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RESEARCH FOR MARKETING DECISIONS

FINAL REPORT

ON

VIABILITY STUDY OF ESTABLISHMENT OF BIG BAZAAR IN TRICHY

Submitted in partial fulfilment for the award of


Post Graduate Diploma in Management

Submitted to: Submitted by:


IIM Tiruchirappalli IIM Tiruchirappalli
PGP Year – I (2016-2018) | Section – A | Group-1
Prof. Anirban Som
Prof. Subin Sudhir Abirbhav Mukherjee [1601001]
Prof. Hari Sreekumar Bala Koteshwar K [1601013]
Durlabh Raghuwanshi [1601016]
Kumaresan S [1601024]
Samuel Thangminlal Khongsai [1601042]
Yamini Thombre [1601055]

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TABLE OF CONTENTS:

1. INTRODUCTION ............................................................................................... 3
2. DESCRIPTIVE STATISTICS .................................................................................. 6
3. CLUSTER ANALYSIS .......................................................................................... 7
4. FACTOR ANALYSIS ........................................................................................... 9
5. DISCRIMINANT ANALYSIS ............................................................................. 11
6. INFERENCES AND RECOMMENDATIONS ........................................................ 12
7. LIMITATIONS ................................................................................................ 12
8. APPENDIX ..................................................................................................... 13
8.1 TRANSCRIPT OF INDEPTH INTERVIEW...................................................13
8.2 SURVEY QUESTIONNAIRE.....................................................................15

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1. Introduction:
Retail Industry:
Retail refers to selling consumer goods and services to customers in a B2C(Business to Customers) model.
It has multiple channels of distribution and is primarily classified as organized or unorganized. We will be
talking about organized retailing which refers to trading done by licensed retailers who are registered for
sales tax, income tax, etc. Publicly traded supermarkets, corporate-backed hypermarkets and retail chains
and privately owned retail businesses are all consist of organized retailing.

Retail Industry in India:


Retail market in India is among the top five retail markets in world and it accounts for 10% of India’s GDP.
It’s estimated about $600 billion (US) and one of the fastest growing markets expected to grow by 3 times
in next 5 years. In 2003, retailing Industry in India consisted of mainly unorganized owner manned shops.
In 2010 supermarkets and large convenience introduced however they accounted for only 4% of retailing
Industry and were present in urban cities only. India has large market opportunity because of increasing
customer purchase power day by day. But there are many challenges as well. Even now 90% of trade is
done via independent local stores. Organized retailers face problems due to complex distribution network,
geographically dispersed population, little use of IT systems, existence of counterfeit goods and limitations
of mass media.

Market Size of Indian Retail Industry

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Organized and Unorganized Retail in India:
92% shares in retail Industry is of unorganized retails as of 2013. There are approximately 15 Million
small owned independent shops. However, from 2009 to 2013 there has been a growth of 19% in
organized retailing and is expected to have 24% shares in retail industry.

Major Players in Indian Retail Industry:


1) Departmental Stores:
Pantaloons has 104 stores. Westside operates 86 stores. Shoppers Stop has 66 stores. Reliance Retail
launched Trends in this format and currently has nearly 100 stores across India

2) Hypermarkets:
Pantaloons Retail is the leader in this format, with 512 Big Bazaar stores and online franchisees.
Hyper City (16 stores), Trent, Spencer’s (Spencer Hyper), Aditya Birla Retail, and Reliance are
other players.

3) Supermarkets and Convenience Stores:


Aditya Birla Retail (1735 stores). Spencer’s daily (134 stores). Reliance Fresh (700 stores). REI
6Ten (350 stores). Big Bazaar (512 franchisees stores)

4) Specialty Stores:
Titan Industries is a large player, with 430 World of Titan, 174 Tanishq, and 336 Titan Eye+ shops.
Vijay Sales, Croma, and EZone are into consumer electronics. Landmark and Crossword focus on
books and gifts.

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5) Cash and Carry Stores:
Metro started the cash-and-carry model in India; the company operate 16 stores across Mumbai,
Kolkata, Delhi, Punjab, Hyderabad and Bengaluru. Reliance opened its first cash-and carry store in
September 2011 and plans to open 20 stores by the end of the fiscal.

Big Bazaar:
Big Bazaar is one of the largest organized retail hypermarket chains in India. Headquartered in Mumbai, it
is owned by Future Group, a major Indian conglomerate. Big Bazaar, the second largest offline organized
retailer in India, currently operates around 200 stores, centred mainly across metro cities. The Big Bazaar
hypermarkets sell numerous brands of products across several categories, mainly FMCG goods, groceries,
apparels, furniture etc. Recently Big Bazar announced an ambitious plan of adding about 18 million square
feet of retail stores in the next one year, which is equivalent to 35-40 new stores. Despite being in existence
for about 15 years, organized retail, including Big Bazaar, have commanded only 8% of the total retail
market share in India. This brings us to describing the underlying problem associated with the
hypermarkets, which we attempt to solve.

PROBLEM DESCRIPTION
Trichy, being a Tier II city in India, offers opportunity for a hypermarket chain to start operation in the city.
At present, only one player, Reliance Mart exists in the city. The main retail space is dominated by
unorganized retail sector. Through our project, we attempt to conduct a market research among the
customers, learn about their preferences and advise the Management of Big Bazaar on whether they should
open a store in Trichy. Expanding into Tier-II cities is quite essential since these stores already have a near
saturated presence in metro cities, while tier-II cities may offer untapped potential for expansion, as is
discussed in the introductory section.

RESEARCH METHODS
We consider this research more of an exploratory type where we have very limited idea as to what may be
the customers’ needs or wants, or what can motivate him to purchase from an organized retail shop. For
this purpose, we have conducted an interview with a customer, Mr. Rahul Kumar, a working professional
in a Tier-II city Goa. The insights of such an interview will give an understanding as to what we should
proceed forward to design our question set and measure different attributes which a customer might be
interested in, or disinterested in.
After the interview, the question set is designed accordingly to get the customer insights and measure the
parameters. It is to be noted that a better interview about the market research could have been done for
existing players in the market like Big Bazaar or Reliance stores, and we extensively contacted the
representatives and managers of these stores. However due to Company policies, such interview requests
were declined. The question set was set off both online and offline, and door to door surveys were also
conducted near Reliance Market in Trichy, CCD in NIT Trichy and Neelkesh hotel in NIT Trichy Campus,
in offline mode, to add on to more randomness and diversity of the respondents and get a clearer picture.
We intend to use the following methods for this project:
I) Qualitative
a) In depth interview

II) Quantitative
a) Market Survey
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b) Data Analysis through:
 Descriptive Statistics
 Cluster Analysis
 Factor Analysis
 Discriminant Analysis
Through these methods, we attempt to understand the following aspects:
a) Buying patterns of people in Trichy
b) Buying preference of various FMCG Goods
c) Top of Mind space of customers
d) Perception of residents towards organized retail (Big Bazaar to be specific)

TARGET AUDIENCE / DATA COLLECTION


Our target audience comprised of people who are involved in purchasing various kinds of FMCG goods on
a regular basis. We categorized such FMCG Goods into 4 main categories like: Groceries, Household needs,
Consumer Electronics and Apparels, which are required by every individual on a regular basis. These are
obtained through retail stores (or recently, online). Such is the trend across the country. Hence our target
audience are:
a) Students in IIM Trichy
b) Residents of Trichy
c) Local shopkeepers or retailers in Trichy
d) Residents of other parts of the country

2. DESCRIPTIVE STATISTICS
Our analysis was based on one in-depth interview of a random customer, followed by a survey to gauge the
customers’ preferences or requirements which he or she might consider in order to take a decision of buying
from a hypermarket like Big Bazaar. Our survey consisted of about 163 responses. It consisted of several
questions about the personal information of the respondents, like Age, Gender, Profession, Income Range
etc., as well as several questions about the consumer preferences like Price, Proximity from home,
Experience, etc., which can affect his or her decision to buy from that store. The idea of such a survey was
generated from the interview.
About 56% of the respondents are below 26 years of age, 30% earn below ₹10,000 per month. There is a
good mix of respondents belonging to both student community (52%) and the salaried employee
community.

AGE GENDER

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INCOME RANGE PROFESSION

PLACE OF STAY RETAIL STORE CHOICE

3. CLUSTER ANALYSIS:
Segmentation is amongst the primary reasons for a market research about a product. Cluster analysis
techniques are used for this purpose. We identify relatively homogenous clusters into which the customers
can be classified such that each cluster has objects/cases that are relatively similar to each other and
dissimilar to objects in other clusters.
As part of this project, we have tried to
 Identify the number of clusters that can be formed based on the respondent pool
 Identify the number of respondents who fall into these clusters
 Identify the basis on which the respondents are classified under the respective cluster
The cluster analysis would assign each respondent to one and only one cluster. The variables that we have
used for classification are ‘Age’, ‘Occupation’, ‘Gender’, ‘Income Group’, ‘Profession’, ‘Marital Status’,
‘Place of Stay’ and the seven attributes based on which the intention to purchase at a Hypermarket are
measured.
From the resulting dendrogram obtained from cluster analysis, we could identify that the 163 respondents
could be classified into 3 clusters as shown in the below diagram.

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Then, K-means clustering was performed to identify the positions of the clusters that minimize the distance
from the data points to the cluster. The entire 163 respondents were divided into 3 clusters as shown below.

The F test value and the mean squares from ANOVA show the following results:
“Income”, with an F-test value of 212.475 and mean square of 246.483 is the most important attribute upon
which the clustering was done.
Other important classification bases are “Profession”, “Marital Status” and “Age”.
The p-value for Gender (0.143) and City (0.12) are greater than 0.05 showing that these attributes are not
significant for clustering.
We can broadly classify the clusters to be having the below respondents.
Cluster 1: The respondents mostly fall in the income bracket “Above Rs 40,000 per month”, are unmarried,
salaried male employees and belong to the age group “26-30”. This group rates “Proximity from home”
and “Prices / Offers / Discounts” highly while making decisions related to choice of Hypermarkets.
Cluster 2: The respondents mostly fall in the income bracket “Rs 30,000 to Rs 40,000 per month”, are
unmarried, salaried female employees and belong to the age group “26-30”. “Shopping experience” at the
store matters more for this cluster.
Cluster 3: The respondents mostly fall in the income bracket “Less than Rs 10,000 per month”, are
unmarried, male students and belong to the age group “21-26”. “Proximity from home”, “Availability of
products/brands” and “Prices / Offers / Discounts” are the major considerations for this group.
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4. FACTOR ANALYSIS:
Factor analysis is carried out to identify the factors of similar set of questions or variables which can be
clubbed together to convey the same information as a group of questions.
The unique factors obtained by factor analysis are uncorrelated to each other. The common variables
grouped together as one factor can be used to express the factor as the sum-product of the individual
variables with their associated component score coefficients. Hence, we can express the factors as:
Fi = W1X1 + W2X2 + W3X3 + . . . + WkXk
where
Fi : Factor i
Wi : Component score coefficient associated with variable Xi
In our current survey, we want to use factor analysis to reduce the number of questions asked in the
survey, particularly the ones about the customer trends or preferences. The questions or variables we
would like to target are as follows:
1. R_Proximity 3. R_Relationship 5. R_Experience 7. R_Parking
2. R_Price 4. R_Availability 6. R_HomeDelivery
Each of these variables are based on 7 point Likert Scale. It varies from Point 1 to Point 7, where 1
represents the score corresponding a feeling of “Hate” for the attribute, and Point 7 to “Love” for the
attribute. For example, a person completely satisfied with the proximity of the store from his house will
give Point 7 to R_Proximity variable.
We group all our variables together and run the KMO test and Bartlett’s test of sphericity to check the
validity of the Factor analysis performed. KMO returned a result of 0.621 (> 0.5) and Bartlett’s test had a
significance of 0, both indicating that the factor analysis is correct.

The number of factors to be obtained can be understood from the table Total Variance Explained. The total
of the component exceeding 1.0 are taken as valid factors. The number of factors obtained are 2.

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The variables now need to be grouped into one of the two factors obtained. The information about the same
can be observed from the absolute value of the weights in Rotated Component Matrix. The higher the value
corresponding to a factor, the corresponding variable will be grouped there.

For example, in the table given alongside:


R_Proximity is more closely related to Factor 2, since its
weight, i.e., |-0.475| = 0.475 > 0.359, which is present for Factor
1.
Hence, we can group the variables into factors as:
FACTOR 1: R_Availability, R_Experience, R_Relationship,
R_Price

FACTOR 2: R_HomeDelivery, R_Parking, R_Proximity

It may be noted that the factors explained above can be re-


named as:
FACTOR 1: Experience Factor, since it mainly deals with
variables which are directly related to enhancing the experience of a particular store.
FACTOR 2: Distance Factor, since the customer will expect home delivery, parking facility and proximity,
if the distance from his home to the retail shop is quite significant.
Now, after grouping, we need to find the weights to individual variables constituting the factors. Such
weights can be obtained from Component Score Coefficient Matrix, as shown below.

Factor 1:
F1 = 0.257  R_Price + 0.319  R_Relationship +
0.421R_Availability + 0.393  R_Experience

Factor 2:
F2 = -0.264  R_Proximity + 0.486  R_HomeDelivery +
0.471R_Parking

These equations are analogous to the factor equations as


discussed earlier in this section.

Hence we recommend that the question set be designed keeping


in mind the distance and experience factors only.

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5. DISCRIMINANT ANALYSIS:
In order to gauge the “Intention of the buyer” based on the several attributes/factors pertaining to a
Hypermarket, we have performed a Discriminant Analysis and have developed a Discriminant Analysis
Model based on the below seven factors.
 Proximity from home (X1)
 Prices, Discounts and Offers offered (X2)
 Relationship / Loyalty (X3)
 Desired Brand / Product availability (X4)
 Shopping Experience (X5)
 Home Delivery option (X6)
 Parking space availability (X7)
The discriminant analysis model involves linear combinations of the following form:
D = b0 +b1 X1+ b2X2 + b3X3 + …. + bkXk
Where
D = discriminant score
b’s = discriminant coefficient or weight
X’s = predictor or independent variable
The dependent variable is the categorical variable “Intention to buy” (“Yes” = 1, “No” = 2) and the above
mentioned seven variables are the independent variables used in the analysis.
The coefficients are estimated such that the groups differ as much as possible on the values of the
discriminant function.

The following were the results obtained.


 A significance of 0.037 (i.e. p-value < 0.05) illustrates that the model suggests significant
discrimination between the categories of the dependent variables.
 A Wilks’ Lambda of 0.905 shows that the model designed though significant is not powerful and
can be improved upon.

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 The standardized canonical discriminant function coefficients show that “Prices, Discounts and
Offers offered” is the best predictor followed by “Shopping Experience”.
 The discriminant analysis model is obtained as shown below.

Y = 0.746 X1+ 0.978X2 + 0.690X3 +0.590X4 + 0.671X5 + 0.881X6 + 1.085X7 – 12.465

6. INFERENCES AND RECOMMENDATIONS:


Following are the conclusions and recommendations which we found, from our project work:
1. Hypermarkets are preferred by about 47.9% of the respondents, the highest among the retail stores. This
indicates a good potential for hypermarkets to expand.
2. About 64.5% of the respondents are aware of Big Bazaar as a retail store, which is a very high number.
Again, this indicates that promotional activities need not be emphasized much to create awareness.

3. About 67.4% of the people would like to recommend Big Bazaar to their peers for shopping. The
reasons for recommending will be discussed through discriminant analysis.
4. Through discriminant analysis, we find that customers are mainly liking Big Bazaar for:
 Price / Discounts / Offers
 Shopping Experience
The customers dislike the following attributes of Big Bazaar and hence it would require Big Bazaar’s
attention to improve the following parameters:
 Relationship and Customer Engagement
 Proximity
 Product / Brand Availability

5. Big Bazaar may improve the aforesaid hygiene parameters through:


 Encouraging Loyalty schemes, cashback or other promotions
 Setting up new stores, wherever feasible, to improve upon the Proximity factor from people’s
houses
 Have more varieties of brands and products for sale in their shelves

7. LIMITATIONS:
 Greater number of sample size needs to be present for more accurate data.
 Wilk’s Lambda is high, approximately 0.905. So the method may not be reliable (although
significance is low, at 0.037, so the methodology is appropriate). A better design of questions and
sample size can address this problem.

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8. APPENDIX:
8.1 Transcript of in-depth interview:
Interviewee Profile: Rahul Kumar, Goa. Financial Consultant.

ABIRBHAV: Good afternoon. We are from IIM Trichy and we are conducting an interview for retail
markets like Big bazaar, reliance etc. So is this the right time to talk to you?
RAHUL: It’s a good time, please ask.
ABIRBHAV: Ok, your name identity will be kept confidential and it is purely for academic purpose.
RAHUL: Ok, I respect that.
ABIRBHAV: Ok, starting with the interview. Please state your name, occupation and place of stay?
RAHUL: I am Rahul Kumar, originally from Goa. I am a financial consultant and I think you can
understand that I cannot disclose the name of my firm.
ABIRBHAV: Yes, we understand. So, we would like to know what you think of the organized retail stores
in general.
RAHUL: Organized retail stores, in respect of the current world, are not doing very well. So with the
emergence of the e-commerce, probably they have gone down a bit is what I feel. And my interaction with
the brick and mortar store has gone down as well.
ABIRBHAV: Ok, so your current preference is online only.
RAHUL: It depends on the kind of product, so if there is something I want to have touch and feel, I would
go to brick and mortar store, so there is something called as showrooming. So, it depends on the product.
ABIRBHAV: Ok, that’s fine. So, can you please elaborate on what are the factors which makes you choose
between online and brick and mortar. One you have said touch and feel, any other factor that comes to you
mind?
RAHUL: The cost is a very important factor, since tax and all issues come into play, which makes a huge
difference. So, there is a centralized system which gives centralized price and the type of finding they are
getting, and go through volume route, so the issue is that the brick and mortar stores cannot compete on
prices so it probably also plays a huge role.
ABIRBHAV: Ok, we get that. So, what kind of products do you usually purchase in a month. For example,
groceries or electronics or whichever comes to your mind.
RAHUL: So, electronics I will purchase from online stores, so what happens is that they have commoditized
products, so I don’t need to touch and feel. But something on a short notice, like groceries is something I
would like to go to shop and see if the quality is good or not.
ABIRBHAV: Ok, we get that. Regarding your purchase from Brick and mortar stores, can you elaborate
on what kind of Brick and mortar store do you prefer, like one is hypermarkets, supermarkets, local kirana
store etc.
RAHUL: So if you are looking at groceries, probably hypermarket is better because I have been to all three,
and I feel experience there is better and checkout process is also better. So if I go to a busy kirana store or
a busy super market, I won’t find that ease.

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ABIRBHAV: Ok, that’s very nice. So let us come to hypermarket now. Can you tell us about any of your
recent purchase in hypermarket?
RAHUL: Recently, I haven’t been to any hypermarket.
ABIRBHAV: Like in the horizon of three months?
RAHUL: Three months, probably I have been to star bazaar. I have gone for a trip for Pune, it was a very
good experience, as compared to the supermarkets that we have in Goa, of the local kirana stores which we
have over here. So, the experience is much better.
ABIRBHAV: Ok, that’s fine. Can you please elaborate on what are the factors which will make you go for
a hypermarket purchase rather than a supermarket purchase? One you said about ease of checking out, any
other factors?
RAHUL: Availability, the kind of products I get over there. So for example I am looking for Nutella. During
sometime, I cannot find it in some of the kirana store and sometime in supermarket as well as Goa is not a
metro city. But I will go to hypermarket if I need to find such products.
ABIRBHAV: Ok, So I am going to give you a choice of factors. Hearing those factors, we want you to tell
whether those factors will determine your purchase decision from that hypermarket or is it insignificant.
So, based on a 7-point scale where 1 is completely disagree and 7 is strongly agree, you have to rate it. Is
that fine with you?
RAHUL: Yes, it’s fine.
ABIRBHAV: Ok, so first is price.
RAHUL: Price is probably close to 6.
ABIRBHAV: Ok, second is availability of desired product or brand.
RAHUL: 5.
ABIRBHAV: Ok, third is the proximity from your place of stay.
RAHUL: 3 or 4
ABIRBHAV: Ok, fourth is home delivery options.
RAHUL: 5, probably.
ABIRBHAV: Ok, fifth is the availability of praking space.
RAHUL: 2 or 3.
ABIRBHAV: Ok, thank you very much. Now coming on to your purchases. Like you said you will prefer
a hypermarket because of n number of factors. So we would like to know how do you commute, from your
place of stay to that hypermarket, using a public transport or your own vehicle.
RAHUL: So, I was in pune and there is a place called magarpatta, so I used to stay quite close to
hypermarket. So I didn’t feel that problem, I used to walk.
ABIRBHAV: Ok, that’s fine. So, any other factor that you would like to add on to your hypermarket
experience, which you find lacking in any hypermarket that you see?
RAHUL: Probably even though the checkout speed is high, if they go digital, it can be faster. For example,
amazon go, which is in pilot phase in the US, it can help a lot.
ABIRBHAV: Ok, we understand. Thank you for your time.

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8.2 CONSUMER PREFERENCE TOWARDS RETAIL STORE

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