A Comparative Study of Large Scale Retail Chains and Family Owned Small Retail Outlets (Kirana) in India

Abstract

The retail market in India, is one of the largest in the world, accounting for around 15% of the country’s total gross domestic product. This sector has been traditionally dominated by small unorganized family owned stores, colloquially known as kirana. The last few years though have seen a rapid advent of large organized retail chains that have now gained around 8% of the total retail market. This tussle between the two very differently perceived business models, makes a comparative study between the two, a topic of significant relevance. Our research is an attempt to find out how similar or different from each other the organized and the unorganized retail sector really are. We began our investigation through a review of current literature on retail sector. We studied the various effects of the advent of large retail stores on smaller stores. We also identified the different store attributes like location, promotions, income levels, loyalty, family size, etc. that have an influence on the selection of stores. Based on our study, we developed a set of hypotheses to be tested. These hypotheses investigated how similarly or differently customers perceived kirana vis-à-vis supermarkets, in terms of their price levels, customer loyalty, variety of selections, availability of branded vs. unbranded products, average size of Stock keeping units (SKUs) kept and impulse purchases. We backed up our literature review with an exploratory research, which involved several in-depth interviews with customers of both kirana and supermarkets. The insights from the survey helped us to modify our hypotheses to make them more relevant. We next did a quantitative survey of around 100 retail customers asking them about their perceptions about supermarkets and kirana stores. These responses were used to do the hypothesis testing. Based on our study we found that typically there is no well-defined difference between the perceived price levels in kirana and supermarkets. On the issue of customer loyalty, our research proposed that kirana store customers are generally more loyal to their stores than supermarket shoppers. We also found that customers perceive that they get a greater variety of assortments in a supermarket than a kirana. Customers also seem to believe that they purchase more unbranded products from kirana stores when compared to supermarkets and vice versa. We found that people normally bought larger size SKUs in supermarkets when compared to kirana stores, visited kirana stores more frequently and made more impulsive purchases in supermarkets. We verified our findings by doing a basket analysis across two kirana stores and two supermarkets. This involved creating a basket based on a typical customer’s grocery purchase and checking how price, variety, SKU size, availability of brands vary across stores for the items in the basket. Our research generates several rich insights about the inherent strengths and weaknesses of the two retail types and provides a number of pointers for both kirana and supermarket owners to look into.