Food & Beverages: Store strategies
    of major modern stores &
    Preferences of Bangalore
           consumers
        ...
Table of Contents
                                                                                                        ...
Food & Beverages: Store strategies of
 major modern stores & Preferences of
        Bangalore consumers
                  ...
comprise the major food items consumed by an average urban middleclass Indian
                                            ...
Hence, it will eventually help us evolve a strategy that can be followed for the Food
and Beverages section of a supermark...
This driver is further illustrated in the statistic that the percentage of people in
                                     ...
Consumer durables (Rs.57,500 crore) is the fifth largest retail category
followed by Health & Pharmaceuticals (Rs.48,800 c...
In the Organised retail segment, the picture is different altogether. Clothing &
                                         ...
followed by the mobile phones & accessories and the food & grocery retail
  categories, both of which achieved 55.2% growt...
66.9% of the market's overall value. In comparison, sales through food and
                                               ...
of supermarkets and hypermarkets command merely 1.1% of the total food
retail market in the country.
The food retail indus...
concerns however they are not necessarily the only factors. The response
                                                 ...
are replicated quickly and the pressure to undercut other suppliers
   becomes significant. Whilst the need to satisfy con...
systems is predominantly in the direction of food retail, however discontent
                                             ...
of “see-touch-feel”, all at very economical and affordable prices without any
      compromise on quality. Till March 2008...
Age (yrs)                                                Income (Rs. monthly)
                                            ...
consumers are willing to sacrifice one over the other depending on the
        requirement.

      Frequency of purchase f...
Reasons for purchase from preferred
                                                                                      ...
Consumer Priority when shopping at Supermarket
                                                                  Avg.
    ...
Items frequently purchased from supermarket

                                                                             ...
1. This is a Supermarket format.
  2. Liquor and Fresh Meat also available.
  3. Small “Chat” shop outside the store.
  4....
2. Separate bakery, sweets, juice, pickles and milk products (curd & cheese)
                                             ...
30
        25
        20
        15
        10
         5
         0

                               Spar




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

  1. 1. 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
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. 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
  11. 11. 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
  12. 12. 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
  13. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. 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
  20. 20. 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
  21. 21. 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
  22. 22. 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
  23. 23. 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

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