Retail Strategy - Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers

Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers Retail Strategy Group Project Team: D.Gopalakrishnan (0910021) Rakesh Bhansali (0910052) Sandeep Yadav (0910054) Vivek Gupta (0910073) INDIAN INSTITUTE OF MANAGEMENT, BANGALORE September 20, 2009

Table of Contents AIM ............................................................................................................................ 2 METHODOLOGY........................................................................................................ 2 INTRODUCTION ........................................................................................................ 4 A. RETAIL SECTOR IN INDIA ..................................................................................... 4 B. FOOD RETAIL INDUSTRY IN INDIA .......................................................................... 8 MAJOR FOOD & GROCERY RETAIL CHAINS............................................................ 13 CONSUMER FEEDBACK .......................................................................................... 14 A. DEMOGRAPHICS: ............................................................................................... 14 B. BUYING BEHAVIOUR:.......................................................................................... 15 C. PURCHASE PREFERENCE: .................................................................................. 17 STORE AUDIT FINDINGS .......................................................................................... 19 A. FOODWORLD – BANNERGHATTA ROAD ................................................................ 19 B. BIG BAZAAR – JAYANAGAR 9TH BLOCK .................................................................. 20 Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 C. SPAR – NEAR SAGAR APOLLO HOSPITAL ............................................................. 20 D. COMPARISON .................................................................................................... 21 A. ASSORTMENT ................................................................................................... 21 B. RANGE OF PACK SIZES ....................................................................................... 23 C. CHEAPEST BRAND ............................................................................................. 24 D. COSTLIEST BRAND ............................................................................................ 26 E. AGGRESSIVENESS TOWARDS “STORE BRAND” ...................................................... 27 F. SPACE DEDICATED FOR EACH ITEM ...................................................................... 29 STORE STRATEGY................................................................................................... 30 1. FOODWORLD: ................................................................................................... 31 2. BIG BAZAAR: ..................................................................................................... 31 3. SPAR: .............................................................................................................. 31 OPPORTUNITIES & CHALLENGES ........................................................................... 32 “KIRANA” STORE: ...................................................................................................... 32 ORGANIZED RETAIL:.................................................................................................. 33 SUPERMARKET FORMAT: ........................................................................................... 34 HYPERMARKET FORMAT: ........................................................................................... 34 CONCLUSION ........................................................................................................... 35 REFERENCES: ......................................................................................................... 37 EXHIBITS: ................................................................................................................. 38 EXHIBIT-01: STORE AUDIT FORMAT ............................................................................ 38 EXHIBIT-02: CONSUMER SURVEY FORM SAMPLE ......................................................... 38 EXHIBIT-03: PHOTOS & UNIQUE FEATURES OF FOODWORLD SUPERMARKET, BG ROAD ... 41 EXHIBIT-04: PHOTOS & UNIQUE FEATURES OF FOOD BAZAAR SUPERMARKET, JAYANAGAR, 9TH BLOCK..................................................................................................................... 42 EXHIBIT-05: PHOTOS & UNIQUE FEATURES OF SPAR HYPERMARKET, NEAR SAGAR APOLLO HOSPITAL ................................................................................................................ 43 1

Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers Retail Strategy Group Project AIM To study: 1. The growth of retail business in India with special focus on Food and Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Beverage retailing. 2. Strategies of few major modern superstores (for foods and beverages business) in Bangalore viz.: a. Foodworld (Bannerghatta Road) b. Spar (Near Sagar Apollo Hospital) c. Big Bazaar (Jayanagar 9th block) 3. Consumer purchase behavior and preferences of Bangalore consumers for food and beverage products. The above studies will help us to understand the extent of consumer needs being met by the present leading supermarkets or hypermarkets (with regard to the Food and Beverages needs). It will hence help us understand the gap between the consumer needs and the offerings of the stores in order to enable us to formulate few strategies for gaining higher share of wallet of the urban middle class Bangalore consumers. The reason that we chose to study the Food and Beverages is that even though it contributes to approx. 60% of the total retail industry, it contributes merely 11% of the organized retail which shows the immense opportunity in the particular segment. METHODOLOGY In order to understand the assortment and pricing strategies of the various supermarkets/hypermarkets listed above, we visited these stores and audited 25 food and beverage products listed below (see Audit Format in Exhibit-01) which 2

comprise the major food items consumed by an average urban middleclass Indian household: A. Dairy and Poultry products (6 items) B. Fruits and Vegetables (6 items) C. Grains, Pulses and Edible oil (8 items) D. Snacks, Drinks and Beverages (5 items) For the above 25 items, we gathered and analyzed the following data for each of the 4 modern format stores: 1. Assortment – No. of brands, No. of types Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 2. Pack Size – Minimum, Maximum 3. Range – Cheapest brand, Costliest brand 4. Availability of store brand 5. Manufacturing date of oldest item (Perishable products with shorter shelf life) 6. No. of racks dedicated for each item The above data will help us analyze the strategy of each store and also the type of consumer being targeted by them. In order to understand the preferences and buying behavior of Bangalore consumers we conducted a survey of few consumers residing in the vicinity of Bannerghatta Road, Bangalore as the stores which we studied were close to this area itself. This would have ensured appropriateness of the conclusions which we would draw as there could be variations between various outlets of the same retail chain situated at various locations of the city. Through our survey we have attempted to capture the following information from the urban middle class consumers of Bangalore (see Survey Form sample in Exhibit-02): A. Demographic information B. Buying Behaviour C. Purchase preference D. Feedback about their “preferred store” The combination of the above data will help us in correlating the consumer preferences with the consumer needs being presently met by each of the stores. 3

Hence, it will eventually help us evolve a strategy that can be followed for the Food and Beverages section of a supermarket or a hypermarket in order to serve the maximum needs of urban middle class consumers in order to grab a higher share of wallet of that particular stratum of consumers. INTRODUCTION A. Retail Sector in India Retailing in India is emerging as one of the largest industries with a total market size of Rs.13,300 bn in 2007 growing at a CAGR of approximately 11% per annum during the last 5 years. Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Rising income and increased consumerism will further propel the growth happening in the urban areas. % of urban population in India 30.0% 28.0% 26.0% 24.0% 22.0% 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 1951 1961 1981 1991 2001 4

This driver is further illustrated in the statistic that the percentage of people in the urban areas in India has been steadily growing to reach 29% from just 17% some 50 years ago. In addition, India has been ranked as the most attractive market for global retailers to enter now according to A.T.Kearney‟s Global Retail Development Index for 2006. The GRDI conducted to follow the attractiveness of top emerging markets for retail. Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Many factors contribute to India being the most attractive retail target market. A stable democracy alongwith robust economic growth has been driving increasing prosperity and consumerism. The Indian retail market has been gaining strength, riding on the sound vibes generated by a robust economy that has given more disposable incomes in the hand of the consumer who will keep demanding better products and services, and a better shopping environment. In the overall Retail pie, Food and Grocery was the dominant category with 59.5% share, valued at Rs.792,000 crore, followed by Clothing and Accessories with a 9.9% share at Rs.131,300 crore. Interestingly, out-of-home food (catering) services (Rs.71,300 crore) has overtaken Jewellery (Rs.69,400 crore) to become the third largest retail category, with a 5.4% market share – this largely reflects the massive employment opportunities to youngsters in the services sector and accompanying changes in consumer lifestyles. 5

Consumer durables (Rs.57,500 crore) is the fifth largest retail category followed by Health & Pharmaceuticals (Rs.48,800 crore), Entertainment (Rs.45,600 crore), Furniture, Furnishings & Kitchenware (Rs.45,500 crore), Mobiles & Accessories (Rs.27,200 crore), Leisure retail (Rs.16,400 crore), Footwear (Rs.16,000 crore), Health & Beauty Care services (Rs.4,600 crore) and Watches & Eyewear (Rs.4,400 crore) in the order. Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 6

In the Organised retail segment, the picture is different altogether. Clothing & Fashion Accessories is the largest category with 38.1% of the market share, valued at Rs.29,800 crore, followed by Food & Grocery accounting for 11.5% of the organised retail market at Rs.9,000 crore , Footwear with 9.9% of the organized retail market share at Rs.7,750 crore, Consumer Durables with 9.1% market share at the fourth place (Rs.7,100 crore), and Out-of-home food (catering) services and Furniture, Furnishings & Kitchenware retail in the order. The mobile & accessories retail market has shown fastest growth in 2007 (25.6%) over the previous year, the other two prominent categories being out- of-home food (catering) services where growth was 25.1% and books, music Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 & gifts leisure category which achieved 23.3% growth. In the organised retail segment, however, the fastest growth was recorded in the tiny health & beauty care services category (Rs.660 crore), which grew at the rate of 65% in 2007 over the previous year – again a reflection of rise in services sector employment that demands proper grooming. The second fastest growing organised retail category is that of Entertainment (53.8%), 7

followed by the mobile phones & accessories and the food & grocery retail categories, both of which achieved 55.2% growth in 2007. At constant prices, the overall food & grocery retail market grew slightly higher at 2.3% in 2007 as compared to a 2.2% annual growth in the previous two years. Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 But the organised retail segment in this category is simmering in the true sense – a 50% growth in 2007 as compared to 42.9% in 2006, and lot more fireworks can be expected this year and the years ahead. Valued at Rs.9,000 crore, this organised market constitutes barely 1.1% of the total food & grocery retail market. The reason that we chose to study the Food and Beverages is that even though it contributes to approx. 60% of the total retail industry, it contributes merely 11% of the organized retail which shows the immense opportunity in the particular segment. B. Food Retail Industry in India India‟s food retail market has grown more rapidly than any other in the Asia- Pacific region during the 2004-2008 period. Despite deceleration forecast for the 2008-2013 period, it should continue to perform strongly. The Indian market generated total revenues of $263.7 billion in 2008, representing a compound annual growth rate (CAGR) of 12.3% for the period spanning 2004-2008. Convenience stores proved the most lucrative sales channel for the Indian market in 2008, generating total revenues of $176.5 billion, equivalent to 8

66.9% of the market's overall value. In comparison, sales through food and drinks specialists generated revenues of $83.4 billion in 2008, equating to 31.6% of the market's aggregate revenues. The performance of the market is forecast to decelerate, with an anticipated CAGR of 8.3% for the five-year period 2008-2013, which is expected to drive the market to a value of $392.4 billion by the end of 2013. Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Convenience stores form the most important channel in the Indian food retail market, accounting for 66.9% of the total value while the modern retail chains 9

of supermarkets and hypermarkets command merely 1.1% of the total food retail market in the country. The food retail industry will be analyzed taking the retailers as players. The key buyers will be taken as end-consumers, and food manufacturers, farmers, and agricultural co-operatives as the key suppliers. In India, food retail, particularly the hypermarket/supermarket sector, is less developed than in Western economies. Some companies, including conglomerates like Aditya Birla, are expanding rapidly in this competitive space. Many small stores are independently run, often by families and without technical or accounting standardization. The ratio of such retailers to consumers is high, allowing the latter great freedom to move between at will, Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 strengthening buyer power. a) Buyer Power: The sheer volume of potential customers in key areas of the food retail industry diminishes the standing of any individual customer. The revenue generated by any particular consumer is minimal and, in itself, expendable. Yet insofar as they may represent a set of wider interests across consumers, retailers cannot afford to disregard the relevant sensitivities of buyers. Price and convenience are two central 10

concerns however they are not necessarily the only factors. The response of food retailers must accommodate many diverse interests. Whilst loyalty towards a specific retailer is common at a small, local scale for various personal reasons, larger retailers struggle to maintain a strong loyalty that is not secondary to the need for a competitive pricing scheme, a perceived quality of product range, or other defining feature. Although high brand recognition does not automatically translate into consumer loyalty, if it is supported by a product range in which popular food products are central, the retailer can often draw indirectly on the loyalty base that certain food manufacturers have established. With switching costs generally absent in this area, however, a degree of independence remains for consumers and Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 other retailers may offer attractive alternatives. Buyer power, overall, is moderate. b) Supplier Power: Suppliers to the food retail industry include food manufacturers, and farmers and agricultural co-operatives. In order to ensure stability and offset the dangers of local sourcing problems or price fluctuations, large retail companies often attempt to maintain relationships with a wide range of suppliers. This diffuses dependency, minimizing the risks to retailers, and strengthening their standing in relation to suppliers. For this system however, the region must be able to support sufficient supply chains, and the necessary infrastructure. This is not always the case in the Indian market, which poses one of the key challenges to retailers, restoring a degree of power to those who control the limited supply routes in such cases. Long-term contractual obligations are avoided where possible, however, and switching costs kept to a minimum. With a firm hold on key distribution channels, the leading retailers can dominate negotiations with certain suppliers. This is often impossible for smaller retailers such as specialist or luxury outlets. The limited number of suppliers in niche areas, and the centrality of product quality or preparation type, limits the available range of sourcing options. With switching costs subsequently higher, the balance of power shifts somewhat from smaller retailers to specialist suppliers. Mainstream retailers evade this difficulty due to the large number of suppliers. Frequently offering only limited product differentiation – in the absence of strong branding – core products 11

are replicated quickly and the pressure to undercut other suppliers becomes significant. Whilst the need to satisfy consumer demand for popular products bolsters the relevant manufacturers, many others face a high degree of retailer mobility as they shift suppliers in accordance with pricing pressures. Supplier power is no more than moderate. c) Threat of new entrants: Large-scale, established retailers hold a natural advantage in operating businesses that benefit significantly from economies of scale, allowing aggressive pricing schemes that are not viable for smaller retailers. Strong branding exercises and fast paced expansion deepen this asymmetry. Nevertheless, they are not invulnerable to the threat of new entrants. Exit and entry costs within the industry are Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 relatively low in regions that offer the relevant infrastructure, encouraging potential entrants. Given the entrenched status of many large-scale retailers, and the gradual emergence of heavier branding, direct head-to- head competition is extremely difficult for new retailers. The fragmentation of the industry does allow space for smaller retailers to flourish however, sheltered within local niches, and strong market growth is attractive to more ambitious entrants. For foreign players, government regulation has a strong influence on ease of market access. India has tended to adopt a protectionist stance in retail, with multi-brand retailing subject to caps on foreign direct investment, while the single-brand retail sector, and also the wholesale sector, more accessible to foreign investment. The threat from new entrants is moderate. d) Threat of substitutes: The chief alternative to food retail is food service. Supported by strong marketing campaigns in the case of fast food companies, and cultural traditions with respect to sit-down restaurants, both types represent a relevant alternative for many consumers. However, they do not constitute a complete substitute for reasons of cost, health and more basic preferences. This alternative, for the vast majority of people, accompanies food retail rather than replacing it completely. Another substitute is found in subsistence agriculture in which individuals or families farm food to provide for their own personal needs. Despite the introduction of market capitalism it remains common in many rural areas which are yet to be captured by the industry. Movement between the two 12

systems is predominantly in the direction of food retail, however discontent with the decline of traditional lifestyles and its associated values has sparked the occasional exception. Nevertheless, the threat from substitutes overall is weak. e) Rivalry between existing players: Competition is often fierce within the food retail industry. The lack of substantial switching costs for consumers places pressure on retailers to secure their custom. The limited level of differentiation across the basic product range pushes larger retailers into competitive pricing policies. Price wars are frequent, intensified by the increase in consumer awareness generated by „comparison sites‟. Whilst some companies operate in other industries (for example, conglomerates Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 like Reliance Industries) and can absorb the temporary impact of declining food sales, or high supply prices, for many, food retail lies at the heart of the business. This basic dependency gives rise to aggressive competition, assessed as moderate overall. MAJOR FOOD & GROCERY RETAIL CHAINS A. Foodworld: Foodworld Supermarkets Ltd. chain of stores operates over 67 supermarket stores across Bangalore, Chennai and Hyderabad with a store size of 3,000 to 5,000 sq. ft. The retail chain currently operates 4 formats – Supermarket, Superstore, Express store and Gourmet store covering F&G vertical and plans to expand its footprint to upto 200 stores in the country with formats covering hypermarkets, supermarkets, express stores and concept sales by 2009-10. B. Spar: Founded in 1973, Landmark Group is one of the largest retail conglomerates in the Middle East and entered India in 1998. The group forayed into the hypermarket business with the opening of Spar hypermarkets in India by tying up with the Dutch retail giant Spar International. Spar rolled out its 1st hypermarket in India, spread across 75,000 sq. ft. in Bangalore in September 2007, followed by a 2nd - a supermarket format expanding across 30,000 sq. ft. in January 2008. Spar plans to open 7 stores by the end of 2009. C. Food Bazaar: Flagged off in 1982, Pantaloon retail owned Food Bazaar is today a 138 strong chain of large supermarkets where the western values of convenience, cleanliness and hygiene are offered alongwith the Indian values 13

of “see-touch-feel”, all at very economical and affordable prices without any compromise on quality. Till March 2008, Food Bazaar operated 46 standalone outlets. The summary of the network of the 3 above-mentioned modern format stores is as given below: Retail Retail Retail space Name outlets presence (in sq. ft.) (2008-09) (2008-09) Food Bazaar 138 N.A. 31,05,000 Spar – Hypermarket 1 1 75,000 Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Spar - Supermarket 1 1 30,000 Foodworld - Supermarket 67 N.A. 2,68,000 CONSUMER FEEDBACK In order to understand the preferences of consumers living close to Bannerghatta Road, Bangalore, we had conducted a survey. As mentioned earlier, through the survey we tried to collate the following information about consumers: A. Demographic information B. Buying Behaviour C. Purchase preference D. Feedback about their “preferred store” The collated information is as below: A. Demographics: Our study shows that the majority of the consumer housewives are of the age group of 26-35 years. The spread of household income is quite diverse and spread out. Majority of the families are nuclear families with total members in the range of 3-5 only. This clearly shows that relatively young consumers with reasonably good disposable incomes live with small family in the city. This will further have an implication on the consumer preferences and the spending on food by each household. 14

Age (yrs) Income (Rs. monthly) 46-55, 6% >55, 0% <25, 18% <25000, 35 36-45, 18% >75000, 41 <25 % % <25000 26-35 25000-50000 36-45 26-35, 59% 50000-75000 46-55 >75000 >55 25000- 50000- 75000, 6% 50000, 18 % Family Size >5, 0% <3, 12% Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 <3 3-5 3-5, 88% >5 B. Buying Behaviour: As per our survey findings, most of the consumers purchase food items once in a week from the supermarkets and stores and the average spend during each purchase visit is less than Rs.1,000. As per consumers, their prime reason for purchase is quality followed by convenience and variety. Hence, almost 50% consumers are willing to travel 2-5 kms in order to get quality food for the household. Though the nearby “kirana” store is the most preferred by consumers but many consumers have expressed that they visit multiple stores depending on the requirements. For small purchases for immediate requirements, they prefer the kirana store but for weekly bulk purchases they prefer to visit a modern supermarket. Spar is the most preferred place for shopping food items followed by Star Bazaar. Customers seem to prefer hypermarket over supermarkets for their regular purchase of food items. It may be due to the better variety and assortment that is available. As we have already seen that consumers equally prefer convenience and variety. Hence, keeping basic quality as given, 15

consumers are willing to sacrifice one over the other depending on the requirement. Frequency of purchase from supermarket Avg Spend (Rs. per purchase) Almost 1000- Thrice a Daily, 12% 2000, 18% >2000, 0% week, 0% <500, 29% Once a week <500 Twice a week 500-1000 Thrice a week 1000-2000 Twice a week, 18% Almost Daily >2000 Once a 500- week, 71% 1000, 53% Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Distance (in kms) of preferred store 5-10, 18% 0-2, 35% 0-2 2-5 2-5, 47% 5-10 Preferred Store 47% 50% 40% 35% 30% 24% 18% 20% 12% 12% 10% 0% 0% Kirana Food More Spar Big Reliance Star store World Bazzar Bazaar 16

Reasons for purchase from preferred store 80% 60% 40% 20% 0% Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 C. Purchase Preference: As per our survey, the primary concern of consumers when choosing a supermarket to shop are the availability of food products and the proximity of the store i.e. convenience factor. Though consumers want good assortment of food products, but the convenience factor tends to overrule the store loyalty. However, when shopping at supermarket, consumers also give a higher priority to price and availability of household products and cosmetics apart from just food items. Hence, if a standalone food store wants to gain a higher customer base then it must keep in mind the convenience factor as it will not qualify higher on customer‟s priority over other stores on the remaining top 5 parameters. Similarly, as consumers tend to place a reasonable weightage to price, it implies that similar size stores of same format in the same location will not be able to survive as consumers will value price as a differentiating factor leading to intense price rivalry which will be detrimental for both the stores. As consumers are quite price sensitive when shopping at supermarkets and as most of the products are standardized, hence consumers don‟t place a higher weightage to the service rendered at the store which is reflected by the parameter on courteous and friendly employees. Hence, customers are willing to shop on their own provided they get the price advantage at the supermarket. 17

Consumer Priority when shopping at Supermarket Avg. S.No. Parameter Rating 1 Availability of food products 12.4 2 Close to where you live 12.2 Availability of personal care products like 3 10.8 cream, toothpaste, brush 4 Price lower than the printed MRP 10.4 Availability of household products like 5 10.1 plastics, mosquito repellent, detergent 6 Convenience of parking 9.5 7 Fast billing system/ less waiting 9.2 Extended store operating hours – 8 am to 8 9.1 10 pm 9 Accepts credit card 8.6 Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 10 Special promotion schemes 6.8 11 Courteous, friendly employees 6.6 Availability of snacks/ fast food joint outside 12 3.9 the supermarket 13 Availability of fresh meat 2.8 14 Availability of magazines 2.1 15 Availability of alcoholic beverages 0.3 From the chart on the items frequently purchased by consumers at the supermarket, we can see that consumers primarily purchase household items, cosmetics, oils, grains and pulses at supermarkets. Items with relatively shorter shelf life and hence more frequent purchase items like milk, eggs, vegetables, fruits are still not purchased by majority of consumers from supermarkets. The reason is that consumers purchase once a week from supermarkets and in such shorter shelf life items, the quality and freshness is a concern. Hence, these items are either procured from the nearest “kirana” store or from the nearby “small vendors” at a higher frequency in a week. This was also evident from the fact that consumers rate the proximity almost equal to food products availability. Hence, in order to improve the sales of perishable food items like milk, fruits, vegetables, supermarkets will have to devise a system of daily delivery by taking orders over phone and delivering at home. As per the graph below, the consumer‟s purchase preference for an item from supermarket is proportional to the shelf life of most of the items. Lower the shelf life, lower is the chance that the item will be purchased regularly from the supermarket. 18

Items frequently purchased from supermarket Toileteries/ Cosmetics Household Items Cooking Oil/ Spices Wheat/Rice Flour Grains and Pulses Snacks Bakery Items Soft Drinks/Juices Fruits Frozen Foods Vegetables Milk Prods Eggs Ice Creams Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Baby Cosmetics & Food Fresh Meat Milk Magazines 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% As per a recent study made by the Retailers Association of India, the factors that shoppers consider as important for deciding where to shop are:  Always have what I want  Attractive and interesting promotions  Efficient check-out counters  Good value for money  Provide home delivery  Wide product range/ variety STORE AUDIT FINDINGS As a part of our project, we physically visited the 3 stores. Below are our observations of the distinct features of each of the stores (only food and grocery section) and a comparison amongst them. A. Foodw orld – Bannerghatta Road Capacity of car parking area: ~ 12 cars Fees for parking: Free Area: 5,000 sq. ft. (approx.) Unique aspects seen (see Exhibit-03 also): 19

1. This is a Supermarket format. 2. Liquor and Fresh Meat also available. 3. Small “Chat” shop outside the store. 4. Even pirated CDs sold outside the store. 5. Promise of “Lowest Price in town” displayed prominently near billing counters to reinforce customer‟s decision to purchase. 6. Grains, pulses and spices sold mostly as store brand under 2 varieties – Regular and Premium. B. Big Bazaar – Ja yanagar 9 t h block Capacity of car parking area: ~ 10 cars Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Fees for parking: Free Area: 8,000 sq. ft. (approx.) only Food and Grocery section Unique aspects seen (see Exhibit-04 also): 1. Many products discounted and sold by bundling with other products – combo offers. 2. Pickles sold loose. 3. Fresh idli and dosa batter available alongwith coconut chutney. 4. Grains and pulses available loose. 5. Impulse purchase items and cheap items stocked near the billing counters. 6. Many promotional schemes on purchase like 2 kg sugar free with Rs.1,000 worth of purchase. 7. Products stored in aisles and overall movement is congested. 8. Packet milk and eggs are not available. 9. Even breads which are kept are of the basic type. Not much variety available. 10. Express checkout counters for consumers with less than 5 items. C. Spar – Near Sagar Apollo Hospital Capacity of car parking area: ~ 70 cars Fees for parking: Rs.10 per hour Area: 25,000 sq. ft. (approx.) only Food and Grocery section Unique aspects seen (see Exhibit-05 also): 1. This is a Hypermarket format. 20

2. Separate bakery, sweets, juice, pickles and milk products (curd & cheese) counter within store. 3. Grains and pulses available loose. 4. Wide variety of fresh meat. 5. Exotic and foreign brands of food products also available. 6. Wide aisles for easy movement of trolley. 7. Fresh ground coffee also available. 8. Store brands for grains, pulses and spices available in 3 slabs – Premium brand: Select; Mid-range brand: Value and Economy brand: Best Price. 9. EDLP on select items. 10. Low price display with item alongwith valid time period. Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 11. Reasonably sized food-court outside the store. 12. Express checkout counters for senior citizens, pregnant women and consumers with less than 10 items. D. Comparison The comparison has been done by taking a particular parameter and bringing all stores‟ products on a comparable platform. Hence, while interpreting the graphs, we must be careful only to compare the same product amongst different stores and not to compare different products across different or even the same stores as the scales have been rationalized for easy interpretation of data. The comparison has been done on 6 parameters: a. Assortment b. Range of pack sizes c. Cheapest brand d. Costliest brand e. Aggressiveness towards “Store Brand” f. Space dedicated for each item a. Assortment 1. Dairy & Poultry products: Spar has the highest assortment and Big Bazaar the lowest. For milk, Spar even keeps the packet milk while others don‟t. Similarly they have a separate counter for curd and juices. 21

30 25 20 15 10 5 0 Spar Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Milk Curd Butter Cheese Eggs Ghee 2. Fruits & Vegetables: For fruits, Spar has the higher assortment while for Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 vegetables, which we have chosen, Foodworld has the higher assortment. However, the variety of fruits and vegetables is higher at Spar than the other two, while Foodworld has the least variety. 5 4 3 2 1 0 Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Banana Apple Onion Potato Tomato 3. Grains, Pulses & Edible oil: Overall Spar has the higher variety while Big Bazaar has the lower. Spar keeps both store brands and popular brands and hence serves a broader range of consumers. 14 12 10 8 6 4 2 0 Spar Spar Spar Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Sona Idli Rice Basmati Moong Dal Tur Dal Chana Dal Wheat Sunflower Masoori Rice Flour Oil Rice 22

4. Snacks, Drinks & Beverages: Spar has the highest assortment amongst the three while Foodworld and Big Bazaar have almost similar assortment. 12 10 8 6 4 2 0 Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Chips Juice Tea Coffee Jam b. Range of pack sizes 1. Dairy & Poultry products: Spar has the highest range of pack sizes while the other two have lower range and are similar. 1.2 1 0.8 0.6 0.4 0.2 0 Foodworld Spar Foodworld Spar Foodworld Spar Foodworld Spar Spar Foodworld Spar Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Milk Curd Butter Cheese Eggs Ghee 2. Fruits & Vegetables: As these products are available loose hence pack sizes is not much relevant for them. 3. Grains, Pulses & Edible oil: Spar and Big Bazaar sell most of the items loose hence the pack size can be tuned to customer‟s preference. But, Foodworld offers only fixed pack sizes. 23

0 10 20 30 40 50 60 70 80 90 0 5 10 0.5 1.5 0 1 2 Foodworld Foodworld Spar Foodworld Milk Spar Big Bazaar Spar Big Bazaar Chips c. Cheapest brand Foodworld Foodworld Big Bazaar Spar Spar Curd Foodworld Big Bazaar for coffee Foodworld does. Big Bazaar Foodworld Spar Spar Juice Foodworld Big Bazaar Big Bazaar Spar Foodworld Butter Big Bazaar Foodworld Spar Big Bazaar Foodworld Spar Tea Foodworld Spar Big Bazaar Spar Cheese Big Bazaar Big Bazaar Foodworld Foodworld Foodworld Spar Spar in milk and milk products (including poultry products). Coffee Spar Big Bazaar Eggs Big Bazaar Foodworld Big Bazaar Foodworld Spar Foodworld Big Bazaar Spar Spar Jam Foodworld Ghee Big Bazaar Spar Big Bazaar Big Bazaar all stores. For juices, Spar provides the highest range of pack sizes while sizes for all other products in this category are more or less uniform across 1. Dairy & Poultry products: Spar provides the cheapest and widest range 4. Snacks, Drinks & Beverages: Except for juices and coffee, the pack Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 24

2. Fruits & Vegetables: For fruits, Foodworld is the cheapest while for vegetables, Big Bazaar is the cheapest amongst the three. 30 25 20 15 10 5 0 Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Banana Apple Onion Potato Tomato Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 3. Grains, Pulses & Edible oil: In this category, Big Bazaar is the cheapest as it offers these items either loose or has store brands in all categories including edible sunflower oil. 100 80 60 40 20 0 Spar Spar Spar Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Sona Idli Rice Basmati Moong Dal Tur Dal Chana Dal Wheat Sunflower Masoori Rice Flour Oil Rice 4. Snacks, Drinks & Beverages: Big Bazaar is the cheaper amongst the three if we see the entire range as a whole. 300 250 200 150 100 50 0 Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Chips Juice Tea Coffee Jam 25

d. Costliest brand 1. Dairy & Poultry products: The costlier and the niche products are stored by Spar as they also serve to higher class consumers and foreigners. 120 100 80 60 40 20 0 Spar Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Milk Curd Butter Cheese Eggs Ghee 2. Fruits & Vegetables: On an overall basis, Foodworld is costliest amongst the three for the products chosen for our store audit. On the other hand, Spar keeps a stock of the costly and exotic varieties of fruits and vegetables. 70 60 50 40 30 20 10 0 Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Banana Apple Onion Potato Tomato 3. Grains, Pulses & Edible oil: Even though all the stores store similar costly brands at their stores, Foodworld has the highest price for the same brand as compared to the other two stores. 26

120 100 80 60 40 20 0 Spar Spar Spar Spar Spar Spar Spar Spar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Sona Idli Rice Basmati Moong Dal Tur Dal Chana Dal Wheat Sunflower Masoori Rice Flour Oil Rice Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 4. Snacks, Drinks & Beverages: in this category of products, Spar has more number of costliest brands as compared to the other two stores. 140 120 100 80 60 40 20 0 Spar Spar Spar Spar Spar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Foodworld Big Bazaar Chips Juice Tea Coffee Jam e. Aggressiveness tow ards “Store Brand” 1. Dairy & Poultry products: Spar has higher aggressiveness towards having store brands in dairy products category however, everybody does keep atleast known brands because of consumer sensitivity towards quality and expertise of few major companies like Amul, Britannia etc. in this product category. 27

10 9 8 7 6 5 4 3 2 1 0 Foodworld Foodworld Spar Spar Foodworld Spar Foodworld Spar Foodworld Spar Foodworld Spar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Milk Curd Butter Cheese Eggs Ghee Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 2. Fruits & Vegetables: As all these products are locally purchased, hence the concept of store brand doesn‟t fit them. 3. Grains, Pulses & Edible oil: Big Bazaar has store brands in almost all products in this category while others are also focusing on having store brands with Spar having the highest variety of store brands (3 nos.). The reason maybe that consumers are highly price sensitive for these products and hence store brands help the stores to have higher footfall by offering lower prices without compromising much on the margins. 10 9 8 7 6 5 4 3 2 1 0 Spar Spar Spar Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Sona Idli Rice Basmati Moong Dal Tur Dal Chana Dal Wheat Sunflower Masoori Rice Flour Oil Rice 4. Snacks, Drinks & Beverages: Foodworld is the only store to have ventured into store brands for few products in this category whereas other store do not have any store brand. 28

10 9 8 7 6 5 4 3 2 1 0 Spar Spar Spar Spar Spar Foodworld Foodworld Foodworld Foodworld Foodworld Big Bazaar Big Bazaar Big Bazaar Big Bazaar Big Bazaar Chips Juice Tea Coffee Jam Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 f. Space dedicated for each item While calculating the space dedicated for each item, we have taken the data only for limited products in each category for which we have audited the remaining parameters like assortment, price within each store. Hence, the data is presented below in 2 categories: 1. Absolute number of racks available for each product category. This will give us an idea of the size of the store. 2. Number of racks dedicated for each category per 10,000 sq.ft. of the store. This will give us an idea of the focus of each store on each product category. Total no. of racks Racks per 10,000 sq.ft. area Product Category (only for Food Big Food Big Spar Spar audited items) World Bazaar World Bazaar 1 Dairy and Poultry Products 2 17 4 4 7 4 2 Fruits and Vegetables 3 12 5 5 5 6 3 Grains, Pulses and Edible Oils 9 38 13 19 15 16 4 Snacks, Drinks and Beverages 11 15 16 22 6 20 As per the above data, Spar has the highest number of racks dedicated for each product category. Big Bazaar has comparable space allocated for Snacks, Drinks and Beverages which clearly shows the focus of the store despite being smaller in size than Spar. 29

When we compare the data for the racks allocated per square feet of the store (Food & Grocery section area), we have the following observations in each category: 1. Dairy & Poultry products: Spar has the highest focus as compared to the other two stores. 2. Fruits & Vegetables: All stores are having almost equal focus for the products we have chosen but Spar scores above the other 2 stores when we compare the total area allocated for all vegetables and fruits. 3. Grains, Pulses & Edible Oils: Foodworld has allocated higher share of area for these items but Spar and Big Bazaar have open grains market Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 within store. 4. Snacks, Drinks and Beverages: Both Foodworld and Big Bazaar have allocated higher share of the store area for these items as compared with Spar, but Spar has higher variety then these stores. STORE STRATEGY The summary of the above data and analysis is tabulated below: Assortment Range of pack sizes Price Product Category Max. Min. Max. Min. Cheapest Costliest Foodworld/ 1 Dairy & Poultry products Spar Big Bazaar Spar Spar Spar Big Bazaar Foodworld/ 2 Fruits & Vegetables Spar Foodworld NA NA Foodworld Big Bazaar Foodworld/ Spar/ Big 3 Grains, Pulses & Edible oil Spar Foodworld Big Bazaar Foodworld Big Bazaar Bazaar Foodworld/ 4 Snacks, Drinks & Beverages Spar Same Same Big Bazaar Spar Big Bazaar Aggressiveness towards Space share in store "Store Brand" Product Category Max. Min. Max. Min Foodworld/ Foodworld/ 1 Dairy & Poultry products Spar Spar Big Bazaar Big Bazaar 2 Fruits & Vegetables NA NA All same All same Spar/ Big 3 Grains, Pulses & Edible oil All All Foodworld Bazaar Spar/ Big Foodworld/ 4 Snacks, Drinks & Beverages Foodworld Spar Bazaar Big Bazaar 30

From the above tables we can understand the strategy of each store: 1. Foodw orld: This is a smaller format closer to the neighbourhoods. The prime idea is to extend convenience to consumers, maintain lower variety and charge higher prices for the convenience offered. The main features of Foodworld strategy for food items are: a. Convenient location b. Limited assortment and variety c. Limited options of pack sizes d. Relatively higher price. Charge MRP for most of the items. e. Focus more on sales of snacks and beverages, and less on dairy Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 products. 2. Big Bazaar: The Food Bazaar has a strategy of offering discounts and competitive prices in order to offset the drawback of inconvenient location, and offer limited range to serve primarily the lower middle class section. The main features of strategy of Food Bazaar are: a. Competitive prices b. Limited range c. Focus on low price and discounted items d. High focus on store brands for grains, pulses and oils to offer competitive prices. e. Price is primary, quality is secondary and shopping experience is tertiary on the focus. f. High space utilization and using basic cardboard boxes for display. g. Focus on grains, pulses, snacks, drinks and beverages. h. Less focus on daily purchase items like bread, milk and eggs. i. Promote bulk purchase. 3. Spar: Spar is a completely air conditioned store focused on serving a wide variety of consumers with special focus on high end upper middle class consumers. The intention is to offer the widest range possible with concepts of EDLP and customer care. The main features of strategy of Spar are: a. Wide range, variety and assortment. b. Focus on quality, variety and delivering superior shopping experience. c. Make shopping a pleasure rather than a painful activity. 31

d. Promote bulk and niche purchase. e. Focus on daily & weekly purchase items also like bread, milk, curd, eggs, fruits and vegetables so that consumers doesn‟t have to go anywhere else for anything. f. Focus on giving a wide variety even in store brands, but majorly for grains, pulses and spices. g. Attract only consumers serious for shopping and not attract consumers to just come for experience. h. Also keep exotic varieties of all food product categories. OPPORTUNITIES & CHALLENGES Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 “Kirana” store: Strengths: 1. The local “kirana” store has PSFPD of Rs.70-80 (Sales per sq. ft. per day). This happens because of convenient location and small but regular purchases done by Indian consumers. 2. The size of the kirana store is much smaller and it also has a combination of counter sales and door delivery. Corner-stores and street vendors do their best to cater to the local population in the area in which they operate. As a result most of them provide home-delivery services, for any and all order sizes, at no extra charge. Shopping is as simple as making a phone call and narrating the shopping list to the store owner. Within minutes, the entire list of groceries with an itemized, hand-written bill reaches your doorstep. The absence of product variety, brand diversity, marketing and exposure had made shopping in stores almost unnecessary for the Indian consumer. Retailers unconstrained by labor costs had no problem in understanding this dynamic and adapting to the needs of the Indian consumer. 3. Efficiency of merchandising is superb in the kirana store. 4. Kirana store enjoys the highest customer intimacy due to the limited clientele and the owner of the setup usually sits in the billing area where he meets each customer to settle the bills. 5. The staffing efficiency is also much better than the other modern formats as 90% of the kirana stores have their own family members working in the store. 32

6. Most of the kirana shops also offer purchase “on-credit” for their regular consumers. Unorganized retailers enjoy a loyal and limited clientele. The personal nature of transactions coupled with small transaction sizes allows unorganized retailers to sell goods on credit often settling bills with clients at the end of the month. 7. Items are fresher due to limited customized stocking and higher turnover. 8. Unorganized retailers rarely pay taxes due to the absence of regulation and supervision in this sector. This also allows them to earn higher margins than organized retailers 9. Corner stores operating out of homes usually pay residential rates for utilities like electricity and water. With the large disparity between commercial and Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 residential utility rates, unorganized retailers do not have to worry about these inputs eating into their profits. 10. Unorganized retailers usually operate from their residences that double-up as counter stores or like street-vendors carry their merchandise with them. As a result, they incur little to no real-estate costs. 11. Finally, the proximity of unorganized retailers caters to the just-in-time mentality of Indian consumers who prefer to buy goods when needed for immediate use rather than making bulk purchases in advance Weaknesses: 1. Wide range not available. Fast moving items as per the local community choice only kept. 2. Consumer doesn‟t have the option of pick and choose. He has to rely on the product offered by the shopkeeper. 3. No discount offered. All goods sold at MRP. Organized retail: Challenges: 1. The MRP regime for branded goods reduces the headroom for organized retailers in passing value-added merchandise mix to their consumers. 2. Unpredictable geographical roll-out of organized trade outlets which poses challenge of scaling up. 3. Matrix of regulations and licenses for certain categories. 33

4. Inadequate parking infrastructure in shopping spaces that doesn‟t encourage destination shopping behavior. 5. Variation in tastes and preferences in every next town along the length and breadth of the country. In metropolitan and cosmopolitan cities this is a major challenge due to diverse mix of cultures. 6. In India, food items esp. items like milk, fruits and vegetables are not bought once in a while. Indians rather like it fresh and hence is a frequent purchase item. Under such a condition, the location plays a major role in meeting the convenience requirement of the consumers. Supermarket format: Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Challenges: 1. Such stores have high dump and shrink rates (~ 3.3%) which eventually pull profits down. 2. The rental cost to sales ratio stands low in this format as most of them are located in residential catchments and only a few are in high rental commercial areas. 3. Many of the stores in this format clock sales of Rs.16-20 per sq. ft. per day (PSFPD), but for viability and greater performance, PSFPD of Rs.30-40 is required. Hypermarket format: Challenges: 1. The extent of contribution of private label category to merchandise mix ranges between 40-50% in this format which pushes up the gross margin to 23.5%. 2. The business model is based on high volume low margin sales. 3. Currently the shrinkage due to pilferage and merchandise loss is high (~ 1.5%) and there is good deal of scope to reduce this for better viability in future. 4. Facilities management in hypermarkets is of prime importance as good housekeeping and maintenance standards ensure the upkeep of the merchandise. 34

CONCLUSION How can organized retail overcome its shortcomings in the food business and grab a bigger share of the total “Food & Grocery” market? In this land of 15 million retailers, most of them owning small mom and pop outlets, we also have a modern retail flourishing like never before. The present penetration of organized retail is merely 4% of the total retail market. With the given rapid pace of retail growth, it is expected that Indian retail market (estimated at current prices) will be in excess of Rs.18,10,000 crore by year 2010; Organised retail will likely exceed Rs.2,30,000 crore, accounting for nearly 13% of the total market in 2010. This growth will call for a greater availability of quality retail space in the country. Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 In the previous section we have enumerated the strengths and weaknesses of “kirana” store and also the challenges of the modern food retail formats. We can conclude from our study and consumer feedback that following steps needs to be taken by the modern food retail formats to improve their business: 1. COMMUNITY CONNECTING: Identify the communities visiting the particular store and try to connect with them by stocking the items preferred by the larger communities in the particular catchment area. This must be done by gathering consumer feedback on a regular basis to incorporate their suggestions for either stocking or moving out particular items according to the taste and preference of the majority. 2. CATEGORY BUILDING: Build categories (like Chinese cuisine, South Indian cuisine etc.) in order to build strong consumer pull for the particular category of items. This can be done through consistent in-store activation, sampling and demonstrating the ease of cooking the particular cuisine. 3. CONVENIENCE FACTOR: Door delivery of items is a requirement which can bring in huge additional business as it can offset the convenience disadvantage of the modern retailer. This is essential due to frequent purchase pattern of the Indian consumers‟ buying behavior. Separate list with rates higher than discounted prices and lower than MRP must be charge to balance the financial viability of this exercise and the price advantage over the kirana store. Catalogue for items can be made on website for easy listing of items by consumers and orders can be taken over phone. 35

4. AREA MAPPING: Before opening any new store as per the modern retail format, the mapping of the area needs to be done to ensure atleast 2-3 kms distance from the next closest organized retail outlet to have higher catchment and avoid undercutting. The competition must be with the kirana store and not the next modern supermarket. 5. PAYMENT FLEXIBILITY: In order to counter the “credit” facility offered by the kirana store, modern supermarkets may encourage “cash-card cum loyalty- card” system wherein consumer can get his card recharged online and housewives who usually do not possess credit cards can easily make bigger purchases and impulse/emergency purchases using the card. Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Despite all the optimistic projections of organized retail in India, a number of improvements in a number of areas will be required for organized retail in India to truly live up to its enormous potential. With the current status-quo, organized retail is a large market in India but with certain improvements, organized retail in India can be one of the biggest sectors in the world. 1. Currently, the government permits 51% FDI by a single-brand retailer. The retail market needs to be opened up to 100% FDI to invite significant foreign competition that will introduce best practices, improve productivity in the industry and accelerate its development and penetration. 2. The government must also reduce the amount of bureaucracy that an organized retailer has to deal with. Currently, a large organized retailers need to obtain a variety of permits from different departments to open each outlet. This creates significant barriers to entry and increases administrative costs. The government must set up a one-stop department that caters to the requirements of organized retail given the potential of this sector in bringing gains to the economy. 3. The government must give the retail sector industry status to allow it to enjoy the benefits that come with this status. The government needs to introduce a number of policies to accelerate the growth of the Indian retail industry. 36

REFERENCES: 1. India Retail Report – 2009 – Images F&R Research 2. India Retail Report – 2008 – Images F&R Research 3. Retail in India – Getting organized to drive growth – CII-ATKearney report – November 2006 4. Data Monitor - www.datamonitor.com 5. Organized Retail “Inquilab” in India – Stanford Technology Ventures Program – June 2007 Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 37

EXHIBITS: Exhibit-01: Store Audit Format Store name: Location: Date of visit: Assortment Pack Size Cheapest brand Costliest brand Mfg. date Min. Max. Store No. of No. of No. of Quantit Quantit of oldest S.No. Item pack pack Price Price brand racks brands types y y item/ size size available? dedicated freshness A. Dairy & Poultry products 1 Milk 2 Curd 3 Butter 4 Cheese 5 Eggs Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 6 Ghee B. Fruits & Vegetables 7 Banana 8 Apple 9 Costliest Fruit 10 Onion 11 Potato 12 Tomato C. Grains, Pulses & Edible oil Sona Masoori 13 Rice 14 Idli Rice 15 Basmati Rice 16 Moong Dal 17 Tur Dal 18 Chana Dal 19 Wheat Flour 20 Sunflower Oil D. Snacks, Drinks & Beverages 21 Chips 22 Juice 23 Tea 24 Coffee 25 Jam Exhibit-02: Consumer Surve y Form Sample ============================================================= Survey questionnaire This questionnaire is meant for assessing the purchase behaviour of Bangalore consumers for food items. The survey would hardly take 5 minutes to fill. We request you to share your valuable feedback with us in order to help in our academic project. Your information will be kept confidential with us and shall be used purely for educational purposes. Basic information 38

1. Name: Mr./Ms. ______________________________ 2. Age (in yrs): < 25/ 26-35/ 36-45/ 46-55/ > 55 3. Monthly household income: < Rs.25,000/ Rs.25,000 – 50,000/ Rs.50,000 – 75,000/ > Rs.75,000 4. Number of family members staying in your house: < 3/ 3 – 5/ > 5 Purchase pattern information 5. At what frequency do you purchase food items for your family needs? Once a week/ Twice a week/ Thrice a week/ Almost daily 6. How much do you spend on an average during each purchase visit for food items? < Rs.500/ Rs.500-1,000/ Rs.1,000-2,000/ > Rs.2,000 7. From where do you regularly purchase food items for your household needs (“preferred store”)? Nearby “kirana” shop/ Food World/ More/ Spar/ Big Bazaar/ Reliance/ Star Bazaar 8. Approximately how far is the above store from your residence? Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 0-2 kms/ 2-5 kms/ 5-10 kms 9. Please “tick” the main reason(s) because of which you purchase more from the above store, and not from others. a. Convenience b. Prices c. Variety d. Quality e. Freshness f. Other reason ________________________ Purchase preference factors & Supermarket feedback 10. Kindly tick against the supermarkets which have you visited atleast once in the last 6 months for purchasing food items and also mention the location of the supermarket which you have visited: a. Food World : Location:_____________________________ b. Spar : Location:_____________________________ c. Big Bazaar : Location:_____________________________ 11. a. Kindly rate the following 15 parameters in the order of its importance to you for visiting a “Supermarket”. Please rate on a scale of 1 to 15 with 1 for the parameter “MOST important” and 15 for the parameter “LEAST important” to you. b. Please also mention the stores (including your nearby “kirana store”) which you feel are the “BEST” and “WORST” in each category. BEST WORST S.No. Parameter Rating store store 1 Close to where you live 2 Convenience of parking 3 Price lower than the printed MRP 39

4 Special promotion schemes 5 Courteous, friendly employees 6 Fast billing system/ less waiting 7 Availability of food products 8 Availability of alcoholic beverages 9 Availability of magazines Availability of personal care products 10 like cream, toothpaste, brush Availability of household products like 11 plastics, mosquito repellent, detergent 12 Availability of fresh meat 13 Accepts credit card Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Availability of snacks/ fast food joint 14 outside the supermarket Extended store operating hours – 8 am 15 to 10 pm 12. Kindly “tick” the food & grocery items which you regularly purchase from your “preferred store”. a. Milk b. Milk products c. Fruits d. Fresh Vegetables e. Grains and pulses f. Wheat/ Rice flour d. Eggs h. Fresh meat i. Soft drinks/ Squashes/ Juices j. Snacks/ Savouries k. Frozen foods l. Ice creams m. Cooking oil/ Spices n. Bakery items (breads/cakes) o. Magazines p. Household/ cleaning item q. Toiletries/ Cosmetics r. Baby cosmetics & food 13. From the above list of items, if you do not purchase any “Food” items (i.e. items listed from ‘a’ to ‘n’ in the above grid) from your preferred store, then kindly mention the reason. Item Reason for not purchasing from “preferred store” a. _______________ ______________________________________________________ b. _______________ ______________________________________________________ c. _______________ ______________________________________________________ d. _______________ ______________________________________________________ e. _______________ ______________________________________________________ 14. Please suggest 3 improvements points/actions for your “preferred store”. a. ____________________________________________________________________________ b. ____________________________________________________________________________ c. ____________________________________________________________________________ Thank You for sparing your valuable time!!! ============================================================= 40

Exhibit-03: Photos & Unique features of Foodw orld Supermarket, BG Road 1. Main entrance with limited parking 2. Positioning & Low price guarantee display Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 3. Vegetables rack 4. Check-out counters (3 nos.) 5. Only store brands for grains and pulses 6. Quality assurance 41

7. Banner mentioning direct purchase from farmers Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 Exhibit-04: Photos & Unique features of Food Bazaar Supermarket, Jayanagar, 9 t h block 1. Products stored even in aisle 2. Bundling of products for more offers 3. Grains & pulses sold loose 4. Separate free gift counter 42

5. Stacking done on cardboard packs 6. Impulse purchase items near counters Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 7. Local pickles sold loose 8. Exchange, Quality, Price guarantee Exhibit-05: Photos & Unique features of Spar Hypermarket, Near Sagar Apollo Hospital 1. Main fascia & entrance 2. In store neat stacking and broad aisles 43

3. High end bakery inside store Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 4. Sweet shop in store 5. Juices and salads counter inside store 6. Elaborate fresh sea food and meat counter inside the store 44

7. EDLP promise 8. Discounted price display with validity Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 9. Store brands for pulses 10. 3 store brands – Select, Value & Best Price 11. Fresh ground coffee counter 12. Grains market for loose purchase 45

13. Escalator inside store 14. 22 checkout counters with 6 express counters Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers | 9/20/2009 15. Precautions taken by store 16. Fruits & vegetables area within store 17. Welcome board at entrance 18. Car & 2-wheeler parking ticket dispenser 46

Retail Strategy - Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers

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Retail Strategy - Food & Beverages: Store strategies of major modern stores & Preferences of Bangalore consumers Document Transcript

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