a study on anlysis of kirana stores (brick and mortar) to click ...

“A STUDY ON ANLYSIS OF KIRANA STORES (BRICK AND MORTAR)

TO CLICK AND ORDER STORES IN INDIA”

DR.SAVNEET KAUR, ASST. PROF., BVIMR, NEW DELHI

MS. MEGHA SEHGAL, ASST. PROF., BVIMR, NEW DELHI

Abstract:

Brick and mortar (also bricks and mortar or B&M) refers to a physical presence of an

organization or business in a building or other structure. The term brick-and-mortar

business is often used to refer to a company that possesses or leases retail shops, factory

production facilities, or warehouses for its operations. More specifically, in the jargon

of e-commerce businesses in the 2000s, brick-and-mortar businesses are companies that

have a physical presence (e.g., a retail shop in a building) and offer face-to-face customer

experiences.

”. The phenomenal three digit growth in the “click and order” retail business has been

fuelled by the burgeoning middle class, increasing incomes, a robust economy and the

rapid penetration of the internet and smartphones.

The retail landscape in India is in a state of flux undergoing a major shift. Retail scenario

in India is rapidly transforming from the traditional brick and mortar “Kirana” stores to

the burgeoning Malls and now the new age “Click and orderThe total concept and idea of

shopping has also undergone a drastic change in terms of format and consumer buying

behavior, ushering in a revolution in shopping in India, with more and more consumers

from Metros to Tier II and Tier III cities opting to make online purchases.

However this rapidly growing landscape with its fairytale scenario, is not without its

pitfalls and there are several issues and critical factors which must be taken into account

before the fairytale comes true. The modern retailers will have to address these critical

success factors and also overcome the associated challenges.This paper makes an attempt

to analyse the online retail scenario and gain insights into the rapid of process of

transformation of the “Brick and mortar” stores to “click and order” stores. The major

Aut Aut Research Journal

Volume XI, Issue IX, September/2020

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https://en.wikipedia.org/wiki/Retail_shop

https://en.wikipedia.org/wiki/E-commerce

https://en.wikipedia.org/wiki/Retailer

issues to be covered in the paper will be to identify the critical success factors for online

marketing and the challenges to be faced by emerging online retail business.

Keywords: Online Marketing, Brick and Mortar stores, Retailing, E Commerce.



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Introduction

E-commerce can simply be defined as „using the Internet to do businesses. It involves

transformation of economic activity into digital media and includes:

Exchange information, content, agreements, and services among parties that are

connected to through the Internet.

Enables new ways of creating, delivering and capturing value to customers.The

World Wide Web has redefined every facet of marketing since its inception. All this

happened within a very short time of the public launch of the internet in 1991 by Tim

Berners Lee.

One of the major catalysts for e-commerce has been the increasing reach and breadth

of Internet penetration in India. India with 325 million web users and over 1 billion

telephone users (according to the latest figures released by TRAI) has third largest

base of internet users in the world after China and the United States. 60% of internet

users in India are now using mobile phones to access the internet.

In operations research, joint inventory and pricing optimization has received increasing

research attention since the 1990s. We refer to Petruzzi and Dada (1999) for a

comprehensive review on the early literature and Chen and Simchi-Levi (2012) for the

updated literature. This literature stream usually focuses on a single product.

Including the decision of assortment breadth in the model may post insurmountable

challenges because the objective function becomes an ill-behaved multivariate function

with integer and continuous variables. We refer to Kok¨ et al. (2009) for a comprehensive

review of the literature on assortment planning. One of the important early results on

assortment planning was obtained by van Ryzin and Mahajan (1999). Under the

assumption that each variant has an identical newsvendor ratio, these authors show that

the optimal assortment consists of several of the most popular items. Subsequent studies

extend the analysis to include such factors as consumer search (Cachon et al., 2005) and

endogenous pricing (Maddah and Bish, 2007). Several other studies take a different route

by relaxing the assumption of an identical newsvendor ratio.



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For example, Li (2007) and Alptekinoglu et al. (2009) show that the optimal assortment

does not always include the most popular variants but instead includes the most profitable

ones. The research performed by Maddah and Bish (2007) is closely related to the

traditional retailing model analyzed in our research. However, we extend the analysis by

comparing the performance of two distinct retailing models

Present Indian Retail Landscape

The Boston Consulting Group and Retailers Association of India published a report titled,

„Retail 2020: Retrospect, Reinvent, Rewrite‟, highlighting that India‟s retail market is

expected to nearly double to US$ 1 trillion by 2020 from US$ 600 billion in 2015, driven

by income growth, urbanisation and attitudinal shifts.Bothorganised and unorganised

retail companies have to work together to ensure better prospects for the overall retail

industry, while generating new benefits for their customers.The total concept and idea of

shopping has also undergone a drastic change in terms of format and consumer buying

behavior, ushering in a revolution in shopping in India. Modern retailing has entered into

the Retail market in India as is observed in the form of bustling shopping centers, multi-

storied malls and the huge complexes that offer shopping, entertainment and food all

under one roof.

Retailing consists of the business activities involved in selling goods and services to

consumers for their personal, family, or household use. It includes every sale of goods

and services to the final consumer. Retailing in India today is at an interesting crossroads

and the Retail Industry in India has come become one of the most dynamic and fast paced

industries with several players entering the market. However India is the country having

the most unorganized retail market in the world. According to MrArvindSinghal,

Managing Director, KSA Technopak India Pvt. Ltd the size of the unorganized retail

market in India is roughly Rs 5,80,000crores representing 90% of the market whereas

organized retailing accounts for the remaining 10% of the market. In absolute terms,



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India has amongst the lowest per capita retail space availability and the average size of

the retail outlet is less than 500 sq feet. India‟s retail industry accounts for 10% of the

country‟s GDP. The retail sector is expected to grow at the rate of 12% per annum and

some of the major retail organizations like TESCO, Wal-Mart , Ikea and Amazon are in

the process of making major investments in the Indian market.

Brick and Mortar Retailers and Brands Going Online

Diagram 20: Transformation of “Brick and Mortar” to “click and order stores”

. In India, the retail market has been primarily catered by traditional brick and mortar

stores which even today handle over 90 percent of the total market.The Indian online



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retail market has been striding leaps and bounds over the past few years on account of

digital revolution. However the reach of the Internet is still limited although increasing at

a fast pace.

E-commerce is expanding steadily in the country. Customers have the ever increasing

choice of products at the lowest rates. E-commerce is probably creating the biggest

revolution in the retail industry, and this trend would continue in the years to come.

Retailers should leverage the digital retail channels (e-commerce), which would enable

them to spend less money on real estate while reaching out to more customers in tier-2

and tier-3 cities.

The focus is also shifting from traditional brick and mortar distribution channels to the

Click and mortar distribution channels, which is a combination of the traditional brick

and mortar channel and clicks only channel.Retail e-commerce (or e-tailing), is

essentially the selling of retail products through internet such as Online shopping, online

retailing, e-shopping, e-retailing, etcThe current market size of online retail sector is

around $ 3.5 billion (over Rs 21,000 crore), and is expected to reach around $ 18.5 billion

by 2018.

The major reasons for this growth will include the increasing penetration of mobile

Internet, higher purchases of smartphones, need for ease of shopping, time convenience

and higher mobility. Heavy discounts offered by online portals will also propel the

market growth. In terms of product segments, at present electronic gadgets claim the

highest share followed by apparel and books. Some other factors helping the online retail

industry seeing good growth include smartphones offering accessibility to online

shopping, aspirations of tier II & III cities, women becoming more tech savvy, evolving

perception around branded products, impulsive buying and logistical convenience.

Despite its diverse population, disposable income has increased in India and is expected

to increase at the rate of 8.5% per annum .The number of working women has also

increased, thus increasing the number of households, where both husband and wife are

working. Consumers have larger disposable incomes, greater purchasing power and less

time to spend on daily shopping.



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http://economictimes.indiatimes.com/topic/digital%20revolution

http://economictimes.indiatimes.com/topic/market%20size

http://economictimes.indiatimes.com/topic/online%20retail%20industry



This will lead people to buy daily goods online rather than waste time and fuel to shop

from a hypermarket. This has lead to the slew of new websites like bigbasket.com,

grofers.com, localbaniya.com which offer groceries and household products that can be

delivered to households in a short span of time.

Discount and other promotional offers are strongly believed to have led customers from

the physical stores to virtual stores. Flash sales like GOSF (great Online Shopping

Festival) by Google in which online retailers like jabong, snapdeal, flipkart and

amazon.com participated helped in increasing online purchases substantially. Discounts

and promotional offers have always attracted customers.

This is evident from sales figures of days when heavy discounts are available for the

customers in both single and multi-brand outlets. Most of the e-commerce portals have

started giving discounts round the year. With such availability of discounts throughout

the year, more and more people are expected to shift their shopping from physical to

virtual stores and thus paving the path through increased buying on the World Wide Web.

The B2C segment has also become very popular as far as the service sector is concerned.

The online services marketing includes travel portals like irctc.co.in for railway

reservation, makemytrip.com, goibibo.com, expedia.co.in, cleartrip.com, yatra.com ,

redbus.com etc. The advantages offered by these websites like booking from the

convenience of home, comparing fares, checking availability, hotel bookings etc have

made them very popular and acceptable to the Indian customer.

A large majority of railway reservations today are through the irctc.co.in web portal. The

latest entrant to the travel sector is oyorooms.com, which offers hotel bookings in popular

hotels at heavy discounts and no cancellation charges, making it an instant hit. Another

category of b2c segment is the group buying web portals like Groupon.com and

foodpanda.com for restaurant bookings. These websites also provide substantial savings

for the customers.



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Different Categories of E-Commerce Sites Operating in India

There are different categories of web portals offering products and services in India Some

of the pioneering web portals were Bazee.com (which was acquired by ebay) ,Hometrade

(involved in a scam), which did not really take off and were mired in controversies.

Online shopping sites can broadly be classified into the following categories:

Virtual Marketplaces: Websites which offer a platform for sellers and buyers to meet.

These websites facilitate the process of buying and selling, but do not sell products of

their own e.g. Ebay, Rediff shopping, Amazon etc. These websites charge a certain

amount from sellers and allow them to set up shops in their virtual marketplace. These

websites facilitate the buying and selling process by rating buyers as well as sellers and

also help in transfer of payment from the buyer to the seller.

The payment is made by the buyer to the website , which in turn releases the payment to

the seller after the buyer confirms receipt of the product. This way they protect the

interest of the seller as well as the buyer. The website also has a helpline for handling

complaints of the buyers. The seller has the advantage of not having to promote their

products.

Horizontal/ Vertical Markets :The second category of websites are those which

maintain inventory and sell products of their own like jabong.com, flipkart, homeshop18,

snapdeal, myntra etc. These portals may be vertical portals which sell a particular

category of product like apparel as in case of jabong, furniture as in case of urbanladder,

pepperfry, ediy, jewelry as in case of bluestone or a horizontal portals selling a wide

variety of products like flipkart, homeshop18, snapdeal etc.

These portals need to aggressively promote their websites and product categories,

maintain inventories and develop a major supply chain network. The latest entrants to this

sector are like portals offering groceries like bigbasket.com, grofers.com,

localbaniya.com. These portals also arrange to deliver the groceries, generally in large

cities and that too limited geographical areas.



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Transactional websites: The third category of websites is brick and mortar shops which

set up a virtual presence on the net to augment their sales. These may be portals set by

companies selling durable products like Sony, Samsung, Philips, restaurants like

“Dominos” or publishing companies or large and well known retailers which have a pan

India presence. Generally the basic purpose of these portals is to provide information

about their products and help the customer to search for or pay for product or to direct the

consumer to their dealers or physical outlets, or help to complete the online

Service portals :Fourth category of e-commerce websites are those offering services like

travel services by makemytrip, goibibo.com, expedia.co.in, cleartrip.com, yatra.com ,

rebus, hotel booking by OYO rooms, income tax filing like taxsmile, real estate buying

and selling like 99acres, magicbricks, India property etc. The travel portals tie up with

various airlines , hotels etc to book tickets or hotel rooms. The real estate portals provide

a platform for prospective buyers and sellers to meet. These portals also need to

aggressively advertise , promote and differentiate their offerings.

Regional Diversity in Online Purchases

Online retail has revolutionized the way Indians shop. Electronics and apparel are some

of the largest selling items, products such as adult diapers and blood glucose meters are

seeing a rapid rise in demand on e-tailing sites. Penetration of FMCG products and

consumer durables are very high across India. But in smaller towns and cities, people

don't have access to many categories that are easily available in metros. So the only

option for people there is to shop online because, for many categories, the reach of online

players is greater than that of their brick and mortar counterparts.Data from eBay shows

people in Lakshadweep buy a large number of bar accessories online from eBay, while

Nagaland sees a high demand for camping gear. Bike accessories are a big hit in Daman

& Diu, while Chandigarh sees big purchases of networking and wireless devices, and

Goa fuels the demand for hats.People in smaller towns are going online not just for

`offbeat' goods, but also “Items such as branded apparel which are also hard to find in

those areas. So, shopping online is the only option for people.



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Shoppers in smaller towns are also buying things like computer accessories, spare parts,

laptop batteries which are not easily available in these towns and also because they are

available at lower prices through online stores. Another factor for online purchases by

people in smaller towns is the sheer variety of products available online, while the brick

and mortar stores in smaller towns offer a limited variety e.g. furniture.

Another category of products which people are buying online are products like lingerie

and condoms which people may shy away from buying from brick and mortar stores.

Critical Success Factors for E-Commerce Websites

Role of the Web

Project a retail presence

Enhance image

Generate sales

Reach geographically-dispersed customers

Provide information to customers

Promote new products

Demonstrate new product benefits

Provide customer service (e.g., e-mail)

Be more “personal” with consumers

Conduct a retail business efficiently

Obtain customer feedback

Promote special offers

Describe employment opportunities

Present information to potential investors, franchisees, and the media



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For E Commerce to be successful in India the companies need to address the following

issues:

Building trust and overcome customer‟s fear of being cheated. This can be done

by offering schemes like a 15 day full refund, proper product description and also

having a robust customer service department.

Building an efficient Supply Chain Delivery Network, that will reduce the delivery

time for various categories of products. The average delivery time is around 4-5

days. This can be reduced through an efficient Supply Chain network.

Delays or problems in remittances, particularly preventing and sorting problems in

online payment modes, which occur frequently due to slow internet connections

and incomplete transactions. There should be a clear cut mechanism for refunding

money in such cases. Most of the customers in online purchases prefer the COD

route, however this facility is limited to major cities, by most of the sellers.

Acquiring and retaining customers. Acquiring new online customers is difficult,

since the buyer has to be literate and computer savvy. Also selling the idea of

making online purchases to a generation of customers who did not trust mail order

type purchases is not an easy task.

Meet customer expectations of lower prices, since customers are easily able to

compare prices across brick and mortar and online stores. Another disadvantage is

that customers do not have the freedom of bargaining, to which they have been

used to, for a long time.

Overcoming the problem of “touch and feel” which customers considered

important in case of apparel and accessories. This can again be overcome by a

refund policy, such as try and buy , since majority of the refunds in case of

apparel, shoes etc occur due to misfit in sizes.

Developing innovative offers to attract customers. Online retailers have developed

several innovative offers such as “Midnight Sale”, or offers which are valid only

for a limited time period, Online Shopping Festival offering substantial discounts



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on durable products etc. Companies are offering certain products, which are

available only online , e.g. Motorola mobile phones are available only through

“Flipkart” and are not sold through brick and mortar shops.

Absence of human touch is an important challenge faced by online retailers. In

brick and mortar shops, customers can interact with sales personnel and clear any

doubts, they may have regarding the products, their usage or compatibility. This

problem has also been resolved by retailers like Ebay, where they allow potential

buyers to ask the seller questions regarding the products offered.

After Sales Service. This is the most important factor in online sales, since

customers feel that they are at the mercy of the seller, who may not respond. In

case of established durable brands, generally the after sales service is provided by

the local service centre, but there may be problems when products like Televisions

and watches which are sold at substantially lower prices by online retailers .These

products may be those which have been imported from South East Asian

countries, and hence are not eligible for warranties or guarantees.

Partnering with brick and mortar stores. The focus is also shifting from traditional

brick and mortar distribution channels to the Click and mortar distribution

channels, which is a combination of the traditional brick and mortar channel and

clicks only channel. Today retailers with brick and mortar stores in Chennai and

Mumbai, who traditionally catered to customers from their locality only, are

selling products to consumers in every part of the country through online shopping

sites like E Bay, Amazon etc, thereby increasing their sales many fold. The other

way in which retailers are increasingly using the Internet is by way of “Affiliate

Marketing”.

The concept of Affiliate Marketing in principle is of having sites partner with

yours and carry links to your site and you on your part, pay a commission to your

partner only if they sell something from your inventory. This works out to be a

win-win situation for the manufacturers, online marketers as well as the retailers.

A case in point is the model adopted by Amazon in India. E-commerce major



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Amazon is taking the kirana store online. Amazon is launching an express delivery

platform in partnership with Kirana stores, calling it “Kirana”.

Challenges Faced By E-Commerce Websites.

Increasing competition in the online market place will be a major challenge for online

retailers. There is likely to be stiff competition in the online market, particularly on the

pricing front. Online prices are easy for buyers to see and compare, as compared to brick

and mortar stores. A person with an internet connection can compare prices by sellers all

over the world and choose the best option. The online marketplace will move towards a

state of perfect competition whereby there are a very large number of buyers and sellers

and the buyer is well informed. It is much more cost effective to set up online store as

compared to a brick and mortar store. There may also be increased competition from

brick and mortar stores and malls which have the added advantage of offering a

“shopping experience”.

Conclusion:

Regulatory changes. Another factor which may have an impact on the online marketplace

is the regulatory changes, which the government may introduce in order to protect the

brick and mortar store lobby.Some unscrupulous fly by night online sellers may damage

the reputation of online sellers.A large percentage of the population in India is illiterate or



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may not have access to internet or online methods of payment. Heterogeneous Market.

India is a very complex and diverse market in terms of demographic and psychographic

profiles of customers. The purchase behavior may vary significantly across states and

regions, thus preventing sellers from having a uniform product mix or a uniform

marketing mix policy.Poor infrastructure. The online sellers will have to grapple with

problems of poor infrastructure in semi urban and rural areas which do not have access to

electricity and internet connections.

Our study also shows some other interesting results. First, inventory cost and demand

volume are the two main factors that influence a traditional retailer‟s inventory decision.

A traditional retailer needs to carefully balance the costs of holding surplus inventory and

of having a stockout. Second, consumer patience and delivery cost are the two primary

factors that influence an online retailer‟s pricing strategies. There is a negative

relationship between delivery cost and time. The faster the delivery, the higher the

logistics costs. Thus, if a consumer is very patient, it is not necessary to have a very quick

delivery.

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Schiffman Leon G. and Kanuk Leslie Lazar (2007) “Consumer Behavior”,9th

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Piyush Kumar Sinha, SrikantGokhale ,SaurabhRawal “Online Retailing Paired with

Kirana – A Formidable Combination for emerging Markets”, W.P. No. 2014-02-09,

IIM Ahmedabad.

Piyush Kumar Sinha, Sujo Thomas “Development of Modern Retailing in India: It‟s

Impacts on Distribution and Procurement Networks and Changing Consumption

Pattern”, W.P. No. 2012-12-04, IIM Ahmedabad.

The Times of India Title : Amazon to take kirana stores online Author : Samidha

Sharma Location Mumbai: Article Date : 03/26/2015



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