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“A STUDY ON ANLYSIS OF KIRANA STORES (BRICK AND MORTAR)

TO CLICK AND ORDER STORES IN INDIA”

DR.SAVNEET KAUR, ASST. PROF., BVIMR, NEW DELHI

MS. MEGHA SEHGAL, ASST. PROF., BVIMR, NEW DELHI

Abstract:
Brick and mortar (also bricks and mortar or B&M) refers to a physical presence of an
organization or business in a building or other structure. The term brick-and-mortar
business is often used to refer to a company that possesses or leases retail shops, factory
production facilities, or warehouses for its operations. More specifically, in the jargon
of e-commerce businesses in the 2000s, brick-and-mortar businesses are companies that
have a physical presence (e.g., a retail shop in a building) and offer face-to-face customer
experiences.
”. The phenomenal three digit growth in the “click and order” retail business has been
fuelled by the burgeoning middle class, increasing incomes, a robust economy and the
rapid penetration of the internet and smartphones.
The retail landscape in India is in a state of flux undergoing a major shift. Retail scenario
in India is rapidly transforming from the traditional brick and mortar “Kirana” stores to
the burgeoning Malls and now the new age “Click and orderThe total concept and idea of
shopping has also undergone a drastic change in terms of format and consumer buying
behavior, ushering in a revolution in shopping in India, with more and more consumers
from Metros to Tier II and Tier III cities opting to make online purchases.
However this rapidly growing landscape with its fairytale scenario, is not without its
pitfalls and there are several issues and critical factors which must be taken into account
before the fairytale comes true. The modern retailers will have to address these critical
success factors and also overcome the associated challenges.This paper makes an attempt
to analyse the online retail scenario and gain insights into the rapid of process of
transformation of the “Brick and mortar” stores to “click and order” stores. The major

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issues to be covered in the paper will be to identify the critical success factors for online
marketing and the challenges to be faced by emerging online retail business.
Keywords: Online Marketing, Brick and Mortar stores, Retailing, E Commerce.

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Introduction
E-commerce can simply be defined as „using the Internet to do businesses. It involves
transformation of economic activity into digital media and includes:
 Exchange information, content, agreements, and services among parties that are
connected to through the Internet.
 Enables new ways of creating, delivering and capturing value to customers.The
World Wide Web has redefined every facet of marketing since its inception. All this
happened within a very short time of the public launch of the internet in 1991 by Tim
Berners Lee.
 One of the major catalysts for e-commerce has been the increasing reach and breadth
of Internet penetration in India. India with 325 million web users and over 1 billion
telephone users (according to the latest figures released by TRAI) has third largest
base of internet users in the world after China and the United States. 60% of internet
users in India are now using mobile phones to access the internet.
In operations research, joint inventory and pricing optimization has received increasing
research attention since the 1990s. We refer to Petruzzi and Dada (1999) for a
comprehensive review on the early literature and Chen and Simchi-Levi (2012) for the
updated literature. This literature stream usually focuses on a single product.
Including the decision of assortment breadth in the model may post insurmountable
challenges because the objective function becomes an ill-behaved multivariate function
with integer and continuous variables. We refer to Kok¨ et al. (2009) for a comprehensive
review of the literature on assortment planning. One of the important early results on
assortment planning was obtained by van Ryzin and Mahajan (1999). Under the
assumption that each variant has an identical newsvendor ratio, these authors show that
the optimal assortment consists of several of the most popular items. Subsequent studies
extend the analysis to include such factors as consumer search (Cachon et al., 2005) and
endogenous pricing (Maddah and Bish, 2007). Several other studies take a different route
by relaxing the assumption of an identical newsvendor ratio.

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For example, Li (2007) and Alptekinoglu et al. (2009) show that the optimal assortment
does not always include the most popular variants but instead includes the most profitable
ones. The research performed by Maddah and Bish (2007) is closely related to the
traditional retailing model analyzed in our research. However, we extend the analysis by
comparing the performance of two distinct retailing models

Present Indian Retail Landscape

The Boston Consulting Group and Retailers Association of India published a report titled,
„Retail 2020: Retrospect, Reinvent, Rewrite‟, highlighting that India‟s retail market is
expected to nearly double to US$ 1 trillion by 2020 from US$ 600 billion in 2015, driven
by income growth, urbanisation and attitudinal shifts.Bothorganised and unorganised
retail companies have to work together to ensure better prospects for the overall retail
industry, while generating new benefits for their customers.The total concept and idea of
shopping has also undergone a drastic change in terms of format and consumer buying
behavior, ushering in a revolution in shopping in India. Modern retailing has entered into
the Retail market in India as is observed in the form of bustling shopping centers, multi-
storied malls and the huge complexes that offer shopping, entertainment and food all
under one roof.

Retailing consists of the business activities involved in selling goods and services to
consumers for their personal, family, or household use. It includes every sale of goods
and services to the final consumer. Retailing in India today is at an interesting crossroads
and the Retail Industry in India has come become one of the most dynamic and fast paced
industries with several players entering the market. However India is the country having
the most unorganized retail market in the world. According to MrArvindSinghal,
Managing Director, KSA Technopak India Pvt. Ltd the size of the unorganized retail
market in India is roughly Rs 5,80,000crores representing 90% of the market whereas
organized retailing accounts for the remaining 10% of the market. In absolute terms,

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India has amongst the lowest per capita retail space availability and the average size of
the retail outlet is less than 500 sq feet. India‟s retail industry accounts for 10% of the
country‟s GDP. The retail sector is expected to grow at the rate of 12% per annum and
some of the major retail organizations like TESCO, Wal-Mart , Ikea and Amazon are in
the process of making major investments in the Indian market.

Brick and Mortar Retailers and Brands Going Online

Diagram 20: Transformation of “Brick and Mortar” to “click and order stores”

. In India, the retail market has been primarily catered by traditional brick and mortar
stores which even today handle over 90 percent of the total market.The Indian online

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retail market has been striding leaps and bounds over the past few years on account of
digital revolution. However the reach of the Internet is still limited although increasing at
a fast pace.
E-commerce is expanding steadily in the country. Customers have the ever increasing
choice of products at the lowest rates. E-commerce is probably creating the biggest
revolution in the retail industry, and this trend would continue in the years to come.
Retailers should leverage the digital retail channels (e-commerce), which would enable
them to spend less money on real estate while reaching out to more customers in tier-2
and tier-3 cities.
The focus is also shifting from traditional brick and mortar distribution channels to the
Click and mortar distribution channels, which is a combination of the traditional brick
and mortar channel and clicks only channel.Retail e-commerce (or e-tailing), is
essentially the selling of retail products through internet such as Online shopping, online
retailing, e-shopping, e-retailing, etcThe current market size of online retail sector is
around $ 3.5 billion (over Rs 21,000 crore), and is expected to reach around $ 18.5 billion
by 2018.
The major reasons for this growth will include the increasing penetration of mobile
Internet, higher purchases of smartphones, need for ease of shopping, time convenience
and higher mobility. Heavy discounts offered by online portals will also propel the
market growth. In terms of product segments, at present electronic gadgets claim the
highest share followed by apparel and books. Some other factors helping the online retail
industry seeing good growth include smartphones offering accessibility to online
shopping, aspirations of tier II & III cities, women becoming more tech savvy, evolving
perception around branded products, impulsive buying and logistical convenience.
Despite its diverse population, disposable income has increased in India and is expected
to increase at the rate of 8.5% per annum .The number of working women has also
increased, thus increasing the number of households, where both husband and wife are
working. Consumers have larger disposable incomes, greater purchasing power and less
time to spend on daily shopping.

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This will lead people to buy daily goods online rather than waste time and fuel to shop
from a hypermarket. This has lead to the slew of new websites like bigbasket.com,
grofers.com, localbaniya.com which offer groceries and household products that can be
delivered to households in a short span of time.
Discount and other promotional offers are strongly believed to have led customers from
the physical stores to virtual stores. Flash sales like GOSF (great Online Shopping
Festival) by Google in which online retailers like jabong, snapdeal, flipkart and
amazon.com participated helped in increasing online purchases substantially. Discounts
and promotional offers have always attracted customers.
This is evident from sales figures of days when heavy discounts are available for the
customers in both single and multi-brand outlets. Most of the e-commerce portals have
started giving discounts round the year. With such availability of discounts throughout
the year, more and more people are expected to shift their shopping from physical to
virtual stores and thus paving the path through increased buying on the World Wide Web.

The B2C segment has also become very popular as far as the service sector is concerned.
The online services marketing includes travel portals like irctc.co.in for railway
reservation, makemytrip.com, goibibo.com, expedia.co.in, cleartrip.com, yatra.com ,
redbus.com etc. The advantages offered by these websites like booking from the
convenience of home, comparing fares, checking availability, hotel bookings etc have
made them very popular and acceptable to the Indian customer.
A large majority of railway reservations today are through the irctc.co.in web portal. The
latest entrant to the travel sector is oyorooms.com, which offers hotel bookings in popular
hotels at heavy discounts and no cancellation charges, making it an instant hit. Another
category of b2c segment is the group buying web portals like Groupon.com and
foodpanda.com for restaurant bookings. These websites also provide substantial savings
for the customers.

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Different Categories of E-Commerce Sites Operating in India

There are different categories of web portals offering products and services in India Some
of the pioneering web portals were Bazee.com (which was acquired by ebay) ,Hometrade
(involved in a scam), which did not really take off and were mired in controversies.

Online shopping sites can broadly be classified into the following categories:
Virtual Marketplaces: Websites which offer a platform for sellers and buyers to meet.
These websites facilitate the process of buying and selling, but do not sell products of
their own e.g. Ebay, Rediff shopping, Amazon etc. These websites charge a certain
amount from sellers and allow them to set up shops in their virtual marketplace. These
websites facilitate the buying and selling process by rating buyers as well as sellers and
also help in transfer of payment from the buyer to the seller.
The payment is made by the buyer to the website , which in turn releases the payment to
the seller after the buyer confirms receipt of the product. This way they protect the
interest of the seller as well as the buyer. The website also has a helpline for handling
complaints of the buyers. The seller has the advantage of not having to promote their
products.
Horizontal/ Vertical Markets :The second category of websites are those which
maintain inventory and sell products of their own like jabong.com, flipkart, homeshop18,
snapdeal, myntra etc. These portals may be vertical portals which sell a particular
category of product like apparel as in case of jabong, furniture as in case of urbanladder,
pepperfry, ediy, jewelry as in case of bluestone or a horizontal portals selling a wide
variety of products like flipkart, homeshop18, snapdeal etc.
These portals need to aggressively promote their websites and product categories,
maintain inventories and develop a major supply chain network. The latest entrants to this
sector are like portals offering groceries like bigbasket.com, grofers.com,
localbaniya.com. These portals also arrange to deliver the groceries, generally in large
cities and that too limited geographical areas.

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Transactional websites: The third category of websites is brick and mortar shops which
set up a virtual presence on the net to augment their sales. These may be portals set by
companies selling durable products like Sony, Samsung, Philips, restaurants like
“Dominos” or publishing companies or large and well known retailers which have a pan
India presence. Generally the basic purpose of these portals is to provide information
about their products and help the customer to search for or pay for product or to direct the
consumer to their dealers or physical outlets, or help to complete the online
Service portals :Fourth category of e-commerce websites are those offering services like
travel services by makemytrip, goibibo.com, expedia.co.in, cleartrip.com, yatra.com ,
rebus, hotel booking by OYO rooms, income tax filing like taxsmile, real estate buying
and selling like 99acres, magicbricks, India property etc. The travel portals tie up with
various airlines , hotels etc to book tickets or hotel rooms. The real estate portals provide
a platform for prospective buyers and sellers to meet. These portals also need to
aggressively advertise , promote and differentiate their offerings.
Regional Diversity in Online Purchases
Online retail has revolutionized the way Indians shop. Electronics and apparel are some
of the largest selling items, products such as adult diapers and blood glucose meters are
seeing a rapid rise in demand on e-tailing sites. Penetration of FMCG products and
consumer durables are very high across India. But in smaller towns and cities, people
don't have access to many categories that are easily available in metros. So the only
option for people there is to shop online because, for many categories, the reach of online
players is greater than that of their brick and mortar counterparts.Data from eBay shows
people in Lakshadweep buy a large number of bar accessories online from eBay, while
Nagaland sees a high demand for camping gear. Bike accessories are a big hit in Daman
& Diu, while Chandigarh sees big purchases of networking and wireless devices, and
Goa fuels the demand for hats.People in smaller towns are going online not just for
`offbeat' goods, but also “Items such as branded apparel which are also hard to find in
those areas. So, shopping online is the only option for people.

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Shoppers in smaller towns are also buying things like computer accessories, spare parts,
laptop batteries which are not easily available in these towns and also because they are
available at lower prices through online stores. Another factor for online purchases by
people in smaller towns is the sheer variety of products available online, while the brick
and mortar stores in smaller towns offer a limited variety e.g. furniture.
Another category of products which people are buying online are products like lingerie
and condoms which people may shy away from buying from brick and mortar stores.

Critical Success Factors for E-Commerce Websites

Role of the Web
 Project a retail presence
 Enhance image
 Generate sales
 Reach geographically-dispersed customers
 Provide information to customers
 Promote new products
 Demonstrate new product benefits
 Provide customer service (e.g., e-mail)
 Be more “personal” with consumers
 Conduct a retail business efficiently
 Obtain customer feedback
 Promote special offers
 Describe employment opportunities
 Present information to potential investors, franchisees, and the media

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For E Commerce to be successful in India the companies need to address the following
issues:

 Building trust and overcome customer‟s fear of being cheated. This can be done
by offering schemes like a 15 day full refund, proper product description and also
having a robust customer service department.
 Building an efficient Supply Chain Delivery Network, that will reduce the delivery
time for various categories of products. The average delivery time is around 4-5
days. This can be reduced through an efficient Supply Chain network.
 Delays or problems in remittances, particularly preventing and sorting problems in
online payment modes, which occur frequently due to slow internet connections
and incomplete transactions. There should be a clear cut mechanism for refunding
money in such cases. Most of the customers in online purchases prefer the COD
route, however this facility is limited to major cities, by most of the sellers.
 Acquiring and retaining customers. Acquiring new online customers is difficult,
since the buyer has to be literate and computer savvy. Also selling the idea of
making online purchases to a generation of customers who did not trust mail order
type purchases is not an easy task.
 Meet customer expectations of lower prices, since customers are easily able to
compare prices across brick and mortar and online stores. Another disadvantage is
that customers do not have the freedom of bargaining, to which they have been
used to, for a long time.
 Overcoming the problem of “touch and feel” which customers considered
important in case of apparel and accessories. This can again be overcome by a
refund policy, such as try and buy , since majority of the refunds in case of
apparel, shoes etc occur due to misfit in sizes.
 Developing innovative offers to attract customers. Online retailers have developed
several innovative offers such as “Midnight Sale”, or offers which are valid only
for a limited time period, Online Shopping Festival offering substantial discounts

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on durable products etc. Companies are offering certain products, which are
available only online , e.g. Motorola mobile phones are available only through
“Flipkart” and are not sold through brick and mortar shops.
 Absence of human touch is an important challenge faced by online retailers. In
brick and mortar shops, customers can interact with sales personnel and clear any
doubts, they may have regarding the products, their usage or compatibility. This
problem has also been resolved by retailers like Ebay, where they allow potential
buyers to ask the seller questions regarding the products offered.
 After Sales Service. This is the most important factor in online sales, since
customers feel that they are at the mercy of the seller, who may not respond. In
case of established durable brands, generally the after sales service is provided by
the local service centre, but there may be problems when products like Televisions
and watches which are sold at substantially lower prices by online retailers .These
products may be those which have been imported from South East Asian
countries, and hence are not eligible for warranties or guarantees.
 Partnering with brick and mortar stores. The focus is also shifting from traditional
brick and mortar distribution channels to the Click and mortar distribution
channels, which is a combination of the traditional brick and mortar channel and
clicks only channel. Today retailers with brick and mortar stores in Chennai and
Mumbai, who traditionally catered to customers from their locality only, are
selling products to consumers in every part of the country through online shopping
sites like E Bay, Amazon etc, thereby increasing their sales many fold. The other
way in which retailers are increasingly using the Internet is by way of “Affiliate
Marketing”.
 The concept of Affiliate Marketing in principle is of having sites partner with
yours and carry links to your site and you on your part, pay a commission to your
partner only if they sell something from your inventory. This works out to be a
win-win situation for the manufacturers, online marketers as well as the retailers.
A case in point is the model adopted by Amazon in India. E-commerce major

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Amazon is taking the kirana store online. Amazon is launching an express delivery
platform in partnership with Kirana stores, calling it “Kirana”.

Challenges Faced By E-Commerce Websites.

Increasing competition in the online market place will be a major challenge for online
retailers. There is likely to be stiff competition in the online market, particularly on the
pricing front. Online prices are easy for buyers to see and compare, as compared to brick
and mortar stores. A person with an internet connection can compare prices by sellers all
over the world and choose the best option. The online marketplace will move towards a
state of perfect competition whereby there are a very large number of buyers and sellers
and the buyer is well informed. It is much more cost effective to set up online store as
compared to a brick and mortar store. There may also be increased competition from
brick and mortar stores and malls which have the added advantage of offering a
“shopping experience”.

Conclusion:
Regulatory changes. Another factor which may have an impact on the online marketplace
is the regulatory changes, which the government may introduce in order to protect the
brick and mortar store lobby.Some unscrupulous fly by night online sellers may damage
the reputation of online sellers.A large percentage of the population in India is illiterate or

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may not have access to internet or online methods of payment. Heterogeneous Market.
India is a very complex and diverse market in terms of demographic and psychographic
profiles of customers. The purchase behavior may vary significantly across states and
regions, thus preventing sellers from having a uniform product mix or a uniform
marketing mix policy.Poor infrastructure. The online sellers will have to grapple with
problems of poor infrastructure in semi urban and rural areas which do not have access to
electricity and internet connections.
Our study also shows some other interesting results. First, inventory cost and demand
volume are the two main factors that influence a traditional retailer‟s inventory decision.
A traditional retailer needs to carefully balance the costs of holding surplus inventory and
of having a stockout. Second, consumer patience and delivery cost are the two primary
factors that influence an online retailer‟s pricing strategies. There is a negative
relationship between delivery cost and time. The faster the delivery, the higher the
logistics costs. Thus, if a consumer is very patient, it is not necessary to have a very quick
delivery.

References

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 Piyush Kumar Sinha, Sujo Thomas “Development of Modern Retailing in India: It‟s
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 The Times of India Title : Amazon to take kirana stores online Author : Samidha
Sharma Location Mumbai: Article Date : 03/26/2015

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