Early Adoption of Modern Grocery Retail in an Emerging Market: Evidence from India

44 Pages Posted: 5 Jul 2012 Last revised: 27 Mar 2015

See all articles by Vishal Narayan

Vishal Narayan

NUS Business School

Vithala R. Rao

Cornell University - Samuel Curtis Johnson Graduate School of Management

K. Sudhir

Yale School of Management; Yale University-Department of Economics; Yale University - Cowles Foundation

Date Written: March 1, 2015

Abstract

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

Narayan, Vishal and Rao, Vithala R. and Sudhir, K., Early Adoption of Modern Grocery Retail in an Emerging Market: Evidence from India (March 1, 2015). Johnson School Research Paper Series No. 27-2012. Available at SSRN: https://ssrn.com/abstract=2101254 or http://dx.doi.org/10.2139/ssrn.2101254

Vishal Narayan (Contact Author)

NUS Business School

Singapore

Vithala R. Rao

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States

K. Sudhir

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-3289 (Phone)
203-432-3003 (Fax)

Yale University-Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
578
Abstract Views
3,291
rank
45,783
PlumX Metrics