Organized Retail: The Hub for Evolving Ecosystems?

May 9, 2011
School of Business, Bengaluru

Until not too long ago, unorganized retailers enjoyed a 90% share of the Indian retail market. In recent years, however, the organized retail sector has expanded rapidly, now contributing around 5% of India’s GDP.

Corporate-backed hypermarts, exclusive brand outlets, shopping malls, retail chains, department stores now dot the landscape in many Indian cities.

Shopping Mall

Has the advent of organized retail sounded the death knell for the local kirana shop? A new study at the Amrita School of Business, Bengaluru concluded that on the contrary, small businesses in the vicinity of organized retail outlets are thriving.

The study covered ten areas in Bengaluru city. A total of 62 vendors were examined. The team noted the dates of establishment for the major retail outlets in each of these areas as well as those for the small vendors in their vicinities.

“Our study revealed that 49 vendors set up shop only after the organised retail shop was established; only 13 out of 62 vendors studied were functioning before then,” the Amrita team shared.

“It can be inferred that organised retail had triggered opportunities for the micro-entrepreneurs. Flocking of customers to the organised retail shop also paved the way for these micro-entrepreneurs to flourish.”

School of Business

The team interviewed about 60 customers in the different spots to understand the factors that influenced their shopping behaviour.

The major shopping destination for all customers was the organised retail store. The customers also frequented the vendors due to differences in price and quality of various products.

The study focussed especially on organised retail stores offering food and grocery items. Last year, 58% of total retailing revenues in India of Rs. 11.49 lakh crore came from this segment.

The team found that kirana store keepers, vegetable hawkers, hawkers of greens, food sellers, flower vendors, tender coconut sellers and such other vendors typically complemented the product offerings of the retail store.

flower vendors

“Most of the products sold by the micro-entrepreneurs are perishable in nature,” the team stated. “The perishable nature of several commodities has posed difficulties to the organised retail stores to constantly replenish stocks. This has provided opportunities for the micro-entrepreneurs for sustained coexistence.”

A paper titled Organized Retail: The Hub for Evolving Ecosystems? highlighting the results of this study was recently presented at an international conference on Global Impact of Indian Management organised at Oxford College of Engineering, Bengaluru.

Dr. S. Usha NandhiniThe paper was presented by Assistant Professor of Business, Dr. S. Usha Nandhini from the Amrita School of Business, Bengaluru, who led the study.

First-year MBA-MS students Kirrthiga R. Krishnan, Preethi L. and Subhashini N. also participated.

“The intrusion of the organised sector in the Indian retail market led to an uproar among the 13 million unorganized retailers across the country,” stated the Amrita team at the presentation. “These protests were fuelled by the fear of loss of business by small shop owners.”

“From our study, we found that organised retail stores have caused the mushrooming of several micro-entrepreneurs. It was observed that a majority of vendors set up shop only after the inception of the organised retail store. The hub and the micro-entrepreneurs form an ecosystem that makes the shopping experience of the consumers, complete. The initial fears that the organised retail store would cannibalize the micro-entrepreneurs, especially the traditional kirana store keepers, were unfounded.”

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