Hamdard Institute of Management Sciences

Why are supermarkets preferred over small retail stores

NAME: FATHER NAME: KHAN G.R No: COURSE: METHODOLOGY SUBMITTED TO: DATE: M. NADEEM KHURSHEED KHAN MUHAMMAD KHURSHEED MEN-2200961 BUSINESS RESEARCH

RESEARCH REPORT On

Ms. QANITA IMTIAZ 06 AUG 2012

TABLE OF CONTENTS

a. b. c. d. e. f. g.

Acknowledgements Introduction Research Process

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Flow Chart Of Research Process Background Analysis Of Questionnaire Hypothesis Testing Final Conclusion & Recommendations

h.

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Acknowledgements
All praise is to Allah who makes everything possible in the universe and beyond. First of all, I would like to thank Allah, who helped me with everything and made everything come together, then our parents and family who have always supported us in every good thing that we do. I am greatly thankful to our course instructor for Business Research Methodology, Ms. Qanita Imtiaz, who provided clear concepts and a strong foundation of understanding for the subject. She made the course a valuable learning experience for all of us and made us grow as learned individuals. I would also like to thank Hamdard University for a great learning place with different academic and extra-curricular experiences, all contributing to our growth as students. Lastly I would like to thank our fellow classmates for making this learning experience a thoroughly productive and enjoyable one. Hopefully this report will serve a good purpose. Thank You.

Introduction
Retailing in Pakistan:
Retailing in Pakistan, and for that matter in most of the Third World Countries, has traditionally been a small scale business, meant mainly for small and less or not educated entrepreneurs. Till late sixties, large scale retailing institutions like Super Markets, Departmental Stores and Discount Houses were unheard of in Pakistan. However, utility Store and canteen stores Department, a type of mini super markets, are functioning since the time of independence; but these stores were mutual benefit stores for service of government servants and Defense Services personnel respectively. In late sixties, in Lahore, a super market chain with the name of COOP stores was introduced. The CSD still remains a mutual benefit store but utility stores have been opened to general public. The chain of COOP store of Lahore was later taken over by Utility Stores Corporation of Pakistan. In the rural areas of Pakistan, the retailing still follows the same traditional "HUTTI' system small shops which provide very necessary daily use items to the villagers from available stores. These days almost all grocery items, cosmetics, vegetable ghee, and other essential items including shelf medicines are available on HUTTIES, but back in fifties rather till late in sixties very few items could be procured from these HUTTIES. In the urban areas of Pakistan, almost all types of related outlets exist. The introduction of sector wise planned markets in the newly planned modern city of Islamabad the capital, gave new dimensions to modern retailing in Pakistan. Thereafter almost in all other cities and new towns of Pakistan, where a new residential locality had to be developed, special emphasis was given to plan retail markets in a proper way. The main retail urban outlets are: Small retailers Large retailers/ wholesale retail stores Department stores Super markets Utility stores Cooperative stores Medical & general stores Specialty stores Friday, Tuesday or Sunday Bazaars 4

Small Retailers: These are very similar to HUTTIES found in the rural areas of the country. Normally these types of stores are located in suburbs of the cities and towns and take care of the demands and requirements of the people living in that area. Super Markets: A supermarket is a departmentalized food store. Pakistan entered the super market era at a time when some western European countries were moving from super market to 'Hyper mart'. The first supermarket in Pakistan was opened at Karachi in 1968. During last 27 years quite a few of them have sprung up, but most of these are more like mini super markets rather than full fledged supermarkets with intensive and extensive product mix. Even food items like meat, fresh fruits, are not available with most of them. Role of Supermarkets: Supermarkets simply meet the needs of consumers as cost effectively as possible, while acting within the bounds of ever-extending legislation, therefore in large part their behavior simply reflects the desires of consumers and government. Larger retailers do exert significant "buyer power" which can be destructive, more carefully thought out rules on Trade Justice and allowable ethics in international trade could well reduce this. Recent consumer interest in Fair Trade has lead to a "rush to Fair Trade" by many retailers and supermarkets which is welcomed, but there is no saying whether it will last or not, as supermarkets will always be ready to throw fair trade products out of the door to replace them with products that meet the needs of the next wave of consumer interest. Despite the low purchasing power of the majority of Pakistani consumers, multinational companies dominate sales in the household care market. This is because those consumers who do buy household care products are affluent enough to afford the goods offered by foreign multinationals, which they buy through supermarkets and hypermarkets in urban areas. The multinationals also benefit from the perceived higher quality of their goods, and the lack of domestic competitors. This is 6

underpinned by their capacity to invest more in advertising and promotional campaigns aimed at boosting consumer awareness of their products.

Research Process
My research is based on several steps and through an entire process we have concluded certain results. The research process included the following steps: At the initial stages I had an idea of growing trends of supermarkets in Pakistan; this was being seen as a problem for some and an opportunity for the others. The initial research was conducted in terms of secondary research where articles on the internet and magazines were viewed which confirmed the increased trend of supermarkets and highlighted why people preferred going to supermarkets. The details of the exploratory research have been mentioned in the research proposal. Next step in the research process was to conduct various focus groups so that we have an idea about the general opinion of different people and what do they have to say about the increasing trends of supermarkets and also to gain their suggestions about the current scenario of supermarkets. One of our aims was also to know the peoples opinion about the changes they would want to see in the supermarkets in the future. Exploratory research helped to find out the alternatives and other concepts as to why people preferred going to supermarkets then small retailer shops, which helped making research objectives and research questions and helped framing questions for the questionnaire. The initial research helped to create hypotheses. Sampling unit will be households and sampling element will be individuals in the household who went to supermarkets, this defined our target population. Then non probability sampling will be done due to cost /time constraints. I did the convenience sampling and got questionnaires filled, finding out what people wrote in open ended blanks to rectify them and coding was done for further tabulation of the data. After tabulation, started the work of hypothesis testing, short listed the questions for the purpose of hypothesis testing.

Research Process
Exploratory Research

Setting Research objectives and Designing research questions

Focus Group

Survey: Getting Questionnaires Filled

Tabulation of Data: entry, Coding and editing

Hypotheses testing

Conclusion

Background
In Pakistan the retail and wholesale business accounts for over 25 per cent of the GDP with the share of trading even bigger than the manufacturing sector. According to the latest Pakistan Economic Survey, the sector is growing at the rate of 9.9 per cent. Some European retail chains have shown interest in Pakistan. A German retail giant, the Macro has entered into Karachi market. A few other retail firms are said to be in the process of entering into Pakistani market. So far the Wal-Mart name has not come up on the list of companies aspiring to enter. It is estimated that in 2002, about 6.8 million of the 50 million people living in urban Pakistan belonged to the upper and uppermiddle class, and represented a grocery market worth $1.7 billion. This segment, projected to grow to 17 million people by the year 2010, is expected to be the first to switch to modern retail stores.

Purpose of the research:

The purpose of the research is to find out various reasons for peoples preference to shop in supermarkets rather than small retail shops. This of course is an opportunity for people wanting to open supermarkets in the future.

Research Objectives:
1. The objective of this report is to analyze the extent of consumer preference for superstores. 2. To determine which reason dominates or stands out the most for consumers preference for superstores 3. To determine what other services can be added in supermarkets which consumers would prefer. 4. To find the future of supermarkets in Karachi.

Research design:
Research methods employed were: 1. Exploratory research 2. Descriptive research

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Exploratory research
We have conducted exploratory research in terms of secondary data to clarify the purpose/problem of the research. For many customers these supermarkets are really best place to visit for shopping. "You find almost everything under one roof and that also on reasonable rates," says by a Customer of Makro, superstore at Star Gate, Karachi. He gives many reasons for coming to this place to shop. "The staff is very customer friendly, the store is really big and you can bring family with you. You will face no problems regarding parking of your vehicle, you can carry shopped goods through shopping trolleys direct to your vehicle and contrary to most other such Pakistani stores there are even washrooms for customers," Other shopping-stores, even retailers now need to provide such facilities to customer if they want to remain in competition with such big shopping stores, he says. According to Agri-Food Past, Present & Future Report of Pakistan in August 2005 prepared by government of Canada .Supermarkets are increasing in popularity and currently account for 10% of retail food sales. Modern retail formats, notably supermarkets/hypermarkets and convenience stores, are expanding across Pakistan and giving rural and urban consumers access to a considerably wider selection of goods and services. Also factors like continued migration of rural consumers to urban areas in search of work and an improved standard of living and the number of Pakistanis returning to the country having worked abroad will also fuel growth of urbanization. These factors will be underpinned by the increased penetration of supermarkets and hypermarkets in urban Pakistan, which will be able to offer consumers a wide range of modern, convenient products at highly competitive prices. Throughout the country consumers will continue to demand basic household care products they know to be effective, demonstrating little interest in the short to medium term in highly advanced and expensive products or formats. Through secondary data we have found that supermarkets are being preferred and increasing in number throughout Pakistan.

Descriptive research:
After doing exploratory research we further have done descriptive research to know what makes people prefer supermarkets over small retail outlets and to do so under descriptive research method, surveys will be used to gather primary source data. The questionnaire is attached in the appendix.

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Analysis of Questionnaire
Q1. How often do you go for shopping to supermarkets? a. Daily b. Weekly c. Twice a month d. Once a month e. Any Other periodicity (please specify)_______________________

Options Daily Weekly Twice a Month Once a Month Others Total

Results 06 15 14 15 0 50

Percentage 12% 30% 28% 30% 0% 100%

Q2. Which supermarket(s) do you usually visit for shopping? a. Aghas super market b. Naheed supermarket c. Imtiaz d. Makro e. Other (please specify)_____________________ Options Aghas super market Naheed supermarket Imtiaz Makro Others Total Results 11 08 09 06 16 50 Percentage 22% 16% 18% 12% 32% 100%

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Q3. Please specify the range of your TOTAL MONTHLY family income: a. Less than Rs. 25000 b. Rs. 25001-50000 c. Rs. 50001-75000 d. More than Rs. 75001 Options Less than Rs. 25000 Rs. 25001-50000 Rs. 50001-75000 More than Rs. 75001 Results 07 16 16 20 Percentage 14% 14% 32% 40%

Total

50

100%

Q4. How far is the supermarket from your home? a. Walking distance(< 5 minutes) b. 5-10 minutes drive c. 11-20 minutes drive d. More than 20 minutes drive Options Walking distance(< 5 minutes) 5-10 minutes drive 11-20 minutes drive More than 20 minutes drive Results 07 16 15 12 Percentage 14% 32% 30% 24%

Total

50

100%

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Q5. Will you still go to supermarket even if it is not near your home? a. Yes b. No c. Maybe/ Dont know Options Yes No May Be / Dont Know Total Results 26 12 12 50 Percentage 52% 24% 24% 100%

Q6. Would you like to have home delivery service? a. Yes b. No c. Maybe, sometimes Options Yes No May Be / Dont Know Total Results 16 17 17 50 Percentage 32% 34% 34% 100%

Q7. On an average how much time do you spend shopping in supermarkets? a. Approximately 1 hr b. 1 hrs to 2 hrs c. 2.01 hrs to 3 hrs d. >3hrs Options Approximately 1 hr 1 hrs to 2 hrs 2.01 hrs to 3 hrs >3hrs Total Results 21 21 05 03 50 Percentage 42% 42% 10% 6% 100%

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Q8. At what time usually you prefer going to supermarkets? a. Pre-noon b. Afternoon c. Evening d. Night e. Late night Options Pre-noon Afternoon Evening Night Late night Total Results 06 10 17 12 05 50 Percentage 12% 20% 34% 24% 10% 100%

Q9. Rate how much importance you give to the different aspects in supermarkets. (On a scale of 1-5, 5 is the most important and 1 is the least important) a. Location b. Variety c. Price d. Environment in general e. Car parking space f. Deals/Discounts you get g. Choosing product yourself h. Status symbol i. More space to walk around j. Service provided by sales force k. One stop shop l. Cleanliness Options 1 A B C D E F G H I J K L 1 0 2 1 1 11 0 23 3 19 0 0 2 4 0 0 6 1 12 3 5 4 12 13 1 Rating Scale 3 4 0 7 5 20 0 2 4 3 9 4 8 3 17 9 16 15 16 8 14 9 20 8 18 12 5 28 34 27 08 32 08 29 10 14 07 11 34

Q10. Do the supermarkets you visit have helpful and friendly sales force? 15

a. Yes b. No c. Dont care Options Yes No Dont Care Total Results 32 11 07 50 Percentage 64% 22% 14% 100%

Q11. Would you like all the employees in supermarkets to have a specific dress code? a. Yes b. No c. Dont care Options Yes No Dont Care Total Results 29 10 11 50 Percentage 58% 20% 22% 100%

Q12. Would you like to be served beverages while shopping? a. Yes b. Maybe c. No Options Yes No Dont Care Total Results 20 19 11 50 Percentage 40% 38% 22% 100%

Hypothesis Testing
Mega Hypothesis:
Ho: People prefer super markets over retail stores Ha: people do not prefer super markets over retail stores. 16

Hypothesis# 1
Ho: At least 60% people prefer to go to supermarket even if it is far from there home. Ha: Less than 60% people prefer to go to supermarket even if it is far from there home. Level of significance: = 1%

x (bar)=26 = 30

Ztab= -2.33 Zcalc= -1.156 Conclusion:

We see that the value of test statistic does not fall in the critical region hence we can not reject our H0. The data provide sufficient evidence to conclude that super markets are preferred over retail stores even if supermarket is far from there place.

Hypothesis# 2
Ho: There is no relation between Number of visit to supermarket and income level. Ha: There is relation between Number of visit to supermarket and income level. Level of significance: = 1% v = (nc-1) (nr-1) v = 12 Less than 25000 25001-50000 50001-75000 More Than 75001 Total Daily 0 0 01 05 06 Weekly 01 03 02 0 0 07 05 0 16 03 05 07 0 22 08 03 06 0 50 15 14 15

Twice a month 04 Once a Month

02

Others 0 Total

X2tab = 26.217
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X2calc = 13.66 Conclusion:

We see that the value of test statistic falls outside the critical region hence we can accept our Ho. There is no relation between Number of visit to supermarket and income level.

Hypothesis# 3
Ho: At most 8 people on average preferred to go to supermarket. Ha: More than 8 people on average preferred to go to supermarket.

Ha: 8 Ho: > 8 Z = Z0.01 = 2.33 Zcalc = 3.25

Conclusion:
We see that the value of test statistic falls in the critical region hence we can reject our H0. More than 8 people on average preferred to go to supermarkets.

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After doing the hypotheses testing we have concluded the following results: 1. The number of visits made to supermarkets is dependent on the income of the people. 2. People generally prefer supermarkets over retail stores because of deals and discounts they get. 3. People also prefer super markets over retail stores because of the price factor. 4. Super markets are preferred over retail stores more because of variety as compared to location. 5. Super markets are preferred over retail stores because of convenient parking. ALL THE RESULTS OBTAINED FROM OUR SUB-HYPOTHESES AS MENTIONED ABOVE HELPED US TO PROVE OUR MEGA HYPOTHESES. MOST OF OUR RESPONDENTS BELONGED TO THE INCOME GROUP OF RS.50,000 AND ABOVE, THEREFORE WE CONCLUDE THAT PEOPLE FROM HIGHER INCOME BRACKET PREFER SUPERSTORES OVER SMALL RETAIL STORES.

Final Conclusion

Recommendations
Our recommendations are as follows: 1. Superstores should also consider car parking space as an important way to attract more customers. 2. We recommend to the supermarkets that their employees should have a specific dress code. 3. There has been a preference for children play area to be made. 4. Since majority of the people spend more than 1 hour in supermarkets beverages should be served while shopping 5. Supermarkets should continue to offer competitive prices because mostly people go there because of the price factor.

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