Organizing the Unorganized Lifestyle Retailers in India: An

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

Organizing the Unorganized Lifestyle Retailers in India: An Integrated Framework

H. R. Ganesha1, & P. S. Aithal2
1Chief Executive Officer – Consulting Division, Gramss Retail Trading Private Limited, Bengaluru - 560078, India and Post-Doctoral Research Fellow, College of Management & Commerce, Srinivas University, Mangalore – 575001, India. OrcidID: 0000-0002-5878-8844; E-mail: [email protected] 2Vice Chancellor, Srinivas University, Mangalore – 575001, India. OrcidID: 0000-0002-4691-8736; E-mail: [email protected]

Subject Area: Business Management. Type of the Paper: Empirical Study. Type of Review: Peer Reviewed as per |C|O|P|E| guidance. Indexed In: OpenAIRE. DOI: http://doi.org/10.5281/zenodo.3925840. Google Scholar Citation: IJAEML.
How to Cite this Paper: Ganesha, H. R., & Aithal, P. S. (2020). Organizing the Unorganized Lifestyle Retailers in India: An Integrated Framework. International Journal of Applied Engineering and Management Letters (IJAEML), 4(1), 257-278. DOI: http://doi.org/10.5281/zenodo.3925840.
International Journal of Applied Engineering and Management Letters (IJAEML) A Refereed International Journal of Srinivas University, India.

© With Authors.

This work is licensed under a Creative Commons Attribution-Non-Commercial 4.0 International License subject to proper citation to the publication source of the work. Disclaimer: The scholarly papers as reviewed and published by the Srinivas Publications (S.P.), India are the views and opinions of their respective authors and are not the views or opinions of the S.P. The S.P. disclaims of any harm or loss caused due to the published content to any party.

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 257

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

Organizing the Unorganized Lifestyle Retailers in India: An Integrated Framework
H. R. Ganesha1, & P. S. Aithal2 1Chief Executive Officer – Consulting Division, Gramss Retail Trading Private Limited, Bengaluru
- 560078, India and Post-Doctoral Research Fellow, College of Management & Commerce, Srinivas University, Mangalore – 575001, India.
OrcidID: 0000-0002-5878-8844; E-mail: [email protected] 2Vice Chancellor, Srinivas University, Mangalore – 575001, India.
OrcidID: 0000-0002-4691-8736; E-mail: [email protected]
ABSTRACT India is one of the largest countries with consumers belonging to the widest range of Religions, Regions, Languages, Sub-Cultures, Ethnicities, and Economic backgrounds which makes it difficult for just a few organized lifestyle retailers to service divergent needs of such consumers. This makes it furthermore beneficial for unorganized lifestyle retailers spread across India in humongous numbers which are predominantly owned and operated by the store owner and their family members to take such divergent consumer needs to their advantage as far as their survival is concerned. Unless they attempt to adopt certain modifications and changes to their existing retailing model and store image this benefit will no longer be available to them in the long run. Organized lifestyle retailing in India is steadily growing its penetration into Tier-2 and Tier-3 cities and this is putting unorganized lifestyle retailers in these cities in quandary. In this study, we have analysed twelve months actual data across, (a) unit economics; (b) returns on investment; (c) 94 business deployment factors; (d) 192 critical effective factors; and (e) qualitative factors of few select organized and unorganized lifestyle retailers in India thereby drawing inferences / insights to design and propose an integrated framework which is (a) simple to understand; (b) easy to execute; and most importantly; (c) demanding minimal additional capital investment and would possibly help unorganized lifestyle retailers in India to get organized.
Keywords: Indian Retail, Lifestyle Stores, Brick-and-Mortar Stores, Organized Retail, Unorganized Retail, Store Image, Mom and Pop Stores, Aatmanirbhar Bharat, Self-Reliant India.
1. INTRODUCTION :
1.1.Unorganized Lifestyle Retailing in India: For the purpose of limiting the focus of this research study, we define unorganized lifestyle retailers in India as, brick-and-mortar retail stores managed and operated by store owners and their family members themselves, offering lifestyle products such as Apparel, Footwear and Accessories, to consumers located in and around the store’s catchment area and most importantly the sales pitch of sales personnel in the store is push technique driven owing to the concealed merchandise display methodology adopted. Each individual wants to have a unique identity which could be based on his / her, a) background such as nationality, ethnicity, culture, subculture, social class, affiliation, environment, etc; b) experiences and c) choices. Lifestyle retailers in fact attempt to evoke emotional connections between consumers and their need to have a unique identity and most importantly lifestyle retailers are increasingly becoming one of the key components of consumer’s self-expression [1]. Lifestyle retail market size in India is expected to reach 130 billion USD by the year 2023 which is a 77 percent growth when compared to the year 2013 [2]. Based on India’s 2011 census, United Nation’s (UN) Department of Statistics and Programme Implementation estimates Indian population to reach close to 1.38 billion by the year 2020 [3]. It is estimated that more than 300 Global lifestyle brands have plans to open their stores in India this year [4]. In addition to this humongous population, exponential growth in number of working women, double income families, middle-class consumer segment, increasing disposable income, rapid adoption of fashion, urbanization, overall size of Indian retail industry, emergence of modern retailing formats and most importantly enormous increase

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 258

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

in internet penetration / usage, simply cautions existing and upcoming unorganized lifestyle retailers to revisit their retailing strategies and models. Notwithstanding this paradigmatic change, as far as India is concerned researches need to note that unorganized lifestyle retailers have not given up majority of their market share to organized lifestyle retailers which could possibly be attributed to Indian consumer’s buying and patronage behaviour with respect to lifestyle retail stores in India. 1.2. Organized Lifestyle Retailing in India: Owing to the sheer market size and potential, India is able to attract many Global lifestyle brands who have successfully become lifestyle retailers too. Few Global retailers have attempted to offer their product assortment as being an SIS at select large MBO stores, few have offered their product assortment through having EBOs, few have shown their presence only in online stores and few have licensed their brands to third parties or entered into a Joint Venture to offer their products in Indian retail market. To name a few Decathlon, Lifestyle, Max, Levi’s, Zara, United Colors of Benetton, Marks & Spenser, H&M, Mother Care, Carter’s, Puma, Nike, Adidas, Reebok, Armani Exchange, Diesel, Gas, Gap, The Children’s Place, Quiksilver, Superdry, Kappa, Bossini, Calvin Klein, Hanes, Tommy Hilfiger, Ed Hardy, Izod, Nautica, Arrow, U.S. Polo Assn, Jack & Jones, Vero Moda, Tumi, Lee, Hero, Maverick, Wrangler, Fila and Jockey. Unless these Global lifestyle retailers explore sourcing their products predominantly from India, competitive pricing remains one of the key challenges as far as their sustainable success in Indian market is concerned. India also is a home for vast number of lifestyle brands originated from India. One can possibly list more than 5000 lifestyle brands in India [5], of which one could possibly list only a few which can be tagged as well-known / familiar / reputed Indian lifestyle brands cum retailers such as, Biba, Manyavar, Soch, Gini & Jony, Blackberrys, Louis Phillipe, Peter England, Provogue, Monte Carlo, Mufti, W for Women, Oxemberg, Indian Terrain, Global Desi, Parx, S Kumar’s, Vimal, Mini Klub, Aurelia, Sparx, Campus, Go Colors, Enamour, HiDesign, Lino Perros, Idee, Spykar, Killer Jeans, Flying Machine, Da Milano, Park Avenue, Ethnix, ColorPlus, Lux Cozy, Wild Craft, 612 League, WLS, John Players, Fastrack, 109 F, Proline, Image, Jealous 21, Liberty, Paragon and few more. Few of these are successful in becoming organized lifestyle retailers catering to specific product categories and specific consumer groups. Few companies have been able to establish themselves as pure Indian organized lifestyle retailers who cater to multi-category, multi-brand, multi-location and multi-consumer groups and it is evident that one can list all of them as there are only few National level retailers such as a) Westside, b) Shoppers Stop, c) Central, d) FBB, e) First Cry, f) Toons, g) Wildcraft, h) Indian Terrain, i) Pantaloons, j) Brand Factory and few Regional level retailers such as, a) Kapsons, b) Ritu Wears Big Life, c) Stanmax, d) Bindals, e) Sohum Shoppe, f) City Life, g) Chunmun, h) Jade Blue, i) Neeru’s, j) Mebaz, k) V-Mart, l) The Chennai Silks, m) Saravana Stores, n) M&M, o) Sirs & Hers, p) Juelle, q) G3 Fashions, r) Pothy’s, s) RMKV, t) Naidu Hall, u) Chandana Brothers, v) Nalli, and w) Kalyan Silks. It is evident that only few names have appeared in the organized lifestyle retailers list which is possibly indicating that in spite of humongous population and the retail market size in India, majority of Indian lifestyle brands and retailers have failed to establish themselves as organized lifestyle retailers and we would attribute majority of this failure to their existing retailing model in addition to strong loyalty of consumers to unorganized lifestyles retailers in India. 1.3. Consumer’s Retailing Format Choice: As per McKinsey Global Institute study, by year 2030, urban agglomerations in India could possibly lead to increase in the middle-class consumer segment by 3 times compared to year 2010 which was at 22 million; people living in urban cities is expected to increase to 590 million and most important cities with more than one million population will increase to 68 [6]. India is one of the most sought-after countries for retailing opportunities globally, mainly because of i) higher population consisting of relatively younger population, and ii) higher penetration of internet users. India is witnessing rapid expansion of national and international brands/companies into Tier 2 and Tier 3 cities such as Housing, Automobiles, IT, Banking and most importantly Retail Stores owing to; i) exponential growth in urbanization of Tier 2 and Tier 3 cities post-economic liberation, ii) government’s interest and plans for improving basic infrastructure at Tier 2 and Tier 3 cities, vi) relatively cheaper real estate and most importantly, vi) steadily increasing disposable income level of consumers in Tier 2 and Tier 3 cities. These developments and numbers are clear indicators of upcoming changes that are expected in the way consumers will behave while choosing retail stores to purchase their lifestyle needs in addition to cautioning unorganized lifestyle retailers to get organized to ensure they sustain their existing consumer base and the business. Consumer’s store and retailer choice angle to store location is the one which puts many lifestyle retailers whether organized or not in quandary while considering the store location which is one of the key determinants of overall store image and retailing costs. It is inevitable for organized lifestyle brands and retailers to have their presence in as many

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 259

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

different locations and distribution channel partner’s stores as possible to have a competitive advantage over competitors and especially unorganized local favourites. Nevertheless, if unorganized lifestyle retailers fail to adopt basic aspects of organized retailing model and store image, it will possibly lead them to lose market share to organized lifestyle retailers.

2. LITERATURE REVIEW :

2.1. Store image had been one of the key elements of the retailing mix studied in the past. Lindquist was the first to list the key components of store image construct in the year 1974. Based on past studies Lindquist listed eight components of store image construct viz., i) merchandise, ii) clientele, iii) physical facilities, iv) convenience, v) promotion, vi) store atmosphere, vii) institutional factors and viii) post-transactional satisfaction [7]. Later researchers have confirmed that the basic attributes of store image construct as listed by Lindquist in 1974 remain unchanged [8] and were able to add few more attributes to store image construct such as ix) customer service, x) personal selling, and xi) sales incentive programs [9].Few studies argue that these factors together influence the overall store image in consumers minds only when the consumers have experienced these factors through actual shopping [10]. There have been many studies confirming a positive correlation between store layout and consumer loyalty [11 to 13]. Consumers perception of store image varies with store layout and consumers shopping at different store formats having different store layouts create their own perception of store image in their mind [14]. Extending these studies recommend bricks-and-mortar retailers to align their store layout design keeping their target consumers in mind rather adopting standard layout designs [15]. Retailers need to consider various location specific factors while planning for expansion such as a) attractiveness of the market, b) number of stores to be opened per market, c) store locations and d) ideal store size for each of these stores. In this study, they clearly indicate that every store needs to have size optimal for the location and market it is present rather a standard size being adopted across all the stores of a particular retailing format. In all these studies nowhere, researchers recommend retailers to adopt different price level of merchandise for different locations of stores [16]. A retailer having a unique store image and using this unique store image as one of the key promotional and marketing/advertising propositions can possibly yield competitive advantage and it is important to note that copying a store image which is complex in its nature is a difficult task for competitors [17]. One of the most important determinants of retailer success is store image [18]. Retailers need to clearly understand various environmental factors relating to store image influencing their target consumers. It is very important to design strategies relating to store an image in a specific location in relation to retailers target consumers in that particular environment [19]. Majority of retailers design strategies relating to specific locations based on the consumer behaviour pattern and knowledge available in the general market in the specific location which is also based on the general consumer population [20]. These strategies lead retailers to align most of the store image attributes to the general consumer population and hence they might possibly fail to maintain their principal brand/store image standard across various locations or geographies. Retailer’s store success and consumer loyalty is majorly influenced by store image along with store positioning and product-price differentiation in relation to market. Retailers could possibly use such store image attributes to promote and advertise their positioning in the consumers mind [21 - 22].Store location is not just about the physical space which has been occupied by a store, it is actually a catchment area of a store which witnesses heavy commercial and economic activities [23]. Store size and location are the most important components of retailing as far as enhancing consumer experience is concerned. Few reputed retail brands like Zara have increased their store sizes exponentially along with changing the type of locations in the past, few retail brands such as Debenhams and Mother Care have downsized their existing store sizes to incorporate improved operating efficiencies, few retail brands such as Tesco entered city centre locations with smaller sized stores, few continually kept rationalizing their store sizes and few still believe that larger the store size higher the consumer walk-ins [24]. One of the biggest challenges faced by brick-andmortar retailers is the higher cost involved in expanding store sizes even though it helps them in enhancing the overall consumer shopping experience. Retailers are finding it extremely difficult to find relevant spaces in the right locations owing to higher rentals and lesser spaces available in key retail locations [25], which proposes retailers to consider mall kiosks as one possible retailing format which can be cost effective as far as expensive rentals are concerned. It is true that store location plays an influential role in consumer store choice decisions, at the same time store location being a long-term capital lock-in decision plays an important role for retailer’s overall strategic planning. Any location which has inherent properties of attracting consumers is the best location for any retailer and having a store in such locations brings both strategic and competitive advantages

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 260

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

to the retailer, whereas, it will take longer time and huge store losses for any retailer to come out of a bad store location. Good store location could also be analysed by; a) the amount of relevant consumer traffic flow be it, pedestrian traffic or vehicular traffic; b) parking facilities; c) store composition; d) specific site; e) terms of occupancy, f) accessibility, g) travelling time, h) location convenience, i) other complimentary stores present in the catchment [26]. Through our previous empirical and experimental research studies, we have concluded that; (i) if retailer considers building premium store image in consumers, competitors, and investors mind as the key indicator of judging best location for a store, mall stores are the ideal ones, and if the retailer is interested in overall retail performance with consistent growth and sustainable profits then a rational mix of each of these locations is the ideal solution[27]; (ii) there is no significant variance in contribution of different price bands to overall bills / invoices and revenue being generated by stores across Tier 1, Tier 2 and Tier 3 cities for a retailer who runs all these stores under a single store brand name and results have shown that stores in Tier 2 and Tier 3 cities generate lesser revenue compared to Tier1 city stores and this must not be mistaken as consumers in cities other than Tier1 cities face affordability issue [28]; and (iii) the fourth and important elements of Marketing Mix ‘place’ need be aligned based on the product / category grouping in relation to target consumer group and catchment area [29]. 2.2. Consumer preference or choice of brand and the success of a brand depends upon the brand’s personality. It is important for the marketer to constantly work on strategies to convert the existing brand image into equity [30]. Few researchers have investigated the correlation among the competition of brands, formation of consumers’ attitude and intention to choose a particular brand or alternatives being offered to the consumers at a given point of time and the place of the offering. Findings of these studies confirm that consumers’ evaluations, understandings, and knowledge about a particular brand of their choice are not just the key influencer of creating intentions of buying a product belonging to a brand, it is also consumers’ perspectives and perceptions toward another alternative or brand available in the offering [31]. There are few brands which have gained strong brand equity owing to consumers having special, favourable association with such brands in their memories and these brands were able to create higher perceived quality, awareness about the brand name and ultimately leading huge loyal consumers over a period of time [32-34]. Consumers tend to correlate their personality with the brand personality they are willing to associate with, wherein they attribute this to their demographic characteristics, physical characteristics, personal traits and, cognitive abilities consequently leading them to buy a brand’s product to implicitly or explicitly express / showcase their personal image or identity [35 - 36]. Abundant literature is available on Brand personality, image, equity, experience, association, advertisement, endorsements, and loyalty as a result of contributions from many researchers across domains. 2.3.Unorganized retailing had been one of the key research studies in the Policy Making and Economics domain since late 60’s. Traditional retailing formats were perceived to be inefficient and weak in various aspects and hence successful modernization policies to be implemented in countries having majority of retailing in the unorganized form [37]. Many countries have implemented policies favouring unorganized and informal sectors such as; (i) in the year 1979 Singapore Government launched ‘Hawker centres upgrading programme’, (ii) Taiwan launched upgrading programme for ‘Old wet markets’ in 1979; and, (iii) Russia and South Korea launched development programme for traditional sector in 1990 and in spite of many recommendations India is yet to launch such programmes [38]. Singapore’s ‘retail sector development plan’ initiative which was launched in the year 1992 even though driven by an exclusive organization ‘Retail Promotion Center’ which attempted to upgrade unorganized, informal and small-scale retailers was unsuccessful due to limited access and control over convincing the retailers [39]. Organizing the unorganized retailing required additional capital investment which is not easily available on credit to small-scale retailers, many countries have assisted unorganized retailers through capital support to withstand challenges posed by organized and modern retailers, the capital assistance aspect is one of the most important aspects to convince and encourage unorganized retailers to get organized which in turn shall boost the overall economy of a country [40]. Unorganized / small retailers are better in comparison to organized retailers such as,(a) they know the ‘likes and dislikes’ of their consumers, (b) customization while product showcasing, promotions and even information regarding new arrivals are higher, (c) credit facility to their loyal consumers, (d) easier systems and processes with respect to product returns and exchanges, (e) easy to shop for daily needs, (f) convenience of store location which is almost a neighbourhood store, and (g) store owners involvement with local communities and clubs, however, unorganized retailers must attempt to work on few aspects of their retailing model to gain an additional competitive advantage over organized retailers such as, (i) efficient supply chain and inventory management, (ii) matching discounts and offers with organized retailer’s discounts and offers,

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 261

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

and (iii) open merchandise display techniques [41 - 47]. In spite of many studies indicating that the Indian retail market is all set to reach a trillion US Dollars, the fear of organizing retailers taking the market share away from unorganized retailers in India is not justified [48]. Few studies have also expressed their concerns on predatory pricing being used as one of the tactics by the organized retailers to penetrate into new markets which are predominantly serviced by unorganized retailers [49]. Approximately 80 percent of unorganized / small-scale retailing in India is run by family owned business houses in other words it represents 9.6 million stores, and this is one of the largest numbers of small-scale stores present in a country [50]. Many researchers have also focussed on studying the influence of unorganized retailing with respect to the overall economy of a nation and argued that, a) overall economy of a country could be analysed based on the revenue and employment the retailing sector is generating, b) it is inevitable to continuously focus on improving key aspects of retail operations, systems, supply chain and processes which could possibly lead to better economy of a country, c) constant innovations in the business models have a positive impact on the overall performance of retailing company [51 - 53]. 2.4. Need for this research aroused when we found that majority of empirical, theoretical, and descriptive literature available on the unorganized retailing in India focusses on analysing pros and cons of organized and unorganized retailing. We were not able to find frameworks which could guide unorganized lifestyle retailers in India to organize themselves to withstand increasing competition and market penetration from organized lifestyle retailers with which we could answer our research questions such as; (a) should we believe that the existing retailing model of lifestyle retailers in India is an appropriate strategy?; (b) should we believe that the existing retailing model is delivering optimal revenue and profit for the unorganized lifestyle retailers?; (c) should we believe that the existing retailing strategy is aligned with retailer’s target consumers and consumer’s changing attitude towards unorganized retailing?; (d) is it a misconception among unorganized lifestyle retailers in India that consumers are attracted to stores / retail formats located very close to their residence and these consumers tend to continue shopping in these mom and pop stores just because the store location is convenient? and; (e) are these unorganized lifestyle retailers aware of the impact on their sustainability and even existence owing to constantly growing market penetration of organized lifestyle retailers in India? Thus, we decided to select few National level, Regional level, Local level organized Indian lifestyle retailers in addition to few unorganized lifestyle retailers across the country, understand their existing retailing model, empirically evaluate their actual sales and consumer data in relation to retailer’s key business goal, thereby drawing insights to recommend unorganized lifestyle retailers in India an integrated framework to gain longterm strategic and competitive advantage in addition to establishing themselves as organized lifestyle retailers image across their existing and potential employees, investors, competitors, and consumers mind. Most importantly unorganized lifestyle retailing being one of the major contributors to Indian GDP it is inevitable for these retailers to get organized thereby supporting the country’s new vision of Aatmanirbhar Bharat / SelfReliant India.
3. OBJECTIVES :
Key objectives of this research were to, i) understand lifestyle retailing market in India; ii) understand evolution and performance of lifestyle retailing in India; iii) understand the unit economics of organized and unorganized lifestyle retailers in India; iv) compare organized and unorganized lifestyle retailing in India; v) analyse recommendations from previous research studies; vi) determine key concepts which could possibly help unorganized lifestyle retailers to get organized; vii) design and propose an integrated framework, and vii) recommend a systematic approach for executing the integrated framework.
4. METHODOLOGY:
4.1. Secondary Research: Intense and in-depth analysis of data available in the public domain was carried to collect data relating to various aspects of organized and unorganized lifestyle retailers in India through company websites, company annual financial reports, Government data base, trade, and business journals. Research works relating to Indian lifestyle brands was surveyed extensively to collect insights, recommendations, and frameworks. 4.2. Quantitative Primary Research: In the first stage, few organized and unorganized lifestyle retailers in India were selected who can represent, a) different product categories such as fashion, functional, life-stage specific, product specific, gender specific, and need specific products; b) offering single-product category and multiple-product categories; c) serving different consumer target groups at low, mid-low, mid, mid-high, high,

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 262

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

and premium price positioning; d)having single and multiple stores; e) offering single brand and multiple brands; f) having presence across Tier-1, Tier-2 and Tier-3 cities; g) having stores across high street, malls, institutions and neighbourhoods, and h) new and established retail store image. In the second stage, twelve months actual data was collected from these select organized and unorganized lifestyle retailers to quantitatively map their existing retailing model and draw inferences. 4.3. Qualitative Primary Research: Series of open-ended direct interviews were conducted with employees selected through convenience sampling representing different departments/functions from Brands, Distributors and Retailers viz., Human Resource Development, Training, Strategy, Category, Communication, Customer Relationship, Warehousing, Finance, Information Technology, Sales, Distribution, Stores Operation along with Store Sales Personnel across select organized and unorganized lifestyle retailers in India to understand their perspective and attitude towards their existing retailing model and its implications on the overall performance and store image.

5. KEY FINDINGS AND INSIGHTS :

5.1. Qualitative: Prior to the empirical study, we were able to derive qualitative insights through mystery shopping and conduct open-ended direct interviews with employees representing all the departments and functions of lifestyle retailers chosen for the study. Key insights from the qualitative survey indicate that, these lifestyle retailers strongly had numerous beliefs and assumptions as detailed below separately for organized and unorganized retailers. 5.1.1. Unorganized Lifestyle Retailers: Key perceptions which were unanimous among the unorganized retailers were, a) for the products we offer in our stores it is less likely that our consumers purchase from elsewhere; b) unlike organized retailers we do not communicate anything to our consumers which is a computer driven, rather we call each consumer on our own to communicate any specific product and promotion information relevant for them while talking to them in general on matters unrelated to retailing; c) we buy only what sells and we know what is required by our consumers for which we do not require a computer to guide us on managing stocks in the store; d) majority of our product’s original price (MRP) itself is so low as compared to organized retailers which is already known to our consumers and hence offering additional discounts is not a mandatory requirement; e) as we know the complete history, background, socio-economic status of every consumer and their family we showcase and recommend products based on these criterion; f) our consumers belief on us as owners of the shop overrides any deficiencies if at all found in the products and service we offer to them; g) we are more bothered about consistent and constant cash flow generated by the store rather only profits as we are aware of the fact that the store being operational since generations has already given us enough profits; h) sales personnel in our stores are committed and loyal to us and very rarely they disassociate from us; i) notwithstanding we pay less to our sales personnel compared to organized retailer, we make sure that we do solve their personal problems (both monetary and non-monetary) often; j) we need not to train our sales personnel as they are well versed with our product assortment; k) unlike organized retailers we do not use mass social media to connect with our consumers, WhatsApp is enough and is much more stronger tool to get connected with our consumers regularly; l) we do renovate our store once in a year even though it is at a smaller scale; m) we offer more trendy products aligned to latest trends inspired by the Indian Cinema as our supply chain is of small-scale and we manage to test many new products at lower inventory risks; n) our product assortment also has few National and Global brands in it; o) we do sell premium and high priced products, and p) decision making of any magnitude does not take longer time as we are appraised of all the activities related to our stores. 5.1.2. Organized Lifestyle Retailing: Key perceptions which were unanimous among the organized retailers were, a) more than online retailers, unorganized retailers are the biggest threat for us; b) unorganized retailers sell products which are sold at cheap prices with no guarantee on the product quality and durability; c) consumers need to spend some time in planning their shopping at organized retail stores which is not the case when it comes to shopping at unorganized retail shops owing their stores being located very close to consumers residence; d) we are struggling to witness success at Tier-2 and Tire-3 cities as consumers in these cities are still loyal to unorganized retailers; e) we spend a lot of time and money in communicating to consumers using all the latest software tools and solutions; f) our sales personnel are well groomed and trained and they are paid much higher than unorganized retailers; g) attrition rate of our sales personnel is significantly high; h) we follow open merchandise display techniques which enable consumers to choose their best choice unlike unorganized retailer who showcase only few products / models / brands to consumers; i) we have robust

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 263

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

systems and standard operating procedures across all the processes of retailing; j) we offer best National and Global brands in addition to Private labels to consumers; k) we give the same shopping experience to consumers across all our stores irrespective of the city; l) revenue generated by our stores is significantly higher than unorganized stores; m) consumers spend is significantly higher in our stores; n) share of loyal and repeat consumers is significantly less in our stores; o) every transaction in organized retailing is trackable and traceable by government authorities thereby we contribute to Government’s revenue by paying all kinds of taxes; p) we follow standard weights and measures guidelines on all our packaging and products tagging thereby maintaining transparency of product information with our consumers; q) we follow standard hierarchy systems for any decision making thereby ensuring unbiased decisions being taken; and, r) consumers believe in organized retailing as there is transparency across all the aspects. 5.2. Empirical: Interestingly, when we evaluated actual data related to product assortment, sales, consumers, supply chain partners, inventory level, inventory turns, product sell through and velocity, capital investment requirement, returns on investment, decision making process, communication techniques, discount methodologies, organization structure, and sales pitch techniques we have found many insights of which some are contrary and some are matching with what was believed by both the organized and unorganized lifestyle retailers as detailed below. 5.2.1. Unit Economics: Majority of lifestyle retailers in the study were not well versed with the concept of ‘unit economics’. Thus, we attempted to understand the unit economics of stores across organized and unorganized lifestyle retailers in the study which could possibly enable us to understand the economical pros and cons of both the retailing models empirically rather than just looking at the qualitative pros and cons of these models. Table 1 shows the end to end flow of parameters for a lifestyle store. It was also observed that most of these parameters were never tracked by lifestyle retailers. Each of these parameters have been compared line by line between organized and unorganized retailing models in addition to capturing the percentage variance in an unorganized lifestyle retailing model with respect to organized retailing model. Based on this comparison we have noted that organized retailers were superior in comparison to unorganized retailers in parameters pertaining to, a) intake margin level by 31.80 percentage points which is almost double; b) average product pricing higher by 81.82 percent; c) annualized inventory turns by 96.05 percent; d) quantity sold by 30.04 percent; e) sales per day per square foot by 80.29 percent; f) revenue by 2.11 times and, g) gross earnings by 4.66 times. Whereas, an unorganized retailers were superior in comparison to organized retailers in parameters pertaining to, a) optimal utilization of trading area by 16.91 percent owing to the common area loading being 2.35 times lesser; b) product display density higher by 33.33 percent; c) number of product options being stocked in the store higher by 33.33 percent; d) annualized discounts lower by 2.32 times; e) store rental expenses by 3.74 times; f) store employee costs by 4.29 times; g) store overheads by 5.56 times; h) warehousing and logistics expenses by 33.73 times; i) store level EBITDA earning by 50.54 percent, and most importantly; j) net earnings for every unit of product being sold to consumers being higher by 62.16 percent. These findings demonstrate that the organized lifestyle retailers even though generate higher revenue and gross margins in comparison to unorganized retailers, they are significantly poor in generating higher store level profits in spite of 2.11 times higher revenue being generated at 4.66 times higher gross margin earnings, they generate 0.49 times lesser store level profits. Retailing expenditures of organized lifestyle retailers are significantly higher owing to their store location choice, store design, store organization structure and the overall ambiance they create for the consumers to have superior shopping experience as compared to unorganized lifestyle retailers. Results also indicate that if organized retailers attempt to reduce (predatory pricing) their original product price positioning to compete with unorganized lifestyle retailers then it is possible that organized retailers might even start losing the existing store level profits. This particular element has directed us to take an empirical look at the returns on investment (ROI) parameters for both lifestyle retailing models in the study to evaluate if organized retailing is superior in terms of ROI at least.

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 264

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

Table 1: Store level unit economics and the variance among key parameters of organized and unorganized lifestyle retailers in India.

Particulars

Organized Lifestyle Retailer
Value % of Revenue

Unorganized Lifestyle Re taile r
Value % of Revenue

Variance

Trading Area (SFT)

2000

Na

2000

Na

0.00%

Common Area Loading (%)

33.60%

Na

14.28%

Na

-135.29%

Carpet Area (SFT)

2672

Na

2286

Na

-16.91%

Display Density per SFT (Pieces)

5.59

Na

8.39

Na

33.33%

Minimum Display Quantity (Pieces)

11180

Na

16770

Na

33.33%

Minimum Display Options Available in the Store

621

Na

932

Na

33.33%

Average MRP (INR)

986

Na

542

Na

-81.82%

Intake Margin on MRP

61.80%

Na

30.00%

Na

-106.00%

Average Product Base Cost (INR)

377

Na

380

Na

0.78%

Minimum Display Inventory Value at Cost (INR Lacs)

42.11

198.12%

63.66

631.28%

33.85%

Annual Inventory Turns

2.98

14.02%

1.52

7.15%

-96.05%

Sales Quantity (Pieces per Month)

2776

Na

2124

Na

-30.70%

Return Sales Quantity (Pieces per Month)

28

Na

11

Na

-161.40%

Net Sales Quantity (Pieces per Month)

2749

Na

2114

Na

-30.04%

Sales MRP Value (INR Lacs per Month)

27.10

127.50%

11.46

113.66%

-136.45%

Annual Discount (%)

17.65%

Na

7.62%

Na

-131.63%

Discount Value (INR Lacs per Month)

4.78

22.50%

0.87

8.66%

-447.67%

Gross Sales Value (INR Lacs per Month)

22.32

105.00%

10.59

105.00%

-110.77%

Average Selling Price (INR per Piece)

812

Na

501

Na

-62.08%

SPF (INR)

27.84

Na

15.44

Na

-80.29%

Secondary Tax (%)

5%

0.24%

5%

0.50%

0.00%

Secondary Tax Value (INR Lacs per Month)

1.06

5.00%

0.50

5.00%

-110.77%

Revenue (INR Lacs per Month)

21.26

100.00%

10.08

100.00%

-110.77%

Cost of Goods Sold (INR Lacs per Month)

10.35

48.71%

8.02

79.56%

-29.03%

Gross Earning Value (INR Lacs per Month)

11.97

56.29%

2.57

25.44%

-366.45%

Gross Earning (%)

54%

Na

24%

Na

-121.30%

MPF (INR)

14.93

Na

3.74

Na

-298.99%

Rent per SFT (INR per Month)

150

Na

48

Na

-212.50%

Store Rent Value (INR Lacs per Month)

4.01

18.86%

1.10

10.88%

-265.33%

CAM per SFT (INR per Month)

12.59

Na

2.85

Na

-341.75%

Store CAM Value (INR Lacs per Month)

0.34

1.58%

0.07

0.65%

-416.44%

SFT Covered by One Sales Personnel

300

Na

600

Na

50.00%

Sales Personnel Head Count

9

Na

4

Na

-133.81%

Store Managers Head Count

2

Na

1

Na

-100.00%

Store House Keeping Personnel Head Count

1

Na

1

Na

0.00%

Store Security Personnel Head Count

1

Na

0

Na

0.00%

Total Employee Cost (INR Lacs per Month)

2.02

9.48%

0.47

4.66%

-329.17%

Store Overheads per SFT (INR per Month)

54.68

Na

11.50

Na

-375.48%

Store Overheads Cost (INR Lacs per Month)

1.46

6.87%

0.26

2.61%

-455.86%

Bank and Finance Charges (INR Lacs per Month)

0.33

1.58%

0.00

0.00%

0.00%

Brand Promotional Cost (INR Lacs per Month)

1.56

7.35%

0.05

0.53%

-2850.83%

Warehousing Expenses (INR Lacs per Month)

0.85

4.00%

0.03

0.25%

-3272.38%

Logistics Expenses (INR Lacs per Month)

0.85

4.00%

0.03

0.25%

-3272.38%

Shrinkage Provision (INR Lacs per Month)

0.279

1.31%

0.026

0.26%

-953.87%

Total Retailing Cost (INR Lacs per Month)

11.70

55.04%

2.02

20.08%

-477.77%

EBITDA Value (INR Lacs per Month)

0.27

1.26%

0.54

5.36%

50.54%

EBITDA (%)

1.26%

Na

5.36%

Na

76.53%

Net Earnings per Piece Sold (INR)

9.63

Na

25.45

Na

62.16%

SFT: Square Foot; SPF: Sales per Square Foot per Day; MPF: Earning Value per Square Foot pe Day; CAM: Common Area Maintenance; EBITDA: Earnings

Before Interest, Tax, and Depreciation; NA: Not Applicable

5.2.2. Returns on Investment: It was observed that the unorganized lifestyle retailers performance evaluation attitude was more skewed towards evaluating their performance on the basis of ROI in comparison with organized retailers. Most of the organized retailer’s key result areas (KRA) and key performance indicators

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 265

International Journal of Applied Engineering and Management Letters (IJAEML), ISSN: 2581-7000, Vol. 4, No. 1, June 2020.

SRINIVAS PUBLICATION

(KPI) were skewed towards absolute revenue and percentage gross margin generated by the store whereas, only few organized retailers were tracking store level EBITDA earnings. Table 2 captures key parameters which are detrimental in evaluating the ROI for organized and unorganized lifestyle retailers in addition to indicating the percentage variance in unorganized retailing model over organized retailing model. Unorganized lifestyle retailing model has shown a significant 2.64 times higher ROI compared to organized retailing model thereby making it easier for unorganized retailers to recover the capital invested in launching a store significantly earlier than organized retailers. Most of the expenditures of organized lifestyle retailers in the capital expenditure are significantly higher owing to their store location choice, store design, store organization structure and the overall ambiance they are required to create for the consumers to have superior shopping experience as compared to unorganized lifestyle retailers.

Table 2: Returns on investment (ROI) and the variance among organized and unorganized lifestyle retailers in India.

Particulars
Trading Area (SFT) Common Area Loading (%) Carpet Area (SFT) First Time Investment on Inventory (INR Lacs) One-Time Interiors and Store Set Up Cost per SFT One-Time Interiors and Store Set Up Cost (INR Lacs) Realty Partner's Refundable Security Deposit (INR Lacs) Total Capital Requirement per Store (INR Lacs) Total Operating Expenses per Anum (INR Lacs) Total EBITDA Earning per Anum (INR Lacs) Returns on Investment at Store Level (%) Number of Years Required to Recover Capital Invested

Organized Lifestyle Retailer
2000 33.60%
2672 42.11 2500.00 66.80 3.50 112.41 140.37 3.21 2.95% 33.95

Unorganized Lifestyle Retailer
2000 14.28%
2286 63.66 950.00 21.71 0.75 86.12 24.30 6.49 7.60% 13.16

Variance
0.00% -135.29% -16.91%
33.85% -163.16% -207.65% -366.67% -30.52% -477.77%
50.54% 61.23% -157.93%

5.3. Relative Comparison: Among all the business model analysis techniques available such as a) ‘SWOT – Strength, Weakness, Opportunity, and Threat’; b) ‘CPM – Competitive Profile Matrix’; c) ‘IFE – Internal Factor Evaluation’; d) ‘EFE – External Factor Evaluation’; e) ‘BCG – Boston Consulting Group matrix’; f) ‘Porter’s Five Forces Model’; g) ‘PESTLE – Political, Economic, Social, Technological, Legal, and Environmental Analysis’; and h) ‘ABCD – Advantages, Benefits, Constraints, and Disadvantages analysis model’ we chose the ‘ABCD’ analysis technique as the same covers vast factors determining the success of a business model [54 - 55]. ‘ABCD’ analysis technique by its nature is subjective and exploratory. To make sure we make it objective and empirical we have assigned values ‘0 and 1’ for each of the 192 ‘critical effective elements’ of the ‘ABCD’ analysis model wherein ‘0’ represents one being ‘inferior’ in comparison to other and ‘1’ represents one being ‘superior’ to another in this relative comparative study. Assigning these values enabled us to convert subjective results to objective outcomes. Before we come up with inferences and insights it was necessary for us to carry out a relative comparison analysis in as much detailed manner as possible. This detailed comparative analysis demanded us to cover vast number of constructs, elements and sub-elements of the organized and unorganized lifestyle retailing models keeping sustainable retailing model while designing the integrated framework for unorganized lifestyle retailers in India to get organized, and 192 ‘critical effective elements’ in addition to 94 ‘key business deployment factors’ outlined in the ‘ABCD’ analysis model were able to cover majority of the aspects an empirical relative comparative analysis of business models require.

H. R. Ganesha, et al. (2020); www.srinivaspublication.com

PAGE 266