KIRANIZATION OF INDIAN MALLS : THE SNOW WHITE AND THE SEVEN DWARFS EFFECT

Rajan Johree, Ruhbani Singh and Karan Makhania ABSTRACT

In the current changing scenario, it is crucial to be flexible in all possible contexts. Such a scenario currently exists in the Indian retail sector. It is currently estimated to be a USD 200 billion industry and recently saw the entry of very large retailers in the form of malls. Currently, while the malls are attracting a lot of interest in the form of footfalls of visitors, they are not able to convert a sufficient number of these into purchases. This is where the malls need to be flexible and learn from the kirana stores a traditional format of small, corner retailers popular in India.

India and its markets are undergoing a sweeping change. This change is not only in the market structures but also in the way goods are being sold. Gone are the times when a customer would have to make good with whatever merchandise was available, the price and the delivery mode prevalent in those times and finally the value for money that he is given. Today markets and their processes are more flexible in all aspects. The new Snow-white market places have started to replace the traditional bazaar kind of dwarfed tiny corner kirana shop. Be it the supply chain or the point of purchase experience, markets and marketers are deriving sustainable competitive edge based on flexibility. Let us look at the current market position of the Indian malls. The number of shopping malls, which were virtually non-existent in India till five years ago, now stands at about 300. Many more are in the pipeline and will soon be a part of the organized retail segment in our country (India). India is at present a fast growing economy and is attracting considerable amount of interest in its retail sector which is till now still in its nascent stages. Shopping malls are a relatively new phenomenon in India and seem to be linked to the growing middle class and increasing interest in the west. In the Western World there have been malls for so long that they have become part of the public's psyche, but in India it's a new concept, so various factors that govern the success of a mall have to be kept in mind. It is in this context that this

paper is being presented on the acceptability and adaptability of the shopping mall concept in Indian cities and to the Indian population.
HYPOTHESIS

The problem being studied in this article is that of the Indian malls and how to adapt them to the Indian context. The study looks at the possibility of the malls replacing the Kirana stores (a popular form of market stores in India) by adopting a flexible strategy which enables it to successfully adopt the key features of these local stores and at the same time provide the benefits of the shopping malls. The study undertakes an analysis of the attitudes of Indian consumers towards these malls and how the malls need to modify themselves to better service the Indian consumer. Linking the concept of flexibility management systems to the Indian retail segment, this article talks about Indian malls and their need to be flexible and adaptive in order to be successful in the Indian market. Retailing is the business activity of selling goods or services to the final consumer. A retailer is any business establishment that directs its marketing efforts towards the final consumer for the purpose of selling goods or services. The Indian Retail Industry is ranked among the ten largest retail markets in the world. It is currently estimated to be a US$ 200 billion industry and organized Retailing comprises of 3 per cent (or) US$6.4 Billion of the retail industry. With a growth over 20 percent per annum over the last 5 years, organized retailing is projected to reach US$ 23 Billion by 2010. There are multiple factors driving Indian retail growth. With roughly 60 percent of the total population below 30 years of age, favorable demographics are expected to drive consumption across categories. The purchasing power of a young consuming middle class has been talked of considerably since the time of economic liberalization in 1991.
TABLE 1

Table 2

Table 3

As can be seen from the above tables ( taken from the FICCI KPMG Retail Survey, 2005 ) despite Food and Grocery being the fastest growing retail segment in India today, only 8% of it is in the organized retail segment, which offers a huge opportunity for malls to exploit. Presently, this segment is being catered to by the unorganized players, notably the kirana stores. These centrally air-conditioned malls with piped music, high-speed escalators, underground parking space, a multiplex movie theater, multi-cuisine restaurants and a host of national and international brands, these malls generate approximately 25,000 footfalls each, per day, with figures doubling on weekends. It is estimated that there are 450 malls in various stages of development across India, 60 in the greater Delhi area alone. The frequency of visits to these malls can be measured by the number of footfalls and their conversion rates. The number of footfalls that are actually converted to purchases is what is measured by the conversion rates. However at present, most malls in India are regarded as entertainment zones by the people and not as places for making their daily basic purchases. They primarily attract consumers for purchases of furniture, home furnishings apparel and other lifestyle products. Subsequently it has been observed that the footfalls in the Indian malls might be high but the actual conversion rates are low.
THEORETICAL FRAMEWORK

In our study of flexible management systems, we have referred to the book Cornerstones of Enterprise Flexibility by Dr Sushil. This book provided the basis of

our study and provided the broad framework within which we have studied the case of the Indian shopping malls. We begin with an introduction to the Flexibility Management Systems.
BACKGROUND

In this changing world the only thing that is constant is change and the best tool we have with us to deal with this change is Flexibility. The winds of liberalization and globalization are creating a fast changing business scenario. As the barriers across the world gradually diminish with a change in the economic and technological scenario, there emerges a need for higher and higher levels of enterprise flexibility to resonate with these environmental changes. Flexibility is the most valuable strategic option in this turbulent environment and proposes a construct of internal and external flexibilities at the operational, structural and strategic levels. The pillars of this flexibility concept are:
y y y y y y y

Agility Resilience Freedom of choice Adaptive ness Openness Responsiveness Customization

An important concept is called Enterprise Flexibility, which means creating options at various levels in the enterprise, developing ways and means of change across the range of options and providing freedom of choice to various actors in the enterprise for making this change happen with minimum time and effort. The various types of flexibility within an enterprise include:
y y y

Strategic flexibility Organizational flexibility Flexibility of various types of systems including financial, information, marketing etc.

In the present decade of fast changing environment and uncertain levels of organizational operation, a strategy which can absorb the shocks of change and help the organization to adapt it at all levels i.e. from strategy to operations will be successful. The change in the environment has to be learnt by the organization. It has to unlearn the earlier practices which have become redundant /impediments in moving ahead. Such identified changes are absorbed in the corporate strategy and mix of different functional strategies set accordingly.

An enterprise with more options and having systems and processes that can change from one option to another, can easily adapt to the environmental changes. Enterprises that develop an open system will be able to learn about the expected changes in the environment and be proactive in adjusting itself accordingly. Flexibility in an organization should be brought about in the dimensions of strategy, structure, systems and people. In order to generate enterprise flexibility the strategy should be regenerated, organization needs to be restructured, the systems are to be redesigned and the people to be reawakened so as to recreate the culture and adapt to changes.
METHODOLOGY

An exhaustive and detailed questionnaire has been designed to explore all the aspects enumerated above. To arrive at the final questionnaire, we first formulated a rough draft with a few questions, which generated a lot of qualitative data, which played a crucial role in helping us zero in on the final questions. An attempt was made to make the study as broad based as possible by taking a sample of 20 malls in the Delhi NCR region. A minimum of 5-8 shopkeepers and tenants in each of these malls were contacted and surveyed. Detailed and specific information was extracted from them and documented. Personal visits were made to conduct a detailed interview of the respondents (these included both the customers and shopkeepers at these malls). A method of passive observation of shoppers at these malls was also adopted to study the shopping styles and behavior of the Indian customer. Another important tool used for data collection was that of Appreciative Inquiry (AI). Appreciative Inquiry is a positive approach to change that focuses on probing a firm's best attributes and practices. AI is typically thought of as a "soft" strategy used in creating organizational visions, aligning groups, and building cultures. We visited various malls and observed the way the various consumers were going about making their purchases. This helped us get a glimpse of how the mind of the consumer makes choices in real life scenarios. Case studies have also been undertaken and focused group discussions have also been used to collect data and information.
ANALYSIS

Our Study of Consumer Behavior in India At this stage a study of consumer behavior yields great insights into the strategy which must be adopted by the organized retail sector in India. Consumer behavior is seen to involve a mental decision process as well as physical activity. The actual act of purchase is just one stage in a series of mental and physical activities that occur during a period of time . Some of these activities precede the actual buying , while others follow it. However since all are capable of influencing the adoption of products and services , they will be considered as part of the behavior of consumers.

Table 4

Know your enemy, as the saying goes, is considered to be among the most crucial factors for success in retail. Comparing oneself with the competition is a perpetual function of all marketers. The two most commonly used factors for comparison are price and quality, and the perception of the people in both these factors is paramount. In our survey, the respondents perceived the malls to be more expensive as compared to the local kirana stores. This is a clear indication of the need to adopt an effective strategy by the malls to communicate their competitive advantage to the right audience.

Table 5

Another aspect that emerged was the strong preference of the buyer for tried and tested brands and also his penchant for variety at the point of purchase. Traditionally, kirana stores are known to keep an inventory of brands that their regular customers usually buy (e.g. Parachute Hair Oil) while malls stock up on a wide range of brands in the same category. While the customers do appreciate a large variety to choose from, the more popular brands should be displayed prominently to

Table 6

Table 7

The process of choosing a specific store involves the matching of consumer characteristics and purchase characteristics with store characteristics. An individual may use different criteria to evaluate which store best meets his or her needs depending on the type of purchase. Consumers compare retail and store options based on how they perceive each will perform on the various criteria. Evaluative Criteria: y y y y y y y y y Location ( Distance ) Assortment Breadth and Depth Price Advertising and Promotion Point Of Purchase (POP) Display Store Personnel Services Customer Characteristics Store Atmosphere

As observed in Tables 6 and 7, the convenience seeking consumer greatly appreciates the provision of multiple services under one roof. Although this facility is available in the malls, most people surveyed were found to be purchasing their daily groceries and other requirements from the local grocer or kirana store. This contradiction in consumer behavior maybe attributed to the drawbacks that people perceive in the malls as well as to certain convenience factors in the kirana stores that they treasure, which prevents them from making this switch. ANOVA BRAND
Sum of Squares df Mean Square Between Groups Within Groups Total 2.137 20.186 22.322 3 86 89 .712 .235 3.034 .034 F Sig.

The above table reveals the relationship between people who usually buy products on the basis of the brand and also the people who value convenience greatly . In this table the brand is the dependent variable which is shown to be dependent on the convenience factors that people value in the kirana stores(home delivery , personal

association with shop keeper etc).This tells us about the need to stock the brands that the target customer values and usually buys and to also display it in the best possible way . This is another segment that the malls need to aggressively target as their current shopping behavior is being serviced by the local kirana stores extremely well.
Table 8

The people surveyed seem to fall in one of the 2 categories those who shop for products as and when the need arises and also those who visit a store once/twice a month and stock up. The malls need to decide on a strategy to target the buyers who shop as and when the need arises as such people greatly value convenience and usually buy such products from the nearby local vendors.

Table 9

The reason for this is largely typical to India lack of appropriate physical infrastructure like fast moving roads and vacant urban lots for parking requirements. Also, many people tend to indulge in window shopping at the malls ,while not making any significant purchases.

Table 10

It has often been noticed that what others say often influences consumer behavior to a very large extent. The term conspicuous consumption describes purchase decisions motivated in part by the desire to show others just how successful we are. As can be seen, this kind of outlook is widely prevalent amongst the people surveyed. Hence, two factors which we felt would be highly correlated did not turn out to show any significant relationship these factors included the prestige factor associated with shopping in the malls and also the peoples perception of the prices in the malls. ANOVA Where would the people rather be seen
Sum of Squares Between Groups Within Groups Total 3.716 122.353 126.069 3 83 86 df Mean Square 1.239 1.474 .840 .476 F Sig.

Table 11

This chart emphasizes the traditional value seeking behavior of the Indian consumer. Any retail format aiming to target the masses must be seen as providing the best value for the consumers money. Through our focused group discussions and interviews with people in the malls we were able to identify certain strengths and weaknesses of the malls in India, as perceived by the people who shop in them. BENEFITS OF THE MALLS
y The whole retail and merchandizing industry depends on the efficient use of supply chain, pricing and range of products. Single elements alone cannot offer the customer a delightful shopping experience. Small Kirana stores cannot offer this experience as many processes are involved, there are high costs of manpower and infrastructure. Large retail formats , owing to their bulk purchases can achieve better economies of scale as compared to a small shop. The shopping malls offer the customers a wider variety of goods , and also provides them with a better display of products. The store design and better display are point of differentiation for the shopping malls. They provide the consumer with a memorable shopping experience. The package offered to the consumer involves environment, service, price and the product.

The shopping mall offers the consumer a one stop shop for all his needs. The concept is to be able to satisfy multiple needs of the customer and to provide for all his requirements at one location,under one roof. The malls attract people on the basis of their superior store atmosphere , store activities , shopping experience and better services. Crowds of people window shopping and long queues are one of the major problems which keeps people away from the malls. The stores are often out of stock of the goods that the customer is looking for (as they may be in greta demand at that particular point of time) and no information is available on when the stock will come again and also on how soon will it be arriving. Coming to the malls to shop for one or two products as and when the need arises is not feasible. The malls seem restricted to that segment of the people who shop once/twice a month to stock up , either to save time or to avail of better prices. The bad physical infrastructure lack of fast moving roads resulting in traffic jams on the way is something that keeps people restricted to their local shops and kirana stores.

THREATS SPECIFIC TO INDIA

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Much attention needs to be paid to the customization of the malls to the Indian context and to the needs of the local clientele. Just as when a product is being launched in a new market it needs to be customized to the culture of that particular place and the needs of the people there, similarly the concept of malls when applied to India must be tailor made to adjust to the complexities and diversities of the Indian context. Emphasis must be laid on the following:
1. Retail Image- represents an overall composite of how consumers see and what consumers feel about a given retailer 2. Marketing concept sending the right message to the right audience through the right media

- adjust the product, price, place, promotion to satisfy the needs and wants of the consumer One possible course of action could be to not market the malls as upscale shopping areas with big brands only but should try and make themselves a part of the peoples daily lives and portray themselves as places where one can buy a wide variety of things under the same roof. Branding would include the logo, the advertising and also the overall store ambience. In branding the malls, they should be shown to imbibe and reflect the values of the local / target population. By creating a distinct identity, one that the consumer relates to, the retailer differentiates themselves from the competition and creates a unique position or offer. In India , one must understand not only the culture but also the ethnic and religious diversity of the place. Both these aspects have a great influence on the consumer behavior. Consumer buying behavior is the manner in which consumers act

and react to various situations involving the purchase of a good or service or the acceptance of an idea. Effective retailing requires an appreciation of the buying behavior of consumers. Retailers need to better understand their customers so that they can both respond to as well as anticipate their needs. Consumer behavior isnt constant, but varies not only from country to country and culture to culture but also from region to region. There is such great diversity in customer behavior where even Hyderabad and Bangalore are as different as chalk and cheese. On one side Hyderabad is conservative, male dominated, where customers like loud colors and shop in groups and on the other side Bangalore is modern, where customers want subtle shades and shop on their own. In India the culture is more towards being thrift conscious and wanting value for money . The customer needs to be convinced that the malls are giving him good value for his money. In fact, Kishore Biyani, managing director, Pantaloon Retail has turned the study of community behavior into a fine science through a specialized regional diversity tracking system. He goes personally to people's homes, talks to local community leaders and spends weeks walking streets of bazaars to get a feel of what products should be stacked in a new store. Thus a proper understanding of the consumer behavior is a necessary prerequisite to facilitate a smooth transition of the Indian consumers to the malls. The Indian Consumer has for long relied upon the local kirana store for purchasing their groceries and other daily requirements and are used to having their purchases delivered home. The local kirana store is usually run by someone with whom the consumer is familiar and friendly with; this adds the personal touch to their daily shopping experience. The greatest advantage of the kirana stores is their location, being located within or near the residential area makes it convenient for the residents to shop from them. Another reason is that consumers feel that they can bargain easily with the local shopkeepers which they believe is not possible in the large retail malls. The malls must focus on adapting to the needs of the Indian consumer rather than change their habits. Design of the stores interiors are also of critical importance. The interiors should be designed so that their interiors closely match the aspirations of their core customers. The interiors of the malls must adapt to the culture and environment in which they are functioning and be dynamic in this regard. An example of such flexible and dynamic interiors can be seen in the Gateway Mall in Durban which has successfully encouraged retailers to show their product in creative ways, and dissolve the boundary between mall and shop. The same is true of the covered street format of Bugis Junction in Singapore, where shops display their wares in a market-type setting. Retailers must respond to consumer expectations with what's been called "mass customization." The essential premise of localised retailing is about creating "my kind of store" an environment where customers can feel completely at home, relate with ease to

the shopping experience, and see themselves reflected in the marketing. Appealing directly and individually to customers, though, requires a strong awareness of the local customer base and a firm grasp of what will catch customers' attention. The location of new malls should be strategic and locate them in local catchment areas thereby reducing the distance and commuting time of the customer. The retail model should be customer-centric. This involves not only adapting the ambience of the malls to make the shopper feel comfortable but also to customize the products being sold to the consumers. They should thus create modified versions of their brand by targeting smaller and more specific market segments. Such stores should first determine the demographics of the local market, identify their needs /preferences and typical behavior and then respond to them. The retailer must focus on the following aspects of his market:
y y y y y

Consumer population Consumer requirements Consumer potential Ability to buy and disposable income Willingness to buy - Budget Authority to buy

Not only this, the retailers must also be sensitive to the constantly changing external environment and should respond accordingly. The malls must market themselves as offering the customer better quality products and also a greater variety of products to choose from. Further the organized retailers have the advantage of large scale operations. This can be used to eliminate intermediaries and offer better prices to the customers by passing on the middlemens margins to them. The retailers are able to get better bargains with suppliers and manufacturers by offering business scales higher than the local kirana. Thus customization and localization of the malls is the norm of today. It is said that those retail chains are most successful that come and change for a particular city and react to it. It is in this setup that the Indian shopping malls could be likened to the beautiful Snow White from our childhood fairytale, who learns to live and adapt herself to the life and surroundings of the seven dwarfs. The seven dwarfs in this context would be the kirana stores (local mom n pop stores), to whose surroundings the fancy malls of the west must come and adapt to. FUTURE RECOMMENDATIONS As was earlier stated in the hypothesis, The failure of numerous retail formats was due to the wrong blend between international retailing concepts and those adopted in India. It is to avoid such

situations that it is often said that a careful selection of the correct genes of both the parents is the single most important factor in setting up an overseas retail operation. Adoption of the features and practices of either partner without a proper study of the specific situation existing on the ground, usually leads to such failures. In this context , the new retail formats in India not only need to adopt some features of the local kirana store but also provide greater value for money to the customer through differentiation and lower costs. This offering of the malls needs to be effectively communicated to the Indian masses , who perceive the malls to be a place for prestige shopping and to be more costly as compared to products in the local kirana stores. In this regard the retailers need to choose an appropriate marketing mix and hence establish the correct retail image of the malls in the mind of the consumers. Till this happens it is not possible for them to compete with the local kirana stores. As has been said about Nanz, the first organized retail venture (supermarket) in India It failed as it was ahead of its time, the Indian consumer was not yet ready to change and that they did not plan their entry into the market. After careful study, we have been able to gauge that the major factor that has helped the kirana stores retain a competitive advantage against malls has been that of convenience: the location of kirana stores, services like home delivery, long association with the owner of the family run Kirana shop, ability to bargain on prices etc. Against this backdrop, instead of trying to pick up one or two features of the kirana stores and competing against them on their areas of strength, the malls would do well to adopt a model of co optetion. Co-opetition is a business strategy based on a combination of cooperation and competition, derived from an understanding that business competitors can benefit when they work together. The co-opetition business model is based on games theory, a scientific approach (developed during the second World War) to understanding various strategies and outcomes through specifically designed games. In our context, this means the malls and the kirana stores working together towards maximizing customer satisfaction. Since the malls cannot offer the convenience of a kirana store and a kirana store cannot match a mall for the shopping experience , the possible solution could possibly be to retain the consumer friendly features of both formats and to develop a hybrid format. Miniature malls , covering 3 to 4 localities and their households would be ideal. These smaller versions of the mall , would have efficient supply chain management , discounts on bulk purchases, lower prices and better display of products, they would provide the consumer with a shopping experience to look forward to. These malls would have to base their marketing and inventory decisions based on an analysis of the tastes and preferences of their target customers. Based on such surveys , they would choose the right mix of goods and services to provide their customers with. These miniature malls would then have the convenience factor offered by the kirana stores and by providing additional

services like home delivery , credit facilities , computerized bills, in store activities for children and adults. Concentrating on local people and their needs would help create a loyal customer base (repeat customers which the malls at present donot have). Such flexibility on the part of the organized retailers is essential for them to be able to tap the buy as and when the need arises segment , adopt the convenience features of the local kirana stores and thus provide the Indian consumer with a new and more wholesome shopping experience. The table below shows the current retail formats in India, which tells us how all the existing retail formats are being used in India , but not being very effective in attracting , convincing and retaining the Indian consumer.
Table 12

With the increased interest in the Indian retail segment, the malls will soon be able to successfully capture the massive Indian market. This successful adaptation of the western shopping mall concept to the Indian context will not be the end of all problems. As has been observed the changes of yesterday become the norm of today. The next question facing these malls will be, to make the shopping malls a time saving shopping offer for the Indian families. Fast growth, greater income to the middle class, working couples; nuclear families etc are factors that will make the future nuclear families look for ways to save their time and work within their budget

while shopping. Thus to adapt to the needs of this new generation of young working couples, the malls would have to look at acquiring some special features. These would involve opening crches for children so that these young and time pressed couples can shop easily and quickly. Also stores must be customized to display their products in a manner that facilitates easy and quick decisions. Such kind of ideas targeted at flexibility must be kept in mind for the future Indian malls.
AUTHORS PROFILE
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Rajan Johri (Johre), 47, holds a PGDM in Management (AU,Washington), Post Graduate in Organization Behavior MSU), Post Graduate in Labour Law & Practice (MSU) and Fellow of National Institute of Training and Development (UK.). His doctoral work in Management at the Indian Institute of Technology (IIT), New Delhi is referred to as the Flexible Competency Maturity Model (fCMM). Ruhbani Singh is a PGPHRM Intern at International Management Institute, New Delhi and collaborates with Rajan Johre in consulting and research based assignments. Karan Makhania is a PGPHRM Intern at International Management Institute, New Delhi and collaborates with Rajan Johre in consulting and research based assignments.