Dissertation Project Report 1st Draft – 2017-2018.
Project title – Opportunities and Challenges in Organized Retail of Fruits and Vegetables in Pune CitySubmitted by –Shailesh Chavan (16020242040)Under the guidance of – Dr. Shubhangi Salokhe (Professor, Agribusiness, SIIB)Contents1. Acknowledgement ……………………………………………………..
. 32. Introduction …………………………………………………………… 43. Objectives of Study…………………………………………………….
. 7 4. Methodology ………………………………………………………….
. 15 5. Secondary Research Analysis ………………………………………… 306. Primary Research Analysis………………………………….
……… 317. Questionnaires…………………………………………………………8. References and Bibliography…………………………………….….. 391. AcknowledgementI have taken efforts in this project. However, it would not have been possible without the kind support and help of many individuals and organisations.
I would like to extend my sincere thanks to all of them.I am highly indebted to my project guide Dr.Shubhangi Salokhe (Professor, Agribusiness SIIB) guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project.I would like to express my gratitude towards my parents & teaching – teaching – non teaching staff of SIIB for their kind co-operation and encouragement which help me in completion of this project.My thanks and appreciations also go to my colleague agribusiness students of SIIB and my family for providing me the moral support and encouragement.Thank You,Shailesh Shahaji Chavan2.
IntroductionThe organised retail business in its new ‘avatar’ began its growth story in the country only after the liberalisation of the economic policies. An USP of the new retail format, especially the malls, as a one-stop shop with the added advantage of entertainment and food courts, aim at making shopping an enjoyable experience for the discerning consumer-family. Initially, this industry showed a great promise, making rapid strides along its growth path but with the global recession of 2008 impacting the domestic retail scenario, a few major players have downed the shutters. However, the organised retail market appears to be poised on a phase of consolidation with mergers and acquisitions. The outcome of the policy debate on FDI in multi-brand retail could impact the growth trajectory of the industry.
Retailing has been defined as business activities involved in selling goods and services to consumers for their personal, family or household use (Berman and Evans, 2001). Organized retail is nothing but a retail place all the items are segregated and brought under one roof, unlike the unorganized retail where there are different things are sold in different shops. It also aims to bring maximum of different brands making the same type of product together. ‘Agro Products’ embraces a broad all-inclusive category of products related to AGRICULTURE. It includes a comprehensive range of raw and finished goods under the classifications of plants, animals and other life forms. The term ‘agro’ has stemmed from the Greek word ‘agros’ meaning field, which has led to its current usage meaning anything that falls under the ‘agricultural’ category. The Organised retail segment in India is expected to witness higher growth going forward due to the FDI clearances in retailing, the changing consumer needs, rise in young (15-49 years) and working women population, and increase in nuclear families among others.
It is estimated that the young population is likely to constitute 53.0% of the total population in 2020 and 46.5% of the population in 2050 – much higher than countries like the US, the UK, Germany, China etc. Today retailing is largest contributing sector to country’s GDP i.e.
10% as compared to 8% in China, 6% in Brazi3. Objectives of Study1. To understand current scenario of organized and unorganized retail of fruits and vegetables2.
To analyze major issues in organized retail of fruits and vegetables3. To understand consumer awareness regarding organized and unorganized retail of Fruits And vegetables4. To understand consumer perception and behavior regarding organized and unorganized retail of fruits and vegetables4. Methodology1.
Secondary data from online and authentic literatures2. Primary research of consumers through survey Research Design – Descriptive Research Sampling Design -Sampling Frame – Consumer who purchase from both organised and unorganised retailers. Sampling Unit – Consumer from different age, group, gender, occupation, income level and educational backgrounds. Sampling Size – 100 customer Data Collection Methods – Primary Data – Survey Methods Secondary data – Data will be collected from respondents and journals and from previous study related to the retailing sector.5. Secondary Research AnalysisCurrent Scenario of RetailThe study brings out several findings that have serious policy implications. The organised retail which accounts for 5 per cent of the total retail trade is poised to grow at an annual rate of around 11 per cent and is likely to touch business levels of 53,000 billion by 2020.
Agri-food retailing accounts for 18 per cent of the organised retail today and is likely to have a lower share (12%) by 2020. The study has identified a few major impediments, especially structural, hampering the growth of organised retail. Direct sourcing by retailers from farmers is less prevalent though it is most desirable and in the interest of all stakeholders.
Retail in IndiaThe Retail Sector is the largest sector in India after agriculture, accounting for over 10 per cent of the country’s GDP and around 8 per cent of the employment. India has the most unorganized retail market in the world. The Indian industry is divided into organized and unorganized sectors. Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses.
Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing, such as the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc. In the beginning there were only kirana stores called Mom and Pop Stores, the Friendly neighbourhood stores selling every day needs. Most retailers of the market have their shop in the front and house at the back. All Indian households have traditionally enjoyed the convenience of calling up the corner grocery “kirana” store, which is all too familiar with their brand preferences, offers credit, and applies flexible conditions for product returns and exchange. And while mall based shopping formats are gaining popularity in most cities today, the price-sensitive Indian shopper has reached out to stores such as Big Bazaar mainly for the steep discounts and bulk prices. Retail chains such as Reliance Fresh and More have reportedly closed down operations in some of their locations, because after the initial novelty faded off, most shoppers preferred the convenience and access offered by the local kirana store.
So how would these Western multi-brand stores such as Wal-Mart and Carrefour strategies their entry into the country and gain access to the average Indian household? Wal-Mart has already entered the market through its partnership with Bharti, and gained opportunity for some early observations. The company’s entry into China will also have brought some understanding on catering to a large, diverse market, and perspectives on buying behaviour in Asian households. Carrefour on the other hand has launched its wholesale cash and carry operations in the country for professional businesses and retailers, and will now need to focus more on understanding the individual Indian customer. (Dr. Rajiv Kaushik and Kapil Dev, 2015)Need For Study: Indian retail industry plays an important role for the economic growth of our country. Indian retail sector or industry is one of the sunrise sectors with huge growth potential. Retailing is the largest private industry in India.
In year 2001 the amount of FDI in India came to $42.3 billion, in next year 2002 it figure to $54.1 billion this figures stood at $75.4 in year 2003 and $113 billion in year 2004 which clearly denotes that the flow of foreign direct investment has grown at a very fast pace. According to the investment Commission of India, the retail sector is expected to grow almost three times its current levels to $660 billion by 2015. (Dr. D.
D. Bedia et al. Aug 2017)OpportunitiesValue chain & retailing of fresh vegetables & fruitsIn the present era of globalization agriculture is facing some new challenges which relates to linking farmers to modern supply chains, lack of technical knowledge to meet stringent quality and food safety standards, export competitiveness due to sanitary phyto-sanitary measures.( Singh Rakesh, Banaras University, 2009)Food retail & retail supply chain in IndiaIncreasing scale of organised retail distribution network and increasing competition are forcing the players to focus on restructuring the whole supply chain to improve productivity and provide a better deal to customers. Indian market and customers are mainly influenced by their socio economic environment and psychological behaviour so retailers should be aware of these factors. However, no holistic study has been reported in the Indian context probing that which parameters shoppers’ consider important when they decide which retail format they want to shop in and from which parameters they derive maximum utility. In India, organized retailers are trying out a variety of formats, ranging from supermarkets, discount stores to organise. The innovations brought by retailers and marketers in the practice of retailing have been providing new paradigms in the way shoppers have been disposed towards their act of shopping.
(S. Pannerselvam, 2011)Farmers and Organised Retail The experience of other countries in organised modern retail of food shows that processed food occupies the largest share of retail (roughly 65%), followed by semi processed food (about 20%), and fresh food (about 15%). Farmers are increasingly realizing the gains from not only direct links to organised modern retailers but also to processors. A study commissioned by the World Bank in 2007 showed that in India the average price received by the farmer in a typical horticulture product is only 12–15% of the price paid by the consumer.
It has also been found that there is a wide disparity in the prices of horticulture products across markets in the country. (C. Rangarajan, 2012)Cooperatives and Organised Organised Retailing and Agri-BusinessRetail The success of Amul and Mother Dairy clearly bring out how organised retail can be very beneficial not only to the consumer but also to the farmer.
(Organised Retailing and Agri-Business C. Rangarajan, 2012)Contract Farming and Organised Retail Various International Food Policy Research Institute (IFPRI) studies (on Mother Dairy, Nestle, and Venkateshwara Hatcheries) have shown that contract farmers earn higher as compared to noncontract farmers. Contracting reduces cost of production by cutting down marketing and transaction costs. Contracting also gives them access to global markets as against local markets which offer them the best prices. (Organised Retailing and Agri-Business C. Rangarajan, 2012)ChallengesOrganised agri food retailing is still urban centric, miniscule albeit growing at one and a half times as fast as food retailing (NABARD, 2011)Based on estimates of value share of purchase of food in organised retail among the primary survey respondents (22% and 14% respectively for class A and class B cities) of over 1,160 consumers from across the country and based on the share of population of the surveyed regions in the total population, it is estimated that share of organised food retailing is about 1.
44% of the size of food retailing, valued at Rs. 154 billion for 2008-09. Thus, the size of organised food retailing is very small compared to the size of food retailing.
Food retailing essential but not very profitable for organised retailers (NABARD, 2011) It is unfortunate that no multi-category organised retailer has had any prior experience in food. Most organised retailers in fact are from apparel business. Thus, the complexities of dealing with supply chain issues of food were under-estimated. Especially, issues of perishability, wastage and shrinkage, dealing with large number of small suppliers besides volatile and raising prices greatly increased costs and risks and reduced returns.Organised and unorganised retail would coexist Multiple needs and utility functions among various socioeconomic classes would ensure that both organised as well as unorganised retail would coexist primarily in the food sector.MiddlemanThe main concerns that emanate from modern retail are the possible displacement of middlemen (and their consequent unemployment), and the implications of the new channels on the farmers’ well-being. The chief merit of a good distribution system is to ensure that the benefits of increasing demand are passed on to the farmer.
At the 9 same time, the benefits of higher production and productivity must accrue to the consumer6. Primary Research Analysis1. Gender PreferencesNull Hypothesis: there is no significant difference in the choice of retailers’ format across the respondents’ gender. Alternative Hypothesis: there is significant difference in the choice of retailers’ format across the respondents’ gender.
Gender Organised UnorganisedMale 20 25Female 35 20 Interpretation: – The analysis provides enough evidence not to reject the null hypothesis, in the other words, there is significant difference in the choices of retailers format across the Gender.2. Opinion on majority of purchaseIncome Respondents Opinion on majority of purchase Organised UnorganisedLess Than 10k 1 710k to 20k 4 820k to 30k 25 1030k to 40k 16 440k to 50k 18 2More than 50k 5 0Total 69 31 Interpretation: – There is no significant difference in the choices of retailers’ format across the family income level.3.
Products purchased from store:- Items Purchased From organised retail store From unorganised retail storeFood and grocery items 36 22Staples 31 21Other food grains/ flours items 54 16Other packaged foods 65 32Fruits and Vegetables 15 62All of the above 16 194. Choice of retailer v/s Age analysisAge Organised UnorganisedLess than 20 years 8 620-30 Years 33 1230-40 Years 14 0640-50 years 9 9Above 50 years 1 2Total 65 35 Interpretation: – If we look at the ratio of organised and unorganised at different ages, there is no significant difference in the choice of retailer’s format across the respondents’ age level.7. QuestionnaireConsumer Survey Questionnaire 1) Name: 2) Current City: 3) Gender: Male Female 4) Age: Less than 25 25-30 30-35 35 and above 5) Educational qualification: Undergraduate Graduate Postgraduate 6) Monthly income: <10,000 10,000-20,000 20,000-30,000 >30,000 7) Background: Urban Rural 8) Where do you often purchase Fruits and Vegetables? I) Street Vendors II) Mom and Pop shops/Convenience Stores III) Super Stores IV) Online Grocery Stores V) Organised Retailers 9) Why do you prefer these stores? I) Close to Home II) Quality III) Cheaper IV) Service12) Which Fruits and Vegetables products do you prefer? I) UncutII) Pre-cut 13) Factors influencing buying behaviour Price Quality Freshness Convenience14) Frequency of purchasing Fruits or Vegetables Daily On alternate Days Weekly Twice in Month15) Ranking of Consumer based on the Factors that determines the Consumption of their Preferred Purchasing LocationFactors Not At All Important A Little Important Important Very Important Mean RankAvailability within area of residence Visual attractiveness (freshness) General dietary pattern of household Price of item Price of close substitute Ambience Income/salary grade level 8. References and Bibliography1. Organized AFGRI-FOOD retailing in India by NABARD, 2011.2. Challenges faced by organized retail companies of Agro products in Haryana by Dr.
Rajiv kaushik and Kapil Dev, 20153. S. Pannerselvam (2011), International Journal of Research in IT, Management and Engineering,4. Singh Rakesh, Banaras University, 2009, Problems and prospects of food retailing in the state of Uttar Pradesh5. Seminar on ‘Organized retailing vis-à-vis farm economy of India’ at the Centre for Economic and Social Studies, Hyderabad, C.
Rangarajan, 20126. Organised Retailing and Agri-Business, C. Rangarajan, 2012