Early Adoption of Modern Grocery Retail in an Emerging Market: Evidence from India
44 Pages Posted: 5 Jul 2012 Last revised: 27 Mar 2015
Date Written: March 1, 2015
The paper investigates early stage “modern” grocery retail adoption in an emerging market using primary household level panel data on grocery purchases in India’s largest city, Mumbai. Specifically, we seek insight on which socioeconomic class is more likely to adopt, and why. We model adoption as a two stage process of modern retail choice followed by category expenditures within a shopping trip. We find a non-monotonic (V shaped) relationship between socioeconomic class and preferences for modern retail; specifically modern retail spend and relative preference are greater among the upper and lower middle classes, relative to the middle-middle class. Upper middle class preference of modern retail is driven by credit card acceptance, shorter store distance (relative to other segments) and higher vehicle ownership; while lower prices and low travel costs drive the preferences of the lower middle class. Modern retail is preferred more for branded and less for perishable categories. Interestingly, the lower middle class share of modern grocery retail’s revenues is largest and this share is projected to grow as prices fall and store density increases. To address concerns of endogeneity and generalizability, we replicate the key results with a “conjoint” type study with exogenous variation in price and distance, in two cities—Mumbai and Bangalore. We discuss implications for targeting and public policy in emerging markets.
Keywords: Emerging Markets, Retailing, Middle Class, Segmentation, Socioeconomic Status
JEL Classification: D10, D12, L66, L81, M30, M31, Q13, R21, L11
Suggested Citation: Suggested Citation