets were in the range of 1,000 – 3,000 square feet in terms of
space. Of which, about one-third (33%) of the outlets were of 1,500 –
2,000 sq. ft. and another one-third (32%) were of 2,000 – 2,500 sq.
ft. in size. It is interesting to note that about 8% of the outlets were
more than 3,000 sq. ft. The size of the organised retail outlets is
moderate in many cases compared to other metros largely due to the
high real estate prices in Bangalore. Given the space constraint,
many tried to optimise the size.
5.111.3 ‘Grid type’ is the widely practiced layout among the outlets surveyed.
Grid type of layout uses space efficiently, allows easy stacking of
merchandise, allows more customers in the store at any time etc. In
the city like Bangalore, where the space is at premium, Grid layout
might be the best option available to the retailers.
5.111.4 The catchment area of an outlet was about 2 – 3 square kilometres.
The catchment area though apparently looks small, given the density
251
of population per square kilometre in Bangalore, the area could be
sufficient in terms of number of households served by the outlets.
5.112 Merchandise Management (Inventory)
5.112.1 The number of SKUs by and large ranged from 1,500 – 3,000.
Further, about two-fifth (36%) of the outlets were having about 1,500
– 2,000 units and in another one-third of the outlets, the SKUs were
in the range of 2,000 – 2,500 units. The food and non-food items
constituted about 30% each. The staples constituted about 20-22%
of the total SKUs. The vegetables and beverages were about 3-5%
each. About 10-12% of the SKUs were ‘other’ items. The total
number of SKUs was moderate in number. The food, non-food and
staples occupied majority of the SKUs in the outlets.
5.112.2 As far as inventory of SKUs are concerned, Vegetables were stocked
for 2 days; food, non-food and staple items were stocked for 5 – 7
days and beverages for 9 days. The number of days the SKUs
stored depended on the demand from the customers, lead time in
ordering, replenishment and economic order quantity of ordering.
5.112.3 Majority (83%) of the organised retailers experienced a stock-out of
1-10% which is quite normal for the industry. At the same time,
retailers need to take efforts to peg it at an average level of 5%.
5.112.4 As regards merchandise, it may be inferred that the private label was
highest in staples category and lowest in the beverage category and
the branded items were highest in beverage category and lowest in
staples category. The underlying reasons may be quite evident from
the kind of category of items itself. In the case of staples, as such in
India, there is not much branded items and the customers are
habituated to purchase from the traditional grocery shops. So they
are not averse to buy private labels in this category as they believe
they are of superior quality than that of traditional kirana stores. But
in the case of beverages, customers find it risky to go for private
labels. That is the reason, they go for branded products in
252
beverages. In the food and non-food items, there is avenue for
further enhancement of private labels.
5.112.5 Shrinkage of about 1-3% in organised outlets is equivalent to India’s
industry average. Shrinkage can be reduced through well-defined
processes such as counting of inventory, digital surveillance,
electronic tags, etc.
5.113 Transportation
5.113 a. In-bound Transportation
5.113.1 The vendors/suppliers supply the SKUs to the distribution centres

(DCs) at their own cost. Most often, they use the ‘direct shipment’
option. Sometimes, when the demand from the outlets was
insufficient to supply directly; the vendors supply the merchandise to
the DCs using ‘milk-run’ method.
5.113.2 All shipments to the outlets were routed through DCs. Most often, the
DCs were used as ‘Cross-Docking’ facility. The DCs have their own
trucks to carry the SKUs to the retail outlets in the city. In this, they
use the ‘milk run’ method to route the trucks to different outlets in a
single trip.
5.113. b. Out-bound Transportation
5.113.3 The outlets used economical means of transport such as tricycles

and motor vehicles like one-tonne truck. When they used the motor
vehicle, they adopted milk run method to cover more number of
households in order to cut down the cost. The home delivery as a
practice is found to be paying rich dividends in terms of store image,
customer loyalty and goodwill compared to the transportation cost.
5.12 CROSS-FUNCTIONAL DRIVERS
5.121 Sourcing
5.121.1 The Distribution Centre (DC) played a pivotal role in sourcing. The
demand for different SKUs of the different outlets was aggregated at
the DC and the order was placed to the vendors. DC was updated
253
about the requirement of merchandise through phone and also
through automatic merchandise management software by the
outlets.
5.121.2 The lead time between the order and the delivery of different SKUs
was not too high (about 1-2 days). However, in the case of
beverages, the lead time needs to be brought down.
5.121.3 The outlets used the option of buying on credit and sometimes they
bought the merchandise on cash also. As regards the credit period
available for the retailers, the period varied and mostly one month
credit period was common.
5.121.4 The number of suppliers was minimum for vegetables and maximum
for food and non-food items. The reasons may be because of the
number of items, quantity, uncertainty in demand and the cost
involved. But efforts need to be taken to involve optimal number of
suppliers taken into consideration the reliability, confidentiality,
dependability and flexibility.
5.122 Pricing
5.122.1 Most of the outlets have adopted either EDLP or Hi-Low pricing
strategy.
5.122.2 About half of the outlets did not offer any price discount to the
customers. Remaining half of the outlets offered 2 – 5% discount on
MRP. It may be pertinent to offer higher discount by passing to the
customers all the consolidated gains of the outlets in the form of low
prices.
5.123 Information
5.123.1 All the outlets had PoS terminals and all the SKUs were bar-coded.
Seventy percent of the outlets were using inventory management
software interfaced with PoS terminals.
5.123.2 All the outlets were using the computers in different applications. To
a larger extent, outlets used the computers for accounting and
inventory. About half of the outlets used the computers for
purchasing, CRM and order management processes.
254
5.123.3 The usage of information systems benefited the outlets with better
availability of the information followed by reduced inventory level,
more accurate costing and reduced lead time in procurement.
5.2 SUPPLY CHAIN PROCESSES
5.21 CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
5.211 External Customers
5.211. a. Customer Profile
5.211.1 In one-half of the sample outlets (45%), the customer base was 1,500
to 2,000 and in the case of another one-quarter (25%) of the outlets,
the number of customers was 2,000 – 2,500. It could also be noted
that about 3% of the outlets in the sample had a huge customer base
of more than 3,500.
5.211.2 An overwhelming percentage of the outlets (89%) registered 100-250
footfalls per day. In other words, 100-250 customers visited the
outlets per day. Of course, there were also outlets, though the
number is small (about 11%), where more than 250 customers
visited a day.
5.211.3 Customers across different age group come to outlets for their
purchases, i.e., from 10 years to above 60 years of age. However,
the customers in the age group of 21-40 constituted the major
proportion of the outlets. Customers in this age group are modern,
well exposed, like to spend, disparate and willing to experiment. The
retail outlets need to induce the customers in the age group, by
offering a wide variety of merchandise category and better shopping
experience. At the same time, customers in the age group of 41-50
that constituted the next major group need also be targeted.
5.211.4 About 73% of the outlets had regular customers in the range of 46 –
75% with a mean of 58%. Of which, nearly 60% of the outlets
reported regular customers was in the range of 46 – 60% and in
another one-fifth (18%) of the outlets, regular customers was in the
range of 61-75%.
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5.211.5 Regarding the occasional customers, about one-fourth of the outlets
reported that the customers were in the range of 11-15%. Further, it
may be seen that two-fifth of the outlets (36%) had occasional
customers in the range of 31-45% and another one-third (31%) of the
outlets reported occasional customers in the range of 46-60%.
5.211.6 It was found that the customers who visited with their families were in
the range of 31 – 60%, about 90% of the outlets reported. Of which,
about two-fifth (40%) of the outlets reported that the group was in the
range of 31-40% and in about 30% of the outlets, the group was in
the range of 41-50%. In the case of another one-fifth (21%) of the
outlets, the percentage was 51-60%.
The customers who visited with their families spent about 11-20
minutes in about one-fourth (24%) of the outlets, and in another 30%
of the outlets, the time spent was 21-30 minutes. It could also be
noted that in about one-third (34%) of the outlets, the time spent by
the group was 31-40 minutes.
In about one-half (47%) of the outlets, the customers who visited with
their families made purchases worth about Rs. 750-1,000 and in
another one-fifth (18%) of the outlets, the customers purchased
merchandise worth Rs. 1,001 – 1,250. Interestingly, in about 12% of
the outlets, purchases made was more than Rs. 1,250/-. On an
average, there were about 47% regular customers, spent about 45
minutes and made purchases worth Rs. 950. Naturally, when
customers visit with family, they spend more time and purchase
more. Hence, the outlets need to indulge them to buy more by
offering better shopping experience and individual attention.
5.211.7 About one-half (49%) of the outlets reported that the customers who
visited the outlets with their friends were in the range of 11 – 20%
and in another two-fourth (40%) of the outlets, the customers were in
the range was 21-30%. Regarding the time spent by the customers,
in about one-fourth (24%) of the outlets, the customers spent about
11-20 minutes, in another 30% of the outlets, the time spent was
21-30 minutes. Further, in the case of one-third (34%) of the outlets,
the time spent was 31-40 minutes.
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In about 30% of the outlets, the customers who visited with friends
made purchases worth Rs. 251 – 500 and in another one-third of the
outlets, the customers made purchases worth Rs. 501 – 750.
Further, in case of about 30% of the outlets the purchases made by
the customers amounted to about Rs. 751-1,000. On an average
there were about 25% customers who visited with friends, spend
about 30 minutes and purchased merchandise worth Rs. 600/-.
When customers visit with friends, they may buy not only for them,
but also for the family. So, there is a wide variation in the time they
spend and amount of purchases also vary.
5.211.8 About one-fourth (23%) of the outlets reported that the customers
who visited alone was in the range of 11-20% and in another two-fifth
(43%) of the outlets, the customers was 21-30%. Further, in about
one-fourth (23%) of the outlets, the group constituted 31-40%. They
data about the time spent by the customers show that in about 28%
of the outlets, the customers spent about 11 – 20 minutes and in
another two-fifth (39%) of the outlets, the customers spent about
21 – 30 minutes.
With respect to the purchases made by the customers who visited
alone, about one-third of the outlets reported that the customers
bought merchandise for less than Rs. 250/- and in another one-fourth
(24%) of the outlets, the customers made purchases in the range of
Rs. 251 – 500. Further, in about one-third (33%) of the outlets, the
customers purchases was Rs. 501 – 750. On an average there were
about 30% customers who visited alone, spent about 20 minutes and
purchased merchandise worth Rs. 450/-. More so, when they visit for
shopping, usually, they purchase not only for them but also for their
family. So, there is a wide variation in the purchase amount and the
time they spend.
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5.211.b. Customer Contact, Services and Benefits
5.211.9 Outlets maintained the database about the regular customers. But
they were not serious about contacting them regularly. Further, they
did not take the feedback regularly. They need to take measures to
keep the customers informed about new merchandise arrivals,
discount schemes and customer loyalty programmes regularly. This
would help keep the customers well informed. They need to take the
feedback regularly and act on the suggestions and complaints, if any,
given by the customers. The measure would help them to go a long
way in satisfying and retaining the customers.
5.211.10 The outlets offered a plethora of services and benefits such as home
delivery service, credit card remittance facility, price discount, gifts,
gift vouchers, Loyalty Card Scheme, etc to enhance the sales. The
measures need to be augmented and be focused on different
customer segments which will lead to higher sales realisation.
5.212 INTERNAL CUSTOMERS (EMPLOYEES)
5.212 Employee Profile and Benefits

5.212.1 It could be seen that the number of employees in an outlet was in the
range of 7-15. The number of male employees was in the range of
5-10 and the number of female employees was in the range of 3-6.
Further, the average number of male employees of an outlet was 7
and number of female employees was 5.
5.212.2 It is interesting to note that Customer Service Associates (CSAs)
constituted half of the employees. Moreover, about 70% of the
employees were either S.S.L.C or H.Sc. qualified. The managers
were either a graduate or a post graduate.
5.212.3 On an average, an employee was entitled for 30 days leave a year.
About half of the outlets gave a month salary as bonus and another
quarter of the outlets offered bonus on the basis of the outlet’s
performance.
5.212.4 Majority of the outlets have adopted a work schedule of two shifts a
day and had uniforms to all of their employees. An exclusive human
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resources department was created in many organised retail chains to
take care of the human resources development activities.
5.22 INTERNAL SUPPLY CHAIN MANAGEMENT (ISCM)

5.22.1 Retailers need to forecast the future demand for the merchandise for
effective scheduling of the deliveries and forecasting helps capacity building
and budgeting. There was no popular forecasting technique uniformly
adopted by the outlets. About 40% of the outlets used time series method
for forecasting demand. Qualitative forecasting technique was also used by
the outlets in determining the demand. It will be better for organised outlets
to follow a customised quantitative forecasting method to do planning.
5.22.2 Sometimes, the actual demand exceeded the forecasted demand and the
outlets ran into stock-out. In order to tide over the situations, the retailers
resorted to different measures to avoid the stock-out. Holding safety
inventory, emergency call to suppliers and using substitute products were
the major measures adopted by the outlets to meet the excess demand.
These measures helped the retailers to alleviate the problem to a minimum
extent. Therefore, it is imperative that better techniques need to be adopted
by the outlets to forecast the demand accurately.
5.22.3 The wrong merchandise, pilferage and expired merchandise put together
was in the range of 2.5% to 3.8% across different merchandise categories.
Also, it has been found that about 83% of the outlets had well documented
merchandise returning policy for the customers. It may be appreciated that
the return rate of merchandise was well within the Indian industry standards
of return rate, that is between three and five percent.
5.22.4 Order through internet is yet to reach the critical mass. Only a few outlets
adequately equipped with the technology to attend to the online sales. As
there is huge growth potential to further expand the sales by exploiting the
new formats of order taking and delivery, retail outlets need to exploit this
fully. Fulfilling orders through internet took almost one day which is a bit
discomforting to the customers. The percentage of total business through
phone and the internet for the outlets overwhelmingly at 92% was in the
range of 5 – 15%.
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5.3 COMPETITION
As of now, many of the sample outlets do not face tough competition. But
with every increase in number of the outlets within the catchment area and
international retail majors waiting on the wings, scenario may be different. So it is
desirable that retail outlets understand the impending scenario and equip
themselves to manage the future.
5.4 Kirana Stores
5.41 LOGISTICS DRIVERS
5.411 Location
5.411.1 The stores were more or less equally distributed throughout the
prominent geographical areas of Bangalore city. All the stores
invariably are located at vantage points of the main road or bylanes.
Almost all the stores were located on the main road, or street corners
or important junction points.
5.411.2 Kirana stores are typically small in size as they are located in the
residential area zones. The size of the stores revealed that about half
of the stores were less than 200 sq. feet. Some of them were
relatively bigger.
5.412 Merchandise Management (Inventory)

5.412.1 With respect to the SKU categories maintained by the stores, majority
of the stores had food items in the range of 11- 60 items and some
stores stored about 91-100 food items. The stores stored vegetables
in the range of 1-20, non-food in the range of 11-50, staples in the
range of 1-50 and beverages in the range of 11-20. Food, non-food
and staples were the major category of items stored by all the kirana
stores. The total SKUs were in the range of 125 – 150.
5.412.2 In kirana Stores, the food items were carried for about 1-7 days.
Vegetables were carried for 1-4 days. The non-food items were
carried for 4-7 days. The staple items were carried for 4-9 days. The
beverages were carried for 4-13 days.
260
On an average, the stores held the stock of food items for about 4
days, vegetables for 2 days, non-food, staples and beverages for
about a week. From the data, it is evident that the inventory turnover
is high enabling stores to manage the working capital effectively.
5.42 CROSS-FUNCTIONAL DRIVERS
5.421 Sourcing
5.421.1 Kirana stores used more than one source namely wholesalers,
dealers and salesmen to source their merchandise. Among them,
procurement of merchandise by calling through phone to the
wholesalers was the most popular (62%) one followed by placing
orders with the salesmen who visited the stores (36%) at regular
intervals.
5.421.2 As regards procurement of merchandise, kirana stores are showered
with numerous benefits by the suppliers based on the order size,
store relationship and image. Most of the kirana stores got the
quantity discount and sometimes gift vouchers as well.
5.421.3 The kirana stores most often used the option of buying on cash as
well as through credit (54%). About 38% of the kirana stores paid the
cash whenever they bought the merchandise. Usually, cash
purchases go with some benefits/incentives as compared to credit
purchases. kirana stores most often got a maximum of 2 weeks
credit from the suppliers.
5.422 Pricing
5.422.1 Among the stores who had given discount on purchases, about three-
fourth of the stores had given discount on total items purchased and
about 10% of the stores had given discount on the individual items
purchased.
5.422.2 The discount did not exceed 10% and majority of the stores gave a
discount of 2% or 5% on the M.R.P.
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5.423 Information
It may be understood that computers have not been used in kirana stores
extensively. Less than quarter of the kirana stores (23%) have only used the
computers in management of their stores. Of which, 41% of the kirana stores used
computers for managing inventory and 50% of the stores used for accounting
applications. It is obvious that many of the kirana stores are not taking full
advantage of the computer applications, more so with regard to customer
database.
5.43 SUPPLY CHAIN PROCESSES
5.431 Customer Relationship Management

5.431.1 Customers for a kirana stores come from nearer areas. It may be
seen that the customer base of a kirana store ranged from 101 –
300 (about 80% of the kirana stores). Further, about two-fifth of the
stores (44%) were having a customer base of 101-200 and another
two-fifth (39%) of the stores were having a customer base of 201-
300. Interestingly, in the case of about 11% of the stores, the
customer base was more than 300.
5.431.2 The customers per day were in the range of 26-100 for a majority
of a kirana store (about 85%). Further, for about two-fifth (40%) of
the stores, the footfall per day was in range of 51-75. Also, there
were more than 100 customers in the case of about 11% of the
stores.
5.431.3 The sales per customer was in the range of Rs. 1-100 with a mean
of Rs. 69. More so, the sales per customer was in the range of
Rs. 75-100 in about two-fifth (37%) of the stores. Interestingly,
about 10% of the stores sold merchandise worth more than Rs.
100 per customer.
5.431.4 In about 10% of the kirana stores, the sales per day was less than
Rs. 1,000. Further, in the case of about 10% of the stores each, the
sales per day was Rs. 1,000 – 2,000 and Rs. 2,000 – 3,000
respectively and in another one-quarter (24%) of the stores, the
sales was in the range of Rs. 5,000 – 6,000 per day. It may also be
262
noted that about 10% of the stores touched a sales of more than
Rs. 9,000 per day.
5.431.5 In a kirana store, usually a customer spends less time. The data
show that a customer spend time in the range of 1-15 minutes with
a mean of about 8 minutes. It may also be seen that about a half of
the stores (52%) reported that the customers spend about 6-10
minutes for purchases in the stores.
5.431.6 As kirana store evolves into an integral part of the neighbourhood,
there exists a close bond between the store and the customers as
a result of which extending credit to the customers at times is not
very uncommon. The data show that about 80% of the stores had
the customers in the range of 41 – 100% who bought their
purchases on cash with an average of 77%. More so, about two-
fifths of the stores each had regular customers in the range of 61-
80 and 81-10 respectively.
5.431.7 The customers who bought on credit were in the range of 1-25%
and the customers who bought on credit occasionally were in the
range of 1-10%. About two-fifths (38%) of the stores had customers
who bought on credit in the range of 6-10 and another two-fifth of
the stores had customers in the range of 6-10% who bought their
requirements on credit occasionally. The data show that about
three quarters (77%) of the customers made purchases on cash
and another quarter of the customers bought on credit.
5.431.8 Another important feature of kirana store is the familiarity of the
customers to the kirana store owners. The data show that the
owner of a kirana store knows closely 30% of the customers. It
appears that the number of customers closely known to the store
owner is relatively less in spite of the proximity of the store to the
customers. It could be largely due to the urban context where the
customers are busy with their tight home schedule and in more
cases they may prefer privacy and may not be willing to share
personal information with the store owner.
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5.432 Internal Supply Chain Management (ISCM)
5.432.1 It is understood that the sales of kirana stores not only vary from
season to season but from one week to another in the course of a
month. To know the extent by which sales vary over a month, the
month was divided into 3 periods of 10 days each. It is found that
the sales during the first 10 days was higher (45%) than the other
two periods of 10 days each (about 28%).
5.432.2 Ordering through phone and home delivery services were the
services being offered by the kirana stores, of late, to facilitate the
shopping requirements of working people, particularly the grocery
requirements. On the whole, about half of the kirana stores offered
phone order services and about 35% of the kirana stores offered the
home delivery services. Whenever, home delivery as a service was
offered, the stores ensured that the purchases were delivered within
one hour.
5.432.3 Most of the kirana stores are proprietary concerns and generating
funds for setting up the store and its expansion depends on the
proprietor ability to raise funds. This involves not only the capital to
be invested in getting a location for starting the store (capital) but
also running the store (working capital), i.e. the finance required for
procuring the merchandise, employee related expenses, electricity
charges, rent and others. About three-quarters (73%) of the owners
did not get any finance from outside and they managed the finance
on their own. Others got the finance from banks, relatives and
friends.
5.433 Competition
5.433.1 It could be seen that about half of the kirana stores faced competition
from kirana stores (47%) only and another half of the stores (50%)
faced competition from both the kirana stores and organised retail
outlets. Further, the competition from the kirana stores affected the
sales of about 9% and the competition from the organised retail
outlets affected the sales of about 4%. It could be inferred that the
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competition as of now is not affecting the sales much. But at the
same time, this scenario may change with the new retail majors from
the European and American continent entering the business and also
more number of organised retail outlets being setup.
5.433.2 The major problem confronting the kirana stores was the declining
sales margins. This may be because of the declining or stagnation in
sales and the growing competition around. Eventually, all these fell
on the profit margin of the store. As the kirana stores are relatively
small in size, their weak bargaining power with the vendors is
another factor for unimpressive margins.
5.433.3 Another major problem was with the limited space available in a
kirana store. On one side, the kirana stores prefer to stock more
SKUs in their stores in order to offer a wider range of SKUs to the
customers and at the same time, the limited space in the stores is a
constraint. As such, many stores face this conflict and it appears like
a tight rope walking for many a store.
5.433.4 The third major problem faced by many stores relates to finance to
meet the working capital needs of business. Kirana stores want to
offer more merchandise but crippled by shortage of funds.
5.5 PERFORMANCE METRICS
5.51 Organised Retail Outlets

5.51.1 In majority of the outlets (81%), the operating expense was in the
range of 71 – 85% of sales. At the same time, in the case of about
3% of the outlets, the operating expense was greater than 85%.
Further, it could be seen that the operating expense was less than
70% in about 16% of the outlets.
It has been found that the expenses on SKU, employee salary and
rent constituted a major portion of the total expenses of the sales.
Continuous efforts need to be made to reduce these expenses. It
could help the outlets to be cost efficient and at the same time
enable them to devise innovative strategies to serve the customers
better.
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5.51.2 PBDIT was in the range of 20-25% in two-fifth (39%) of the outlets.
Further, in the case of about one-fourth (24%) of the outlets, PBDIT
was in the range of 25-30% and in another one-fifth (17%) of the
outlets, PBDIT was 15-20%. Interestingly, in about 15% of the
outlets, PBDIT was more than 30%.
5.51.3 The monthly sales of about 13% of the organised retail outlets was
less than Rs. 5 lakhs. The monthly sales was in the range of Rs. 5 –
20 lakhs for about 70% of the outlets. Further, in about 30% of the
outlets the sales was in the range of Rs. 10-15 lakhs and in another
one-quarter (27%) of the outlets, the sales was in the range of Rs.
15-20 lakhs. Interestingly, in about 17% of the outlets the sales was
above Rs. 20 lakhs.
5.51.4 Sales per square foot per month of was less than Rs. 250 for about
11% of the outlets. Further, in one-fifth (20%) of the outlets, the sales
per sq. ft. was Rs. 500-750 and in another 32% of the outlets, it was
Rs. 750 – 1,000. Interestingly, in about one-quarter (22%) of the
outlets, it was more than Rs. 1,000.
5.51.5 PBDIT/month was less than Rs. 1,00,000 in about 10% of the outlets.
For about 70% of the outlets the margin was about Rs. 1,00,000 -
5,00,000. Further, for about one-fifth (19%) of the outlets, the ratio
was Rs. 3-4 lakhs and for another one-quarter (23%) of the outlets
the measure was in the range of Rs. 4-5 lakhs. It could also be noted
that the PBDIT/month was above Rs. 5 lakhs for one-fifth (18%) of
the outlets.
5.51.6 PBDIT/Sq. ft. per month was less than Rs. 50 per sq. foot for about
9% of the outlets. For about 16% of the outlets the ratio was in the
range of Rs. 150-200. Further, in the case of about one-quarter
(24%) of the outlets PBDIT/Sq. foot was about Rs. 200-250 and in
another 17% of the outlets, the ratio was about Rs. 250-300. More
so, for about 10% of the outlets, PBDIT/Sq. ft. was more than Rs.
300.
5.51.7 Sales per employee was found to be less than Rs. 60,000 in about
14% of the outlets. Further, in one-quarter (21%) of the outlets it was
in the range of Rs. 60,000 - Rs. 90,000 and in another one-quarter
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(24%) of the outlets the ratio was Rs. 120,000 - Rs. 1,50,000 Thus,
the amount was in the range of Rs. 30,000 - 1,80,000 for majority of
the outlets (87%). Interestingly, in about 8% of the outlets the ratio
was more than Rs. 1.8 lakhs.
5.52 Traditional Kirana Stores
5.52.1 The monthly sales varied from Rs. 25,000 - Rs. 3,00,000. There was
no pattern in the monthly sales among the kirana stores. In about
30% of the kirana stores, monthly sales was less than Rs. 75,000 per
month. In another 40% of the kirana stores, the monthly sales was in
between Rs. 1,00,000 - Rs. 1,75,000. Interestingly, in about one-
quarter (28%) of the stores, the monthly sales was more than Rs.
2,00,000. The sales per month of the stores varied widely for the
reason that sales is a function of the footfalls per day, number of
households in the area, income of the households, the buying power,
competition from the other outlets etc.
5.52.2 The sales per customer was in the range of Rs. 1-100 with a mean of
Rs. 69. Further, the sales per customer was in the range of Rs. 50-
75 in about one-fourth (25%) of the stores and another two-fifth
(37%) of the stores reported that the sales was Rs. 75-100 per
customer. Interestingly, about 10% of the stores sold merchandise
worth more than Rs. 100 per customer.
5.52.3 In about 35% of the kirana stores, sales per square foot was less
than Rs. 250 and another 18% of the kirana stores reported having
sales per square foot in the range of Rs. 250 – 500. More so, the
sales per square foot was Rs. 500 – 750 for about 11% of the stores.
Interestingly, in the case of about 30% of the stores the sales per
square foot was more than Rs. 1,000. The average of the sales per
square foot of kirana stores was Rs. 670.
5.52.4 The sales per employee was less than Rs. 10,000 in about 11% of
the kirana stores. In half of the stores (51%), the sales per employee
was in the range of Rs. 10,000-50,000. Further, in a quarter (24%) of
the kirana stores, the sales per employee was in the range of Rs.
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50,000-60,000. It could also be seen that about 2% of the stores
were having the sales per employee of more than Rs. 1,00,000.
5.6 TESTING OF HYPOTHESES

5.6.1 The One-way ANOVA test showed that the mean time spent in the
outlets by different groups namely a) family vis-a-vis friends and
alone b) friends vis-a-vis family and alone and c) alone vis-a-vis
family and friends were significantly different.
5.6.2 The One-way ANOVA test showed that the mean amount of
purchases made by different groups namely a) family vis-a-vis
friends and alone b) friends vis-a-vis family and alone and c) alone
vis-a-vis family and friends were significantly different.
5.6.3 The One-way ANOVA test showed that the mean of the percentage
of sales over the first ten days (1st -10th) differed significantly with
second ten days (11th-20th) and also last ten days (21st-30th) of a
month. At the same time, mean of the percentage of sales over 11th
– 20th does not differ significantly with the last ten days 21st – 30th of
a month.
5.6.4 The Chi-square analysis showed that the footfall at an organised
retail outlet is independent of the location of the outlet. There may be
other influencing factors that affected the footfalls.
5.6.5 The Chi-square analysis showed that that the customer base of an
organised retail outlet is not independent of the size of the outlet.
5.6.6 The Chi-square analysis showed that the number of footfalls for an
organised retail outlet is not independent of the size of the outlet.
5.6.7 The competition for the retail outlets has affected the sales not more
than 10%
5.6.8 There is a strong positive relationship between the size of a kirana
store and the number of customers.
5.6.9 The average time spent and average sales made by a customer in a
kirana store are significantly correlated.
5.6.10 The average sales was dependent on number of footfalls per day and
time spent by a customer in a kirana store.
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5.7 KIRANA STORES Vs MODERN ORGANISED RETAIL OUTLETS
5.7.1 Mann-Whitney and Wilcoxon Tests showed that there is statistically

significant difference between the underlying distributions of monthly
sales of organised retail outlets and the kirana stores. The monthly
sales of an organised outlet was higher.
5.7.2 Mann-Whitney and Wilcoxon Tests result showed that there is
statistically significant difference between the underlying distributions
of the sales per square foot of organised retail outlets and the kirana
stores. The sales per square foot of an organised outlet was higher.
5.7.3 Mann-Whitney and Wilcoxon Tests showed that there is statistically
significant difference between the underlying distributions of sales
per employee of organised retail outlets and the kirana stores. The
sales per employee of an organised outlet was higher.
Table 5.1: Comparison of Traditional kirana Stores

and Organised Retail Outlets
Parameter Traditional kirana Stores Organised Retail Outlets

Location Not specific to a place. Spread across the city of
They were spread over the Bangalore.
main road, middle of the
road and street corners
Size (Area in Square Mean area was about 320 Range 1,000 – 3,000 square
Feet) square feet feet.
Median area was about 200 Mean and Median about
square feet 2,000 square feet.
SKUs (Total) 125 – 150 1,500 – 3,000
Food 28% 30%
Vegetables 10% 3-5%
Non-food 20% 30%
Staples 17% 20-22%
Beverages 7% 3-5%
Others 18% 10-12%
Inventory (in Days)
Food 4 Days 5-7 Days
Vegetables 2 Days 2 Days
Non-food 1 week 5-7 Days
Staples 1 Week 5-7 Days
Beverages 1 Week 9 Days
Others 1 Week 5-7 Days
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Stock-out 50% of the stores – 1 to 5 40% of the outlets – 1 to 5
per cent per cent
20% of the stores – 6 to 10 43% of the outlets – 6 to 10
per cent per cent
30% of the stores – Nil 12% of the outlets – Nil
Sourcing Wholesalers 62% DC 72%
Dealers 28% wholesalers 42%
Salesman 36% Manufacturer 37%
Personal visit 24% Mandi 15%
Govt. Market 3%
Mode of Payment Cash 38% Credit 50%
Credit 8% Credit and Cash
Both 54% on Delivery 24%
Cash on Delivery 16%
Regional Office 5%
Advance 5%
Credit Period <15 Days 51% 1 Week 29%
15-30 Days 49% 2 Weeks 67%
> 2 Weeks 4%
Discount to the
Customers
Same as MRP 14% 56%
1% Less than MRP 1% 0%
Computer
Application
Accounting 19% 91%
Inventory 15% 85%
Customer Mgt 1% 53%
Purchasing 3% 51%
Order Mgt 0% 49%
Finance 1% 31%
Supplier Mgt 0% 26%
Other Applications 0% 3%
Customer base 1-100 6% 1,000 – 1,500 10%
101-200 44% 1,500 – 2,000 45%
201-300 38.5% 2,000 – 2,500 25%
301-400 7.5% 2,500 – 3,000 8%
401-500 3.5% 3,000 – 3,500 9%
501-600 0.5% 3,500 – 4,000 1%
4,000 – 4,500 1%
4,500 – 5,000 0%
5,000 – 5,500 1%
270
Footfalls per day 1-25 3% 101-150 35%
(Number of 26-50 22% 151-200 35%
Customers and 51-75 39.5% 201-250 19%
percentage of 75-100 23.5% 251-300 5%
stores/outlets) 101-125 7.5% 301-350 3%
>125 4.5% 351-400 1%
400-450 1%
500-600 1%
Sales per Square foot
<250 34.5% 11.3%
250 – 500 17.5% 14.7%
500 – 750 11.0% 20.0%
750 – 1,000 7.5% 32.0%
1,000 – 1,250 14.0% 14.7%
1,250 – 1,500 8.0% 4.7%
1,500 – 1,750 2.5% 1.3%
1,750 – 2,000 3.0% 0.7%
>2,000 2.0% 0.7%
5.7 SUGGESTIONS
5.8.1 Logistics Drivers
5.8.1.1. Though air conditioning was available in all the outlets, it was
observed that they were either not working or switched off in order to
save electricity charges leave alone occasional power cuts. With low
roof, false ceiling and customer density in the store, the absence of
effective air-conditioning systems, no doubt, was a cause of concern
for many a customer. Sometimes retailers need to incur costs within
the supply chain to deliver a benefit of greater value to the retail
outlets. Retailers need to ensure that the A/Cs function during the
working hours. This ensures that the customers shopping experience
is good and result in more purchases.
5.8.1.2. Visit to the modern retail outlets these days is a planned one given
the hectic life style, job stress and the time and effort that goes into
the shopping exercise. Needless to say that ambience of the shop
matters a lot in influencing the customers to step in, shop around and
relax for a while. It is, in this context, a good lounge for the
customers to relax and spend time over a cup of coffee/tea is
271
important. Lounge is an important facility/amenity that was not
available in more than half of the outlets.
5.8.2 Cross-functional Drivers
5.8.2.1. One of the important cross-functional drivers of modern supply chain

management is sourcing. An important component of sourcing is
supplier scoring and assessment. The study reveals that the retails
chains are not doing the process – vendor assessment
enthusiastically. The assessment of the vendors need to be done
regularly to ensure that the suppliers are adhering to different
parameters such as quality of merchandise, on-time delivery etc.
5.8.2.2. Also, it has been found that the number of suppliers for certain
merchandise categories is more. The modern supply chain
management calls for limited and efficient vendors. So, it is
necessary for the retailers to do the needful to prune the number of
suppliers and have long term relationship with the suppliers. This will
bring reliability, consistency and dependability between the retailers
and vendors.
5.8.2.3. On information technology side, the retail chains are now only
migrating from legacy or proprietary software to SAP, Oracle Apps or
other systems. The study shows that there is a scope for further
improvement in the usage or utilisation of the information technology
or information system.
5.8.2.4. The literature shows that the modern retailers such as Wal-Mart, 7-
Eleven, Carrefour, Tesco and others are successful because of their
heavy investment on information infrastructure. Their supply chains
are efficient because of this reason. In India, the retailers are
ambivalent in investing in the information infrastructure. Many of
the retailers have now only started ERP implementation. The retailers
need to establish required information infrastructure to ensure
information visibility, transparency, non-repudiation and traceability
across the supply chain.
272
5.8.2.5. In the survey, it has been found that about a quarter of the organised
outlets have not adopted Vendor Management Inventory (VMI) and
Collaborative Replenishment Programme (CRP) merchandise
management techniques. As these are proven techniques which
results in lot of benefits to the retailers, the other outlets also
implement any of the techniques depending upon their requirements
and feasibility. These techniques help the retailers and vendors to
work like partners than adversaries and accrue benefits from each
other.
5.8.2.6. The pricing of merchandise in organised retail outlets needs a
relook. It has been found that the outlets charge MRP from customers
for most of the SKUs. Modern customers are clever and they hop
from one outlet to another and buy the merchandise where in they get
discount or other benefits. In a price conscious market, the customers
always look at and compare the product prices between different
outlets. Therefore, if the stores gain price advantage in procurement,
the same could be passed on to the customers. This would help the
outlets to achieve greater sales and also retaining the customers.
5.8.2.7. The study shows the EDLP/Hi-Low pricing techniques are not
adopted in true sense. Even though the footfalls may be adequate,
the revenue per customer is low. This could be improved only when
the retail outlets adopt these modern retail pricing strategies and give
discount on MRP across all the merchandise – both horizontal and
vertical.
5.8.3 Customer Relationship Management (CRM)
5.8.3.1. To a larger extent, the modern organised retail outlets have managed
the supply chain drivers efficiently. In managing customers, more
efforts need to be made to attract them and retain them with a slew of
measures which may include i) making them aware of new arrivals, ii)
offering variable discount schemes depending on the size of the item,
quantity purchased etc. iii) enabling them with loyalty schemes, iv)
getting the regular feedback and taking remedial measures, v)
273
reducing the time spent by the customers at the PoS counters
especially during the peak hours, week end days and festival seasons
etc.
5.8.3.2. As in the west, in India too, of late, the number of nuclear families is
increasing day by day. That apart, there has also been a dramatic
change in the attitudes, tastes and preferences of the customers.
Indian customer is becoming more quality conscious and less price
sensitive. Nuclear family demands coupled with peer group pressure,
growing incomes, and westernisation influence the Indian customer
than ever before. All these changes invariably translate into business
volumes to the modern retail outlets.
Further, in cities like Bangalore, both the partners of a family go for
work and come late in the evening to their homes. They may not find
time for shopping and they would like to deliver the provisions they
wish to buy at their homes. Hence the outlets have to further
invigorate alternative ways of order taking and delivery (phone and
the internet orders). They need to build up the necessary e-business
infrastructure in this regard.
5.8.3.3. Segmentation of customers is very important. The study shows that
the percentage of customers who visit alone or who visit with his
friends are less compared to customers who visit with family. When
customers visit with family, they spend more time and made more
purchases. As such the outlets need to have an irresistible ambience
for the family members to shop around. The outlet needs to provide a
pleasant shopping experience, which may trigger impulsive buying.
An onlooker or passerby could be made to step in the outlet, a
window shopper could end up in buying and an occasional visitor
needs to be transformed into a regular customer.
At the same time, when a customer visits with friends or when he/she
visits alone, he/she might be buying for him/her or might be for his/her
family. Hence the time spent and the volume of purchases varies
widely. Hence, these customers need to be targeted differently.
5.8.3.4. An important factor that influences the customer is returnability, i.e.,
the customer’s ability to return, swap or exchange the merchandise to
274
the outlets at ease, if there is any problem, defect etc. On this front,
the traditional kirana stores do better because of their accessibility,
personal rapport etc. In the case of organised retail outlets,
customers find it difficult to return or exchange the merchandise if
there was any problem. The merchandise return policy of the retail
chains could be made customer-friendly so that the customers do not
face hassles that they do face now, in returning/exchanging the
merchandise that they have bought from the outlets.
5.8.3.5. The welfare and benefits given to the employees were fairly good.
Employees were looked after well by the managements. However, in
a few cases, it was learnt that the leave was not granted when it was
required and also some of the managers were found to be highly
stressed due to the job related pressures to meet the targets in sales
and shrinkage of merchandise. Cases of penalisation of employees
who failed to measure up to the expectations and meet the target set
were also brought to the notice of the researcher. At the store
manager level, employee turnover was also high. Therefore, the
managements need to take measures to de-stress the managers and
give training on motivation and stress management and focus on
measures to retain the employees.
5.8.4 Internal Supply Chain Management (ISCM)
5.8.4.1. The sales during the first ten days was higher and the sales was
almost equal during the second and last ten days of a month. So the
retail outlets need to take necessary steps to ensure that there is
enough stock during the first ten days to maximise their sales. At the
same time, they might not neglect the sales over the remaining period
also. Wherever possible, the outlets need to adopt an approach to
balance or even out the sales throughout the months for optimum
utilisation of the resources.
5.8.4.2. In some of the outlets, product (merchandise) variety, both horizontal
and vertical are not high. Sometimes, they are much lower than the
independent outlets. Also, in case of some of the merchandise, it has
been observed by the researcher that empty shelves adore the
275
outlets. The management needs to take necessary measures to
improve the service level (fill rate) and product variety. Also, the
researcher has observed in some of the outlets, the signage are not
put up for the merchandise.
5.8.4.3. Forecasting is an area that needs improvement. The SCM software
such as SAP, Oracle and others has this process as part of the
supply chain planning module. This module is robust with many
analytical and simulation models which will help the retail outlets/DC
to forecast better and plan for the merchandise well in advance.
5.8.4.4. Considering the loss due to shrinkage of the merchandise, it is high
time that foolproof mechanisms are installed for the upkeep and
safety of the merchandise in the outlets and godowns. Outlets have to
ensure the security of the physical assets. It may be noted that India
has the highest shrinkage rate. The theft of the merchandise by the
outlet’s own employees is one of the major concerns faced by the
retail outlets along with the theft or stealing by the customers.
Shrinkage could be reduced through well-defined processes such as
physical counting of inventory, digital surveillance, electronic tags,
etc. Loss prevention from shrinkage calls for coordination among
different stakeholders such as vendors, employees, management and
also customers. Further, the employees need to be properly
educated, trained and inculcated about the evils of the shrinkage.
5.8.5 kirana Stores
From the study, it has been found that the kirana stores are also evolving and
have started adopting some of the strategies such as phone orders and home
delivery which are the domain of the services offered by the organised outlets. At
the same time, they are also facing the heat of changing customers’ behaviour and
also the competition from the organised retail outlets.
5.8.5.1. It has been inferred from the study that more than half of the kirana
stores are facing ‘stock-out’. Customers visit kirana stores for fill-in,
immediate purchases. If the kirana stores are not in position to meet
the demand of customers, they lose their goodwill and also the
276
customers themselves. Therefore, adequate steps have to be taken
to have sufficient stock to meet the demand.
5.8.5.2. Over three-fourth of the kirana store are not using computers for the
management of kirana stores. The stores are not taking full
advantage of computer applications in the field of SKUs management,
accounting, etc, more so with regard to customer’s database. It is
suggested that kirana stores start adopting computers for better
management of the stores.
5.8.5.3. An important feature of kirana store is the familiarity of the customers
to the kirana store owners. Traditionally, the kirana store’s owner
knows the customers and their families very well and kirana store
owner is invited for any occasion or function in the customer’s family
and vice-versa. Such is the relationship between the kirana store and
the customers.
From the study, it appears that the number of customers closely
known to the store owner is relatively less in spite of the proximity of
the store to the customers. It could be largely due to the urban
context where the customers are busy with their tight home schedule
and in more cases they may prefer privacy and may not be willing to
share personal information with the store owner. It is also possible
that the kirana store owners are getting engaged in their routines and
are not finding sufficient time to enquire or inclined to get to know
about the customers. In this regard, it is suggested that any
sluggishness from the part of the kirana store owners in building a
personal rapport with the customers need to be discouraged.
Otherwise, this lead to customers migrating from kirana stores to
organised retail outlets. This may be a bane for kirana stores survival
on the whole.
5.8.5.4. Traditionally, the customers of a kirana stores don’t go to another
store to buy the items even if some of the items are not available in
the preferred store that they are used to purchase from. They would
even wait for the store to procure and supply them. This may be
attributed to the trust and bond that exists between the store and its
customers. The study shows that majority of customers are not
277
willing to wait. It is obvious that the attitude of the customers is fast
changing. As such, modern customer does not have the time to wait
and they have huge choices around. In other words, modern
customer is impatient to wait. Therefore, it is essential that the store
keeps the various SKUs available (fill-rate) to customers as and
when they visit the store. Hence a modern kirana store needs to
adopt modern merchandise management. Otherwise, they loose the
customers.
5.8.5.5. The study found that the major problem confronting the kirana stores
was the declining sales margins. This might be because of the decline
or stagnation in sales and the growing competition around.
Eventually, all these impact profit margin of the stores. As the kirana
stores are relatively small in size, their weak bargaining power with
the vendors is another factor for unimpressive margins. This problem
could be remedied by means of kirana stores by forming ‘co-
operatives’ which will enable them to buy in quantity (Economy of
Scale – EoS) and help them to bargain and get better price from the
suppliers.
5.8.5.6. Another major problem faced by many stores relates to the working
capital needs of business. Kirana stores want to offer more
merchandise but crippled by shortage of funds. This could also be
resolved through kirana stores forming ‘co-operative banks’.
5.8.6 Competition and Sustainable Growth
5.8.6.1. As of now, competition among the organised retail outlets is not

fierce. But with every increase in number of the outlets within the
catchment area and international retail majors waiting on the wings,
tomorrow’s scenario may be different. So it is desirable that retail
outlets understand the impending scenario and equip themselves to
manage the future.
5.8.6.2. In India, organised retail is in the growth stage. At the same time,
there were fallouts also. Two Indian retail chains namely Subhiksha
and Vishal Retail who were accelerating their growth and garnering
278
success have gone into oblivion for reasons such as improper
working capital management, unplanned and unsustainable
expansion of number of outlets etc. The other retail chains have many
reasons to learn from the ‘tale of two retail chains’. The chains may
need to revamp their supply chains drivers especially the information
and sourcing. Also, on the customers side, three stage of CRM –
identify, acquire and retain the customers could be managed better.
5.9. FURTHER RESEARCH
Although the research study answers some of the important aspects of retail
supply chain in a convincing way, it also highlights several leads for further
research. The researcher is of considerate opinion that the following linking
threads may be useful in taking up research studies.
5.9.1. The research revealed that the sales during the first ten days was
much higher than 11th – 20th and 21st – 30th of a month. Even though,
some of the reasons attributed to this phenomenon such as salaried
class of customers, more variety of the SKUs and schemes in different
organised outlets in the first ten days of a month influence the sales, an
in depth study in identifying the factors is necessary. This will help the
retailers to adopt suitable strategies to balance or even out the sales
throughout the months for optimum utilisation of the resources.
5.9.2. The extent of implementation of supply chain inventory management
techniques such as Vendor Managed Inventory (VMI), Continuous
Replenishment Programme (CRP) and Collaborative Planning,
Forecasting and Replenishment (CPFR) techniques in the organised
outlets and their effect on inventory and product availability need an in-
depth study.
5.9.3. Indian retailers could join hands with each other in establishing the
back-end (supply chain) which will mutually benefit them, though they
may compete each other on the front-end operations. The avenue for
collaboration and the impact on individual retailer’s performance on fill
rate, logistics cost, coordination cost etc could be studied.
279
5.9.4. Optimisation Models for manpower planning at the peak hours
especially at Point of Sales (PoS) and for merchandise management
need to be developed by the researchers which happen to be the bane
of customer satisfaction.
5.9.5. The sales contribution of private labels in various SKU categories to the
total sales, the customers’ perception about private labels, the optimum
fit between branded and private labels may further be studied.
5.9.6. Methodology adopted by organised retail outlets in sourcing related
processes such as supplier scoring and assessment, supplier selection
and contract negotiation, supplier collaboration, procurement and
sourcing planning and analysis need an in-depth study to enumerate
the best practices available in the industry.
5.10 CONCLUSION
According to the IMF forecast for the year 2011-2012, India might become
the world’s third largest economy in 2011, overtaking Japan in terms of GDP as
measured according to the domestic purchasing power of rupee also called as
Purchase Power Parity (PPF). India is now the fourth largest economy behind the
US, China and Japan.103
A study by McKinsey Global Institute (MGI) suggest that if India continues its
current growth, average household income will triple in the next 15 years and the
private consumption will quadruple to reach Rs 70 trillion in 2025. Indian consumer
spending will shift substantially from informal economy, with its individual traders,
to the more efficient formal economy of organised businesses. That transition will
lower prices and further boost demand.104 This corroborates the fact that the
organised retail in India will gain further momentum and have lot of potential for
growth.
103
Rishi Shah, “India to Topple Japan as World’s 3rd Largest Economy”, The Economic
Times, 20th September 2011
104
McKinsey Global Institute (MGI), “The Bird of Gold: The rise of Indian Consumer
Market”, 2005.
280
Retail industry in India has come of age as one of the most dynamic and fast
paced industries with several players entering the market. As further liberalisation
of the sector round the corner, Indian retail industry has to gear up and get its act
together. Retailing is instrumental in economic growth of the country as it provides
impetus to agriculture, manufacturing as well as services sector besides huge
employment. Modern retail has a huge potential to not only benefit from India’s
increasing consumption demand but also create demand for value-added
products.105
A healthy sign about the Indian economy is that private consumption in India
is growing at about 20 per cent which is about 4 per cent over and above GDP
growth and inflation put together. While Indian consumers are expected to spend
Rs. 55 trillion in 2011 -12, the share of retail would be over Rs. 25 trillion growing at
above 15 per cent and the share of modern retail would be over Rs. 2.06 trillion
growing at above 30 per cent with 8 per cent share in total retail.106 Maintaining
and pushing this growth in consumption will be extremely vital for overall economic
growth of the country. Undoubtedly, the food retailing in India will continue to
occupy a major segment of organised retail and is going to grow exponentially.
The research study shows that retailers are learning to adopt and manage
supply chain techniques efficiently. With FDI in retailing in the offing and
international majors such as Wal-Mart, Carrefour, Tesco and others waiting on the
wings, the growth in the organised front is going to gain much more momentum.
The retailers in order to survive in a fiercely competitive market, need to better
equip with skills, processes, practices and methods which are contemporary
without losing sight of the customer’s needs, preferences and expectations.
Retailers need to explore the ways to collaborate to create consumption

demand and offer Indian consumers a better standard of living by providing better
products at best prices. This calls for a sound understanding of the supply chain
drivers by all the stakeholders in the retailing. A fresh look at all the drivers will
105
Economic Times Bureau, “India Retail Forum (IRF) to equip retailers to give more to
Indian Consumers”, The Economic Times, 16th September 2011.
106
Ibid.
281
further enhance the efficiency of the supply chain and in turn growth and
sustainability of the retail outlets.
With challenging economic conditions in the western world and fear of

prolonged slow growth, the focus is shifting to fast growing economies like India.
The consistent resilience of Indian economy and healthy domestic consumption
growth will accentuate organised food retail which can be sustained through better
management of retail supply chain. This is the opportune time for the Indian
retailers to establish, strengthen and exploit the supply chain to their advantage. As
Government of India may introduce the FDI in multi-brand retail any time now, the
retail majors such as Wal-Mart, Tesco and Carrefour will use the ‘carpet-bombing’
strategy to establish a number of outlets. With their innovate marketing and
promotional strategies and the successful supply chain strategies, they try to woo
away the Indian customers from the present retailers towards them within the
shortest span of time available by ‘splitting the market’. So the Indian retailers need
to ward off the forthcoming competition by entrenching their supply chain both
independently and also collaborating with each other.

282
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www. karnataka.gov.in
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http://newsletter.ciilogistics.com/july2010/4w/nlfull.htm#@mail/rd4

290
ANNEXURE - 1
RETAILING RELATED ACRONYMS
Acronym Expansion
ABC Always Better Control
CPFR Collaborative Planning, Forecasting and Replenishment
CRP Continuous Replenishment Program
DC Distribution Centre
EOQ Economic Order Quantity
FSN Fast, slow and non-moving
HML High, Medium and Low
MRP Maximum Retail Price
PoS Point of Sales
RFID Radio Frequency Identification
SDE Scarce, Difficult, Easy to obtain
SKU Stock Keeping Unit
VED Vital Essential Desirable
VMI Vendor Managed Inventory
OTHER ACRONYMS
Acronym Expansion
ABC Always Better Control
CPFR Collaborative Planning, Forecasting and Replenishment
CRP Continuous Replenishment Program
DC Distribution Centre
EOQ Economic Order Quantity
ANNEXURE - 2
Questionnaire (Organised Retail Outlets)
Dear Sir / Madam,
I am a research scholar doing my Ph D at School of Management Studies,

Pondicherry University, Puducherry. As part of my research, I am doing a survey on
Supply Chain Management in Food and Grocery. I will be obliged, if you can spare some
time in filing up the questionnaire. The information you will be sharing in the questionnaire
will be used for academic purpose only and kept strictly confidential.
1) Name and address of the food and grocery retail outlet (Office Seal, if possible):
2) Date of Establishment:
3) Name of the Owner/Contact Person:
LOCATION
1) Kind of Outlet
Stand-alone :
Multiple Locations: Number of Locations: ____________
a) Franchisee b) Company Owned
Others ________________________________.
2) Ownership:
a) Proprietary b) Private c) Partnership

d) Cooperative e) Public-Limited f) Any other _____________
3) Location of the outlet
a) Street Corner b) Junction Points c) Main Road

d) Mall e) Shopping Complex f) Any other_______________
4) Type of store layout:
a) Grid b) Free flow c) Boutique

d) Loop e) Spine g) No idea
h) Any other ____________
5) Area (Size) of the outlet (in Sq. feet.) : __________________
6) Catchment Area for the shop (in Sq. Kms.): _________________
ii
7) Which of the analytical method did you use to determine the catchment area?
a) Reilly’s Law b) Huff’s Model c) GIS

d) Concentric Zone Method e) No idea
f) Any other, pl. specify ______________
8) Amenities/Facilities
Particulars Yes No
Air Conditioning
Parking Facility
Cafeteria
Wash Room/Toilet Facility
Drinking Water
Play Area
Lounge/Waiting Space
Telephone Booth
ATM
Internet Café
9) Whether the customers are satisfied with the Amenities/Facilities?
Highly Neither Satisfied Strongly

Satisfied Dissatisfied
Satisfied nor dissatisfied Dissatisfied
CUSTOMERS PROFILE
1) Total number of customers for the outlet: __________________
2) Number of customers (footfalls) per day:

a) 1 – 50 b) 51 – 100 c) 101 – 150 d) 151 – 200
e) 201 – 250 f) 251 – 300 g) 301 – 350 g) above, pl. specify:___
3) Percentage of customers in the following age groups (Pl. Tick Mark)
Age Group Percentage (Total should not exceed 100)

1–5 6-10 11- 16- 21- 26- 31- 36- 41- 46-
15 20 25 30 35 40 45 50
Upto 10
11 – 20
21 – 30
31 – 40
41 – 50
51 – 60
> 60
4) Customer Information:
Information Percentage of total customers
Regular Customers
Occasional Customers
Total 100
iii
Information Percentage Average time Average Sales
of total spent (in per customer in
customers minutes) Rs.
Customers coming with family
Customers coming with friends
Customers coming alone
Total 100 -- --
SUPPLY CHAIN MANAGEMENT
1) Do you have a separate department for managing supply chain:

Yes No
2) According to you, Supply Chain Management includes (please ):

Outlet Inven- Trans- Sourc-
Pricing Information Warehousing
Management tory portation ing
Merchandise Others (Pl.

Suppliers Customers
Management Specify)
3) On an average, how much do you spend as percentage of sales per month on the
following?
Particulars Percentage of Sales

Rent
SKUs
Transportation
Warehousing/ Distribution Centre
Advertising and Promotion
Customer Relation/Management
Information System/Technology
Employees Salary and Benefits
Miscellaneous
Any other
Total
4) Percentage of sales during a month:
Days of a Month Percentage of Sales

1 - 10
11 - 20
21–30 or 31
Total 100
5) What percentage of sales is ‘shrinkage’?
a) No shrinkage b) <1% c) 1 – 2% d) 2 – 3% e) 3 – 4%
f) 4-5% g) 5-6% h) 6 – 7% i) 7 – 8% j) 8 – 9%
k) 9 -10% l) >10%
iv
INVENTORY MANAGEMENT
1) Total number of SKUs in the outlet: _________
2) Number of SKUs in different Category:
Number of Days of Inventory in the

Type
items outlet
Food
Vegetables
Non-food
Staples
Beverages
Others
Total
3) Please give the break-up of percentage of items in the outlet:
Type Private Labels Outsourced Branded Total

Food 100
Vegetables 100
Non-food 100
Staples 100
Beverages 100
Others 100
Total 100
4) Do you undertake any inventory classification?

Yes No
If yes, which method have you adopted?

a. Always Better Control (ABC) b. Vital Essential Desirable (VED)
c. Fast, slow and non-moving (FSN) d. High, Medium and Low (HML)
e. Scarce, Difficult, Easy to obtain (SDE) f. Any other, please specify _____
5) What kind of Inventory control technique you use and for which category of items?
Discount Periodic Continuous
Type EOQ Technique Other
Model Review Review
Food
Vegetables
Non-food
Staples
Beverages
Others
6) Do you use any supply chain inventory management technique such as
a. Vendor Managed Inventory (VMI)

b. Continuous Replenishment Program (CRP)
c. Collaborative Planning, Forecasting and Replenishment (CPFR)
v
7) What is the Service Level you have for the SKUs?
In Percentage
Type
Targeted Achieved
Food
Vegetables
Non-food
Staples
Beverages
Others
8) Do you face the stock-out problem? Yes No
If yes, what percentage of time, do you face the problem?

a) 1 – 5% b) 6 – 10% c) 11 – 15%
d) 16 – 20% e) 21 – 25% f) above 25%
9) Do you use any software for managing the inventory

Yes No
If so, please name the software __________________________________
10) Are the SKUs bar-coded? Yes No
11) Do you have PoS terminals? Yes No
If yes, Name the PoS software you use _________________________
12) Whether the PoS terminals are interfaced with the inventory management Software?
Yes No
SOURCING
1) Who is responsible for sourcing the supplies?

a) Distribution Centre b) Store’s Manager
2) Where from you source your supplies?
a) Directly from the manufacturers b) Wholesalers

c) Mandi d) Government Managed Markets
e) Distribution Centres f) Any other, pl. specify _______________________
3) Mode of Payment:
a) Advance b) Upon delivery
c) Credit d) Any other ___________________
4) Credit Period:
a) < 15 days b) 15-30 days c) 30-45 days
d) 45-60 days e) > 60 days
5) Transportation cost in supplying the SKU is borne by

a) by the outlet itself b) the suppliers c) others, pl. specify _______
vi
6) Number of suppliers in each category
Type No. of suppliers

Food
Vegetables
Non-food
Staples
Beverages
Others
Total
7) Is there any vendor rating policy? Yes No
8) Is there any merchandise returning policy? Yes No
ORDER MANAGEMENT
1) Do you use any forecasting techniques to forecast the demand?

Yes No
2) If yes, which kind of technique do you use?

a) Qualitative Techniques b) Time-Series Method
c) Causal Method d) Any other, pl specify _______________
3) How do you order for SKUs?

a) Phone call b) in-person c) Salesman visit
d) Through regional office e) Distribution Centre f) Others, pl. specify ______
4) What is the average lead-time between the order and delivery for different items
((please ))?
Type No. of Days

Immediate 1 2 3 4 5 6 7
Day Days Days Days Days Days Days
Food
Vegetables
Non-Food
Staples
Beverages
Others
5) Are you satisfied with present policies of the suppliers?

Highly Neither satisfied Strongly
6) How do you take care of the demand exceeding the forecast?

a) By holding inventory b) Emergency call to the suppliers
c) Asking customers to wait d) By substitute products
e) Accept loss of sales
vii
CUSTOMER SERVICES
1) Do the customers pay through the credit card? Yes No
2) Do you have free home delivery Service? Yes No
3) In case of home delivery, what kind of mode of transport do you use?

a) tri-cycle b) motor vehicle c) Both
d) Any other__________________________
4) Are you maintaining the database of regular customers? Yes No
5) What kind of promotional campaign you undertake to keep in contact with the regular
customers?
a) Direct Mailing b) Phone Call c) Seasonal Greetings
d) Birthday wishes e) Any other_______________________
6) How often do you contact your regular customers?

a) Very rarely b) Monthly Once c) Quarterly
d) Half-yearly e) Birthday wishes
7) What are the benefits you give to your customers?

a) Price Discount b) Gifts c) Gift Vouchers
d) Credit points that can be encashed e) Any other ____________________
8) What are the security/monitoring mechanisms do you have?

a) No mechanism b) Close-circuit TV c) Helpers moving around
d) Security at the entrance e) Any other, pl. specify ____________________
9) Whether the feedback is taken from a customer? Yes No

If yes, how often it is taken: _______________
REVERSE SUPPLY CHAIN
1) What is the percentage of items returned for exchange/wrong

merchandise/pilferage/obsolescence etc.?
Wrong Merchandise Pilferage Expired Merchandise

Type
In Percentage
Food
Vegetables
Non-Food
Staples
Beverages
Others
2) Do you have a documented merchandise returning policy?

Yes No
3) How many days are allowed for a customer to return the goods he/she purchased?
______________ days
viii
4) Whether the customers are satisfied with your merchandise returning policy?

PRICING
1) What is the selling price of the SKUs?
a) Same as MRP b) 2% less than MRP c) 5% less than MRP
d) 10% less than MRP e) Any other Price, pl. specify ____________
2) Do you adopt any of the following pricing strategies?

a) Leader Pricing b) Bait Pricing c) Price Lining
d) Multiple Unit Pricing e) EDLP f) High/Low Pricing
g) Any other, pl. specify _________________
INFORMATION SYSTEM
1) Do you use computers in managing your outlet:

a) Yes b) No
i) If yes, in which of the following areas do you use computers:

a) Inventory b) Merchandise Purchase c) Accounting
d) Finance e) Customers management f) Order Management
i)Supplier Management j) Any o ther, pl. specify _______________________
ii) If you use any specific software in managing the above areas, please specify:
a)_____________________b)___________________ c) __________________
2) Are the software interfaced with each other? a) Yes b) No

If yes, please mention the software (modules) interfaced:
___________________________________________________________________
3) How far you are satisfied with the existing computer software?
4) How are you benefited from the computer System (Rank them: 1-> Most 8-> Least)?
S. No. Rank
1 Timely Availability of information
2 Reduced lead-time in procurement
3 Cost saving
4 Reduced inventory level
5 More accurate costing
6 Increased Coordination with suppliers
7 Increased Coordination with customers
8 Increased Sales
5) Do you find any scope for improvement in the computer software?

a) Yes b) No
If yes, please specify: ___________________________________________
ix
STAFF
1) Number of Employees: a) Male ___________ b) Female ______________
2) Level of Employees:
Level Male Average Female Average
Age Age
Manager
Sub-Manager
Supervisors
Customer Service Associates
Others
3) Qualification of the employees:

Level No. of
Employees
Less than S.S.L.C.
S.S.L.C
PUC/H.Sc.
Diplomas
Graduates
Post Graduates
Doctorates
Total
4) Training given to employees:

Level Before Induction After Induction
(No. of Hours) (No. of Hours/Year)
Manager
Sub-Manager
Supervisors
Customer Service
Associates
Others
5) a) Leave Benefits:
Particulars No. of Days/Year
Casual Leave
Earned Leave
Medical Leave
Other Leave
b) Other Benefits:
Particulars No. of Days/Year
Bonus
Discount on Provisions
Any other
6) Upto what level, uniform is provided to employees? _____________________
7) Upto what level, shift system is followed? ________________________________

Is there any Human Resource Department? Yes No
x
OTHERS
1) Are you affected by competition? Yes No
2) You face competition from

a) kirana shops b) Organised retail formats c) Both
3) Within one square kilometre, how many outlets are there?

a) kirana shops ________ b) Organised retail formats _____________
4) How far the competition from other outlets has affected your sales?
a) Not at all b) <5% b) 5 – 10%
c) 10 – 15% d) 15 – 20% e) 20 – 25%
f) > 25%
5) Do you have the option for customers ordering through
Medium Tick the option Time to deliver the

order (in minutes)
Phone
The Internet
Both
6) What percentage of sales comes through this option?
a) <5% b) 5 – 10% c) 10 – 15%

d) 15 – 20% e) 20 – 25% f) > 25%
7) What are your future plans?

a. Increasing the SKUs
b. Expanding the outlet
c. Opening a new outlet
d. Others, please specify _________________________
8) How far are you satisfied with the existing business?
Highly Neither Satisfied Strongly

*****
xi
ANNEXURE - 3
Questionnaire (kirana Stores)
Dear Sir/Madam,
I am a research scholar doing my Ph D at School of Management Studies,

Pondicherry University, Puducherry. As part of my research, I am doing a survey on
Supply Chain Management in Food and Grocery. I will be obliged, if you can spare some
time in filing up the questionnaire. The information you will be sharing in the questionnaire
will be used for academic purpose only and kept strictly confidential.
4) Name and address of the food and grocery retail (kirana) shop:
5) Date of Establishment: _________________
6) Name of the Owner/Contact Person: ____________________________
7) How many people are working in the shop other than the owner? _________
8) How many are related to the owner among the working persons? __________
9) Where does the shop situated?

a) Street Corner b) Junction Points c) Main Road
d) Any other, please specify: ______________________
10) Size (Area of the shop) in square feet: _______________________
11) Overall, the total number of customers for the shop: _____________
12) Average number of customers per day:

a) 1 – 25 b) 26 – 50 c) 51 – 75
d) 76 – 100 e) 101 – 125 f) above 125
13) Average sales per customer per visit (in Rs.):

a) 1 – 25 b) 26 – 50 c) 51 – 75
d) 76 – 100 e) 101 – 125 f) above 125
14) Average time spent by a customer per visit (in minutes):

a) 1 – 5 b) 6 – 10 c) 11 – 15
d) 16 – 20 e) 21 – 25 f) 26 – 30
15) What percentage of customers buys on ‘cash’?

a) 1 – 20% b) 21 – 40% c) 41 – 60%
d) 61 – 80% e) 81 – 100%
16) What percentage of customers has ‘monthly account’?

a) 1 – 5% b) 6 – 10% c) 11 – 15%
d) 16 – 20% e) 21 – 25% f) 26 – 30%
xii
17) What percentage of customers buys on credit occasionally?
a) 1 – 5% b) 6 – 10% c) 11 – 15%
d) 16 – 20% e) 21 – 25% f) 26 – 30%
18) What percentage of customers you know personally?

a) 1 – 5% b) 6 – 10% c) 11 – 15%
d) 16 – 20% e) 21 – 25% f) 26 – 30%
19) Number of items in the following category in your shop:
Type Number of items

Food
Vegetables
Non-Food
Staples
Beverages
Others
Total
20) On an average, how many days’ inventory do you hold (Pl. Tick Mark)?
Type No. of Days

1-2 3-4 4-5 6-7 8-9 10-11 12-13 14-15
Food
Vegetables
Non-Food
Staples
Beverages
Others
21) Do you face the stock-out problem? Yes No
If yes, what percentage of time, do you face the problem?

a) 1 – 5% b) 6 – 10% c) 11 – 15%
d) 16 – 20% e) 21 – 25% f) above 25%
22) Percentage of sales during a month:
Days of a Month Percentage of Sales

1 – 10
11 – 20
21 – 30 or 31
Total 100
23) Do you give discount for the customers? Yes No

If yes, the discount is on
a) Individual items purchased b) Total purchase made
c) Any other, pl. specify _______________
24) In case of discount on individual items/total purchase made, the discount given is
a) 2% b) 5% c) 10% d) otherwise, pl. specify: __________
xiii
25) If the stocks are not available, are your customers willing to wait?
a. All the customers are willing to wait
b. No customer is willing to wait
c. Some are willing to wait Pl. give Percentage _________.
d. Any other, please specify: ___________________
Do you accept orders through phone? Yes No
26) Do you offer free home delivery service to the customers?

Yes No
If yes, how much time it takes for you to deliver the goods (in min): _______
27) What percentage of time the customers come with complaint such as wrong
merchandise, less weight, etc.
a. Never b) <1% c) 1-2% d) 2-3%
e) 3-4% f) 4-5% g) > 5%
28) In the last one year, what percentage of customers has switched over from your shop
to another?
a) 1 – 3% b) 4 – 6% c) 7 – 9%
d) 9 – 12% e) 13 – 15% f) 16 – 18%
29) In the last one year, how many new customers have been added to your shop?
a) 1 – 10 b) 11 – 20 c) 21 – 30 d) 31 – 40
e) 41 – 50 f) 51 – 60 g) 61 – 70 h) > 70
30) How far the customers are satisfied with your service?
Highly Neither Satisfied Highly
31) How far the customers are satisfied with the SKUs you offer?
32) Has the shop been financed from outside? Yes No

If yes, the source of financing:
a) Friends b) Relatives c) Money-Lender
d) Non-Banking Financial Institution d) Bank
e) Any other, please specify: ______________________
33) How do you give orders for the items (Tick mark as many as you need)?
a. Through phone to the dealers b) Through phone to the wholesalers
c) Visit by salesperson d) Personal visit
e) Any other, please specify: ___________________
34) What kind of benefits do you get on purchases?

a. Quantity discount b) Freebie c) Gift Vouchers
c) Gift d) Year-end tours e) Any other, pl. specify: ___________
35) When you buy the items, you buy on

a) Cash b) Credit c) both
36) On an average, what is the credit period available (in days): ____________
xiv
37) You face competition from
a) Kirana shops b) Organised retail formats c) Both
38) Within one square kilometre, how many outlets are there?
a) kirana shops ________ b) Organised retail formats _____________
39) How far the kirana shops nearer your shop have affected your sales?
a) Not at all b) <5% b) 5 – 10%
c) 10 – 15% d) 15 – 20% e) 20 – 25%
f) > 25%
40) How far the organized retail outlets have affected your sales?
a) Not at all b) <5% b) 5 – 10%
c) 10 – 15% d) 15 – 20% e) 20 – 25%
f) > 25%
41) Rank the problems faced by you in the order of their severity (1->Most Severe,9->
Least )
S. No. Problem Rank
1. Credit facility from wholesalers/dealers
2. Competition from kirana stores
3. Competition from supermarket/departmental store
4. Sales Margin
5. Less customers
6. Financing
7. Space in the shop
8. Less Sales
9. Any other
42) Do you use computers in managing your shop:

a) Yes b) No
i) If yes, in which of the following areas do you use computers:
a. Inventory b) Purchasing c) Accounting
d) Finance e) Customers management
b. Any other, pl. specify ___________________________
ii) If you use any specific software in managing the above areas, please specify:
a) ________________________ b) _________________________
43) Are you satisfied with the existing business?

44) What are your future plans?

a. Increasing the number of items
b. Expanding the shop
c. Opening a new shop
d. Computerisation
e. Taking orders through the Internet
f. Others, please specify _________________________
45) Any other comments:

_____________________________________________________________________
*****
xv

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RETAIL SUPPLY CHAIN MANAGEMENT IN FOOD AND GROCERY

(A CASE STUDY OF BANGALORE CITY)

Submitted for the award of the Degree of

Under the Guidance of

Prof. G. ANJANEYA SWAMY, Ph.D.

DEPARTMENT OF MANAGEMENT STUDIES

I, S Panneerselvam hereby declare that the thesis entitled “Retail Supply

in Food and Grocery (A Case Study of Bangalore City)” submitted to

Philosophy in Management is based on the original and bonafide research work

done by S. PANNEERSELVAM, during the period 2006–2011 in Department of

Management Studies, School of Management, Pondicherry University, under my

source, published or unpublished, without acknowledgement.

Place: Puducherry. Prof. G. Anjaneya Swamy, Ph.D.

I dedicate this humble piece of work firstly to the Almighty, then to my

Chapter 2 - Literature Review, Research Design and Methodology

Retail Supply Chain 31

Chapter 3 – Data Analysis on Organised Retail Outlets

Pricing Strategy 101

SUPPLY CHAIN PROCESSES

Performance Analytics of Organised Outlets

Data Analysis on kirana Stores

Chapter 4 – Testing of Hypothesis and Model Building

Chapter 5 – Summary of Findings, Suggestions and Conclusion

Chapter 2 - Literature Review, Research Design and Methodology

Chapter 3 – Data Analysis on Organised Retail Outlets

3.14-b SKU Categories in an Outlet – II 74

3.40 Benefits of Usage of Computers 106

3.52-n Existence of Human Resources Department 137

3.65 Sales per Square Foot/Month 161

Data Analysis on kirana Stores

3.92-b Staff-Relatives Matrix 190

Chapter 4 – Testing of Hypothesis and Model Building

4.56 Correlations (Number of Customers, Footfalls and Catchment 243

Chapter 5 – Summary of Findings, Suggestions and Conclusion

Chapter 2 - Literature Review, Research Design and Methodology

Chapter 3 – Data Analysis on Organised Retail Outlets

3.21 Sales Affected by Competition 151

Data Analysis on kirana Stores

Chapter 4 – Testing of Hypothesis and Model Building

A supply chain is a network of facilities and distribution options that performs

Supply chain exists in both service and manufacturing organizations,

The innovative companies such as Toyota, 7-Eleven Japan, Dell, Nokia,

Traditionally, retailing has not been a structurally organized industry in India.

In India, the terms large-scale, modern-format and organized are used

Source: CII, 2007 and Technopak Analysis, November 2010.

However, the size of Indian organized retail is merely 5% compared to the

Table 1.1: Global Retail Development Index – 2011

Source: A.T. Kearney, 2011.

Figure 1.3: Global Retail Development Index 2011 – Country Attractiveness

Source: A.T. Kearney, 2011.

FOOD AND GROCERY RETAIL

Source: CII Logistics, 2008.

India's strong growth fundamentals—9 percent real GDP growth in 2010;

Food accounts for 70 percent of Indian retail, but it remains under-

Table 1.3: Consumer Spending

Source: “Changing India, Changing Consumption, Changing Consumers”, Technopak,

Source: Indian Retail Report, 2009.

The Growth Factors

Table 1.4: Proportion of Young Population (< 25 years)

Source: Technopak, 2nd November, 2007.

Source: Technopak, 2nd November, 2007.

Rising Population and Incomes