Examining the Effect of Demonetisation on Grocery Retailing in India

 

Ishfaq Hussain Bhat¹, Soumya Singh²

¹Research Scholar, School of Management Studies, University of Hyderabad, Hyderabad

²Research Scholar, School of Management Studies, University of Hyderabad, Hyderabad

 

ABSTRACT:

India is known as the land of kirana stores, as it has a number of small unorganized retail shops at every nook and corner. This has always made shopping very accessible and time saving in India. But in the past few years this highly unorganized face of the Indian industry has undergone tremendous change. While transforming itself into a more organized sector,the sector has contributed, on an average, about 10% to the country’s GDP every year. The dawn of the Internet era opened up amazing new possibilities and e-commerce has emerged as a perfect amalgamation of technology and marketing acumen. The Internet has been increasingly used to facilitate online business transactions between business entities and consumers for various products and services. A number of retailers have set up systems to accept orders over the phone,apps and or even on websites which in itself can be an independent business model. One can buy Indian grocery items online from online grocery stores at the most affordable prices and can avail heavy discounts on each purchase in the form of loyalty points or loyalty cards. This study explores theeffect ofdemonetisation policy (launched on 8^th November’2016) on grocery retailinginIndia.The study is exploratory in nature and secondary data was used to collect the data. It was found that the sudden cash crunch evoked by demonetization proved to be a significant motivator for transacting online. Even the connoisseurs of kirana stores and roadside stalls for grocery shopping turned to e-stores for their daily necessities. Although demonetization successfully created a space for e-stores esp. e-grocers in the retail sector, its role is limited only to being a switching barrier.

 

 

 

 

 

 

 

 

 

 

 

INTRODUCTION:

In the past, consumers used to buy their needed groceries from the traditional market comprising mainly of unorganised sector. It was the only option to fulfil their needs. With the rapid development in the retailing, new speciality stores have come up along with a new trend in e-shopping. The e-shopping has shown positive results in buying habits to the consumers. However, this seems to be able to access without the physical location is the most useful methods to buy the grocery products (Alam and Elaasi, 2016; Bhat and Singh, 2018). With increasing use of internet trend by consumer and their purchasing power they are willing to shop virtually. This is the reason that number of enterprises has developed commercial sites and portals for e-shopping. Due to high need of shopping retailers wanted to improve the quality of the online shopping experience for customers (Bauer, Falk andHammersxhmidt, 2006; Bhat and Singh 2017). However, the level of confidence in making payments online is still not developing fully. In a euro monitor report in 2012 indicated that “with the expansion of the Internet, e-shopping is growing rapidly in the country, and is currently at 60% of the consumer using it, due to reason many online retailers trying to recover the excellence of the virtual marketing involvement for the shopper (IBEF, 2017). India is also transforming greatly in online shopping and since the decision of demonetization the focus has been put more on cashless transactions. There is no doubt that demonetization is a great move for a better future of India and its economy. It will definitely influence many more shoppers to start using plastic money in the long-term. Already, malls see usage of credit/ debit cards and e-Wallets go up during big sales, when banks and fin-tech start-ups offer cashbacks or discounts. This is trend will rise substantially in the long term as such payment methods become more mainstream. For now, demonetization has impacted the retail industry due to a liquidity crunch. As the Indian retail industry generates a lot of cash transactions (Bhat and Singh 2017 ;Gajjar, 2016). This impact is being felt largely by small traders and the unorganised retailing segment prevalent on many high streets across the country, as compared to the organised retailing and malls. Importantly, the retailers will encourage alternate/ digital payment solutions will help the marketplace become more transparent and structured.  Lower footfalls in shopping malls is a passing phase and is expected to normalise in a few weeks as more of the newer currency denominations come into circulation, enhancing the purchasing power of consumers once again. The long-term growth scenario of Indian retail continues to be resilient and growth-oriented. The domestic consumption remains intact due to a strong economic base, favourable demographics and FDI-friendly policies (Bhat, 2016).

Online business or online shopping has brought big changes in the opportunities and challenges for the business houses. From customers’ perspective, the line of demarcation between local and global business firms and/or products has narrowed down where quality, value, time, convenience, style etc. matters a lot (Gajjar, 2016; Bhat and Singh, 2018). It has also helped to reduce the buyer's evaluation time for purchase, good decision after evaluation and in order to resolve invoice discrepancies and spend less time and ultimately increase the chances for the purchase of substitute products. In addition, customers can appreciate online shopping 24 hours a day from everywhere. Particularly customers of Metro cities of India with high disposable incomes are willing to spend on online shopping these days but, the self-confidence of payments through Internet have not been fully developed and its need to adopt market driven strategy to achieve the better performance and value.

 

LITERATURE REVIEW:

Progress of Internet and e-commerce has border trade shrank, leading the company to create opportunities and accomplish modest consumers, directly across the globe. As per the study by Griffiths et al. (2006) the economy and social science research now focuses specifically on Internet marketing and transnational and intercultural issues on e-shopping. As per the study of Alsomali et al. (2009) “the growth of Internet technology in the Developed country has a huge potential because of the less cost of products, services and escalation of environmental boundaries reduces the limitations to meet purchasers and vendors together. Bhat and singh (2017 a); UjwalLanjewar, (2011) explains that in online buying, the rate of diffusion and adoption of the online buying amongst consumers is still relatively low in India.  (AlGhamdi et al. (2012) found that Changes in lifestyles of consumers and demographics also contribute to changing consumption patterns, satisfaction and loyalty. The large increase in the number of population, improving education, increasing expectations and urbanization of rural areas in the country could play a vital role in the pattern of behaviour to current purchase. And it also changed the India’s customers for grooming, clothing, leisure habits, savings, investment, and communications facilities, transportation, and travel and tourism sectors. Morewedge et al. (2007) have shown that consumers perceive the purchase or consumption to be cheaper when he/she has more financial resources that are cognitively accessible Berry et al. (2002), in his study ravelled that the side of the interaction of e-commerce applications it is closely linked to customer loyalty.

 

Hirschmann (1979) suggested that consumer behaviour could be affected and associated by the differences in characteristics of the alternative payment systems; her studies have provided evidence that consumers evaluate credit card by salient attributes and that people who own more credit cards make large purchases per department store visit.

 

Digital money seems to be even easier of operation, convenient and less salient than any other payment mode. Consider the case of the digital wallet, once an account has been created, succeeding purchases could be made with no reference to payment mechanism at all, plus advanced technologies allows consumers to make payments without a lot of reflection, therefore, while convenient, that mechanisms discourage consumers to deliberate over their spending behavior, producing a higher decoupling of spending from payment (ChartejeeandRose, 2012; Bhat and Singh 2018) possibly eliciting increases in purchasing probability, in spending amounts and, most worrying, is that it might elicit compulsive behaviour. Since compulsive consumption impacts young consumers. The interest in cultures and confidence in e-commerce is important for the buyer. In this study it highlights the three different aspects depending on their importance can detrainments the use of electronic commerce: complexity, privacy and compatibility were among of them especially after demonetisation in India. The privacy has proved the most important element in terms of the extension of electronic services easy or difficult to use by the consumer (Kushchu et al., 2004).

 

RESEARCH GAP:

Although, much research has been done in the region and as well as worldwide to understand the e-marketing perceptions. But there is still a need to determine and measure the factors of e-shopping that will create the greater values for e-shoppers in fast competitive and dynamic environment of market especially after demonetisation in India. To give more value product and services to the consumer it is always recommended that marketers should have customer driven market strategy. Therefore, the paper will focus on the examination of the effect that Demonetisation had on the purchase of grocery products and services.

 

SIGNIFICANCE OF STUDY:

The study might be significant helpful to e-retailers, online consumers and other researchers of this field after Demonetisation. Many e-retailers should be benefited greatly by understanding the most important factors of online purchasing behaviour of consumers. And it will also be helpful to develop strategies to serve customer as per their buying needs. After knowing the important and preferable factors the e-marketer can modify and adopt the way which may be helpful to serve better to the customer and to be a successful marketer in this area.

 

OBJECTIVES OF THE STUDY:

The major objectives of the present study are to recognize the Effect Demonetization has on grocery retailing in India.

 

RESEARCH METHODOLOGY:

The study is exploratory in nature as it aims to gain the knowledge of preferences and perception of customers towards e-shopping in India after the demonetisation. Exploratory research is conducted to clarify and define the nature of a problem, where the purpose is to provide insight and understanding, not to provide conclusive evidence. Usually, exploratory research is conducted with the expectation that subsequent research will proceed (Ibid). Exploratory research is characterized by its flexibility. When a problem is broad and not specifically defined, the researchers use exploratory research as a beginning step. By an exploratory research we mean a study of a new phenomenon. It is a mean of understanding what is happening; to seek new insights; to ask questions and to assess phenomenon in a new light (Yin, 1994). Exploratory research has the goal of formulating problems more precisely, clarifying concepts, gathering explanations, gaining insight, eliminating impractical ideas and forming hypotheses. It can be performed using a literature research, surveying certain people about their experiences, focus group and case studies. The secondary data is used in this study which include different journals government records, companies’ annual reports etc. The main purpose behind this research was to know the preferences and perception of customers towards e-shopping at e-stores in India.

 

FINDINGS AND SUGGESTIONS:

There is growing literature that points out to the possibility of changes in spending behaviour as a result of moving to instruments other than cash. There are many substitutes for cash in the modern economy ranging from cheques, debit cards, prepaid cards, credit cards and mobile wallets. Online Food and Grocery businesses are making money above all. The data shows that online groceries industry has seen the number of orders going up by 40-50% from past one month due to demonetisation. The reason behind the same is that the value involved in food orders is quite low as compared to other segments. “As the order value ranges between Rs.400-500, consumers do not mind paying online. Low cash supply in the market with limit set on daily withdrawal amount via ATM, online grocery sales has marked quiet growth. Viewing the market condition, people now a day hesitate to spend cash as they save it for any emergency. Fulfilling the daily urges had led them to purchase groceries online via net banking and wallet system. Brands like Big basket, Grofers and other online grocery firms have seen tremendous growth. Big Basket alone has seen a 25% jump in online transactions.

 

The rapid uses of computer and Mobile Apps has make the internet well known to others. While as the influence of social media and mobile internet makes the uses of internet to more population. So, the growing usage of Internet has led to increase in online shopping. There is a positive relation between increase usage of Internet and online purchase. The marketers should capture this enormous growth, which can be brought by the penetration of broadband and lowering the prices of computers. Thus, increase in usage of Internet over the years and the more time spent has led to an increase in shopping.

 

In case of Groceries, although 60%-70% of the transactions are currently in cash, but due to the demonetisation the impact is likely to be high due to the low- ticket size of purchases and high likelihood of patrons adapting to plastic money. the impact is limited on the food and grocery retail sub-segment, given the non-discretionary nature of purchases in this segment, as well as since the buying cycle for the current month would have been largely completed. Moreover, the demand across the retail sub-segments shifted to the organised segment due to non-availability of cash after demonetisation. As the cash transactions facing a reduction, alternative forms of payment will see a surge in demand. Digital transaction systems, E wallets and apps, online transactions using E-banking, usage of Plastic money (Debit and Credit Cards), etc. will definitely see substantial increases in demand. This should eventually lead to strengthening of such systems and the infrastructures required.

 

Since demonetisation the people are getting used to paying online. This has provided a huge platform for payment gateways such as Mobikwik, Paytm, etc. where the user counts are increasing at faster pace. In the first hours after the announcement, Paytm says it experienced a 200% increase in mobile downloads and a 250% increase in overall transactions. Due to cash crunch, people are trying to get habituated to online payment methods in fact many have already started as seen above facts and figures of m-commerce industry.

Consumer internet companies have to work hard in improving the customer experience of paying and delivery so that they can use this opportunity to move a major chunk of customers towards online payment and also train new customers with new mode of payment.

 

Some of the things, which the consumers should take into considerations while online shopping, are: Use a secure browser. The browser should comply with industry security standards, such as Secure Sockets Layer (SSL). Consumers should shop with the known companies, as it is easy to set up a shop online under any name. If they are not familiar with a merchant, they should ask for paper catalogue or brochure to get a better idea about the merchandise and services and should find about the company’s refund and return policies. Consumers should also search for the reviews of the company.

 

CONCLUSION:

This research shows that online shopping is having very bright future in India especially after demonetisation. Perception towards online shopping is getting better in India. With the use of internet, consumers can shop anywhere, anything and anytime with easy and safe payment options. Consumers can do comparison shopping between products, as well as, online stores. This study is mainly focus on the factors from the Internet and examines those factors that affect the consumer’s online shopping behaviours. The research focus on the Internet shopping (include the nature of Internet shopping, E-commerce website, and online security, privacy, trust and trustworthiness) and online consumer behaviours (include background, shopping motivation and decision- making process). Those factors were looked at, and examined to reveal the influence at online consumer behaviours. In addition, the previous researches were used to help researchers understanding more comprehensively. Moreover, the customer’s purchase decision making process was also examined to identify the potential factors. The information search is the most important factor that helps the customers find the suitable products or services for their needs. Therefore, the online retailers have to enhance and improve the information supporting such as provide much detailed product information and use internal search engine in order to increase the efficient of information search. For the evaluation stage, customers more think a lot of the reputation from the E-commerce website, and the payment security for the purchase stage. At the post-purchase stage, the factor of after services which is the most concerned about. Overall, the factors from the Internet that influenced or prevented online consumer behaviours need to be carefully concerned by the online retailers, who can utilize the appropriate marketing communications to support the customer’s purchase decision making process and improve their performance.

 

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Received on 30.01.2018          Modified on 22.02.2018

Accepted on 23.03.2018           ©A&V Publications All right reserved