Business Project Proposal: Supermarkets Effect on Smaller Business
Business Project Proposal: Supermarkets Effect on Smaller Business
Introduction
Modern retail is having a transformative effect on the smaller businesses around the world. When compared with the conventional mom and pop stores, super markets enjoy huge economies of scale. They procure their goods from the manufacturers directly and eliminate the middlemen. Hence, they could procure goods for a cheaper price than smaller companies. Supermarkets also offer better shopping experience over the conventional smaller companies. Mom and Pop stores with limited space are no match for the spacious and air-conditioned super and hyper markets. Due to the above reasons, many retail customers now prefer modern supermarkets over the conventional stores. However, all the Mom and Pop stores did not vanish due to the spread of supermarkets in the international markets. Small businesses in countries like UK and India continue to survive despite the entry of foreign supermarket chains.
There is a limited understanding over the exact impact of modern supermarkets over the conventional small businesses. The lack of research is more pronounced in countries like India where foreign supermarket chains are now trying to enter. Due to the supposed negative impact of the super markets over the conventional small businesses, there was a lot of opposition to FDI in the retail sector. Most of the existing studies were based on the analysis of secondary data on the impact of foreign supermarkets. The proposed research aims to bridge this gap through a primary research based on the interviews of professionals in the retail sector. Focus group discussions of the professionals in the retail sector will also be conducted to get their opinions regarding the issue. Due to the ongoing controversy regarding the entry of foreign supermarket chains into the Indian market, India will be selected as the target market for the proposed research.
Indian Retail Sector
The Indian retail sector is the one of the biggest in the world due to the sheer population of the country. The rising income levels of Indian customers is contributing to the growth of the sector. Indian retail sector is dominated by the unorganized small retail stores run by families known as the Kirana stores. Analysts opine that these Kirana stores are inefficient and charged higher prices from consumers as they did not enjoy the benefits of big supermarket chains like economies of scale. Many foreign supermarket chains were waiting to enter the market due to the future growth prospects. While local retailers and political parties opposed the entry of foreign supermarket chains, the local supermarkets welcomed them due to the expertise they can bring into the market. The government allowed 100 percent FDI in single brand retail and 51 percent FDI in multi-brand retail stores. But the government has put a lot of restrictions over the operations of multi-brand retail chains in India like compulsory sourcing requirements from local cottage industries. These conditions have limited the interest of multi-national retail chains like Wal-Mart in entering the Indian market.
Literature Review
There is a limited research which explores the impact of supermarkets on small businesses. The current literature review will focus on the studies that were conducted in the global context and then focus on studies in the Indian context.
In a study published by Traill (2006), the author conducted an extensive quantitative study on supermarket penetration is conducted by taking data from 42 developing and middle-income countries for which data was available. The main objective of the study was to study the further potentiality for supermarkets in the future. Data regarding the GDP percapita, urbanisation, income distribution, and openness to inward foreign investment are used to predict the future potentiality of super markets in the emerging markets. Analysis of the data has shown that supermarkets there is a significant but not explosive scope for supermarkets to expand in the developing markets. Hence, the impact of supermarkets on the small retailers in these countries could be limited. The main reasons which might stifle the growth of supermarkets in the developing markets are their limited openness and slow GDP growth.
In a study by Alvarado and Charmel (2002), the authors explore the positive impact of supermarkets on the local small businesses. The authors investigated the rise of supermarkets on the horticultural markets of Costa Rica. Using the data collected through secondary research, the authors trace the development of supermarkets in Costa Rica since the early 1980s to 2002. The funding received by supermarkets from big foreign retail chains helped them to expand aggressively. Expansion of the supermarkets resulted in a number of positive benefits to the local horticultural markets in the form of innovations in procurement systems and better prices to the producers.
In a study done by D’Andrea et al. (2006), the authors explored the reasons behind the survival of small retailers in Latin America despite the rapid spread of supermarket chains. Both primary and secondary data sources were used for this research. The study concluded that old fashioned small retailers could satisfy the needs of poor citizens in developing countries in a better way than modern supermarket chains. Benefits like selling on credit, selling in smaller quantities, and proximity to the residencies of customers were some of the common reasons for their survival in these markets.
In a study by Reardon and Hopkins (2007), the authors discuss the tensions between the traditional retailers and modern supermarkets as the latter rapidly expand their presence into the emerging markets. The paper is conceptual is nature and does not involve collection and analysis of data. The paper does this by taking the past history of USA and Western European countries and the way they designed policies to face the tensions into account. Paper concludes with suggestion to properly create support programs for effectively handling the negative impact of supermarkets on local businesses.
In a study by Goswami and Mrudula (2009), the authors have explored the impact that the spread of supermarkets will have on the small Kirana stores in India. The study focused on collecting primary data from the customers who shop from local Kirana stores. In the study, data regarding customer preferences was collected from a sample of 100 respondents from 2 major and 2 minor cities each. Multivariate analysis of the data has revealed that preference of retail stores by customers depended upon a number of factors like store location, cleanliness of stores, help provided by the sales people, and travel convenience. Respondents to the study have given positive feedback for Kirana stores on all the above discussed aspects other than cleanliness. The authors conclude that unless the local Kirana stores work on improving the store ambience and cleanliness, they might fade into oblivion.
Research Methodology
Research Gaps and Objectives of Study
As presented above in literature review, there is a dearth of quality research on the impact of supermarkets on the small businesses. Many studies like Reardon and Hopkins (2007) are conceptual. Even in case of primary studies conducted by Goswami and Mrudula (2009), data was collected from customers. While the opinions of retail customers are relevant, the opinions of people who run supermarkets and small businesses too is relevant in getting a proper understanding of the topic. However, no studies till now have taken the opinions of executives into account. The current research aims to fill this gap.
The following is the research question for the proposed research:
“What is the impact of supermarkets on small businesses in countries like India which are being open for FDI by the local governments.”
The following are the primary objectives of the proposed research:
Research Paradigm and Research Tools
In order to overcome the limitations highlighted in literature review, the current study will focus on conducting a primary research to get a proper solution to the research question.
It is proposed to use in-depth interviews and focus group research for the current research.
In-depth Interviews
In-depth interviews will be conducted on the senior executives from the organized retail sector and small businesses. In order to make it possible for executives to express their opinions freely, no pre-determined questionnaires will be given to the respondents. Close ended interviews will limit the range of answers that a respondent give. Responses will be recorded on tape and content analysed later. The sample size for in-depth-interviews will be fixed at 50. The total sample size will be equally divided between the executives of the supermarkets and owners of small businesses.
Focus Groups
Under focus groups discussion, executives from both the modern supermarkets and conventional small businesses will be called to a place and discuss the impact of supermarkets on small businesses. During the discussion, executives will also be asked to give their suggestions to reduce the tensions between the modern and conventional retail so that both of them could exist together freely.
10 executives each from both the modern supermarkets and the conventional small businesses will be invited to focus groups discussions. The researcher will act as the moderator for focus groups. All the focus groups discussion will be recorded and content analyzed later for identifying the opinions of the participants.
Ethics in Research
As the current study involves collection of primary data from executives who run businesses, a number of ethical issues need to be taken into consideration while conducting research. According to Diener and Crandall (1978), there are four ethical principles that are relevant to business research, viz. potential harm to the respondents, absence of informed consent, deception of respondents, and invasion of privacy. In order to comply with these ethical requirements, prior permission will be taken from the respondents regarding the publication of research findings. Following the suggestions of Bell (2005), care will be taken to keep the identity of all the respondents to the research totally confidential.
References
Alvarado, I, & Charmel, K 2002, The rapid rise of supermarkets in Costa Rica: Impact on horticultural markets, Development Policy Review, vol. 20, no. 4, pp. 473-485.
Bell, J 2005, Doing your research project, McGraw-Hill International: London.
D’Andrea, G, Lopez-Aleman, B, Stengel, A 2002, Why small retailers endure in Latin America? International Journal of Retail & Distribution Managemement, vol. 34, no. 9, pp. 671-693.
Diener, E, & Crandall, R 1978, Ethics in Social and behavioural research, University of Chicago Press: Chicago.
Goswami, P, & Mishra, MS 2009, Would Indian customers move from kirana stores to organized retailers when shopping for groceries? Asian Pacific Journal of Marketing and Logistics, vol. 21, no. 1, pp. 127-143.
Reardon, T, & Hopkins, R 2007, The supermarket revolution in Developing Countries: Policies to address emerging tensions among supermarkets, suppliers and traditional retailers, The European Journal of Development Research, vol. 18, no. 4, pp. 522-545.
Traill, WB 2006, The rapid rise of supermarkets? Development Policy Review, vol. 24, no. 2, pp. 163-174.
