Retail Store Categorization and Patronage Behavior among Rural Consumers in India

The rural population of India is about 70.2% of the total population. Close to 137,747,384 households reside in more than 0.6 million villages in India. In the last decade spending power of this rural population has been increasing and its attitude and lifestyle have undergone significant alterations. As a result of these transformations, the retail habits and store patronage behavior of the population is also changing. Although retailing in India has traditionally been an unorganized sector, especially in rural markets, that is changing as well. This study focuses on existing retail formats in rural markets in India. The study has two goals: to develop a classification system for these retail formats and then to examine the preferences of segments within the current rural Indian population for the different types of retail formats. Specifically, the following research questions are addressed: What are the categories of retail stores available in rural markets? Are there descriptors that identify segments which vary in preference across the retail store categories identified? The study helps understanding of the different types of formats existing in the rural markets and the characteristics of segments who patronize the various formats, which can ultimately be helpful to classify the retail stores into different categories for the purpose of systematic study and analysis in the future. This will be extremely helpful to the industry looking at the fast changing preferences of rural consumers and the increasing competition in the retail industry. Introduction With the high growth being registered in the retail sector in the developed countries, and the developing countries such as India almost on the verge of a revolution, there is a high research interest in the area. Retail is responsible for delivering the product or the service to the ultimate consumer. Traditionally the research has focused on the issues of store choice, store patronage and other similar questions from the perspective of urban masses. Some work has been done on household demographic variables (Leszczyc, Sinha, and Timmermans, 2000; Bawa and Ghosh, 1999) and relating them to the shopping behaviour of the household, the trip timing (Kahn and Schmittlein, 1989) and the store choice (Kau and Ehrenberg, 1984). However, as compared to the work on the product and service choices, the work on store choice is quite less and covers few dimensions. The retail strategy is very important from the manufacturer’s point of view and thus the store choice becomes a matter of concern to the manufacturer. In addition with the high growth in the organized retail in the recent times, as well as increasing competition for a retailer the store choice becomes an area of concern. If the urban consumer has an influence in deciding the store choice, the loyalty and the patronage it is very relevant that the perspective of the rural consumer be taken in any future research in these areas. Objectives The above discussion reveals that, literature has answered the questions like what to buy and when to buy. However the questions like where to buy and how to buy has as yet not been answered, especially in rural India. As there is very little research in this area, this work is seen as the first step in setting up the outline for further work. It will primarily deal with the question on the classification/categorization of the rural retail stores in answering Journal of Business and Retail Management Research (JBRMR) Vol. 5 Issue 1 October 2010 A Journal of The Academy of Business and Retail Management (ABRM) 31 the question of where to buy. The study is therefore aimed at developing a framework, for exploring the classification variables. It is being conceived as broadly setting the tone for future studies in this direction. It might also be used further to answer the question on how to buy or in other words, how do consumers make store choice of the rural retail store, therefore the two objectives are:  What are the categories of retail stores available in rural markets?  Are there descriptors that identify segments which vary in preference across the retail store categories identified? Literature survey Store choice: The study of consumer store-choice or patronage behavior has been an important area of research in retailing for many decades. The decision on the choice of store has been modeled in different ways in the literature. Some of the studies have taken the household as a rational decision making unit, (Goldman and Johansson, 1978; Bawa and Ghosh, 1999). However, the research has also revealed that customers also care about other store attributes in making their patronization decision. Some of the researchers (Bell, Ho and Tang, 2001) have worked on the shoppers perceived utility and the store image in making the store choice. Research also exists on how store environment cues influence consumers' store choice decision criteria, such as perceived merchandise value and shopping experience (Baker, Parasuraman, Grewal, and Voss, 2002). Store choice has also been seen in the context of the risk reduction strategies of the shoppers (Mitchell and Harris, 2005). In addition work on store choice has also been done on the role of situational factors (Wu, Petroshius, and Newell, 2004) and the task-store attribute relationship (Kenhove, Wule, and Waterschoot, 1999). It has also been found to be dependent on the timing of shopping trips, with consumers visiting smaller local store for short "fill-in' trips and larger store for regular shopping trips (Kahn and Schmittlein, 1989). Most of the studies in store choice have however pointed out the primacy of store location (Freymann, 2002) and price (Bell, Ho and Tang, 2001) as the key drivers of store choice. Lastly Bell and Lattin (1998) found a systematic relationship between a household's shopping behavior and store preference, especially in the context of choice of a format (EDLP/Hilo). Consumers typically shop for multiple items on a given trip rather than a single item; and these items form the shopping basket for the shopper. Shopping basket has been defined as ‘comprising the collection of categories that consumers purchase on a specific shopping trip’ (Manchanda, Ansari and Gupta, 1999). Shopping basket will affect the store choice in various ways such as the size itself will affect the store choice, as shoppers are prepared to go farther to shop for a larger basket than a smaller basket (Bawa and Ghosh, 1999). The contents of the basket will affect the shopper’s perspective of the store and affect the ongoing store choice (Desai and Talukdar, 2003). Overall preference for the store might shift as a function of the composition of the shopping basket (Leszczyc and Timmermans, 1997). In the literature pertaining to store choice the consumers evaluate a group of stores on a set of attributes and then, depending upon their individual preferences, patronize the best store. It has generally been seen that all the stores in the choice set are in the same formats (Bhatnagara and Ratchford, 2004). This indicates that the first choice for the shopper is that of the format. Since not all the products/services are available in all retail formats, this means that the shopping basket will narrow the scope of the store choice to particular formats. However, since some formats offer overlapping products or services, the choice is also between various formats. These indicate that the first choice for the shopper is that of the format, which depends to a large extent on the shopping basket, but will also depend, on the other format attributes that the shopper would derive from the format. The choice of the shopping basket will then play a major role in deciding first the format and then the store. The final store will be chosen keeping in mind the store attributes such as location, store image, price image, ambience etc. In certain exceptional circumstances, such as strong loyalty to a store, a particular type of ambience or location, considering the composition of the basket and the availability in the store of the merchandise, the choice might be made directly for the store instead of going through the process of basket-formatstore. Therefore this study has been focused on classification or categorization of the rural retail stores and then deals with the store choice based on the consumer demographics. Journal of Business and Retail Management Research (JBRMR) Vol. 5 Issue 1 October 2010 A Journal of The Academy of Business and Retail Management (ABRM) 32 Retail Classification/Categorization/Formats The retail format has been discussed in the retailing literature in a variety of contexts: the history of retailing and the evolution of retail formats and innovations (Bucklin, 1983; Jonathan et. al., 2007), retail management and merchandise assortments (Jozefina Simova, Colin M. Clarke-Hill, Terry Robinson, 2003). A distinction is often drawn between the offering and the know-how parts of the format. The first includes the external elements (eg. assortment, shopping-environment, service, location and price) delivering the functional, social, psychological, esthetic and entertainment benefits attracting consumers to stores. The second, the internal part, determines a retailer’s operational strength and strategic direction. The drivers of store choice in various product categories, in the context of the evolving retail industry. (Piyush Kumar Sinha, Arindam Banerjee, 2004). The field of retail distribution is so complex and dynamic that any method used to compile and class its statistics should be reviewed for possible improvement. Retail-store classifications are based on “Establishment” basis and grouped into categories classified according to predetermined structure characteristics (Stephen Brown, 1987). Present Scenario of Rural Store categorization in India There has been no significant research for the purpose of classification an